Q2 2021 Procore Technologies Inc Earnings Call

Good day and thank you for standing by welcome to the FY 'twenty, 1 Q2 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. The ask a question. During the session you will need the press star 1 on your telephone and as a reminder is gone from.

<unk> recorded on the line.

And the conference Overeating Speaker today, Matt Please vice President Investor Relations at the protocol. Thank you. Please go ahead.

Thanks, Good afternoon, and welcome to <unk> 2021 second quarter earnings call with me today of 2 week, Courtemanche, founder President and CEO and polyandrous CFO of <unk>.

Fleet disclosure of our results can be found in our press release issued today, which is available on the Investor Relations section of our website today's call is being recorded and a replay will be available following the conclusion of the call common.

Comments made on this call may include forward looking statements regarding our financial results products customer demand operations the impact of COVID-19 on our business and other matters. These statements are subject to risks uncertainties and assumptions and are based on management's current expectations as of today August 5.2021.

And may not be updated in the future. If this calls replay of reviewed after today. The information presented during the call may not contain current or accurate information. Therefore, these statements should not be relied upon as representing our views as of any subsequent date. We will also refer to certain non-GAAP financial measures to provide additional information to investors.

The reconciliation of non-GAAP to GAAP measures is provided in our press release with that let me turn the call over to Julie.

Thanks, So much Matt and Hello, everyone. Thank you all for spending time with US today, I'm chewy quarter match, founder President and CEO of profile I'm.

I'm happy to be with you today the share my thoughts on our company our opportunity and our Q2 performance.

Given that this is our first earnings call I'd like to take a moment and provide an overview of the company and the industry that we serve.

I've always been passionate about building things and throughout my career of straddle 2 worlds, the often felt disconnected construction and technology.

I loved for construction started when I was young.

In Middle School I had the opportunity to of Prentiss of the cabinet shop. The mall in high School I got the chance to work on construction sites as the journeyman Carpenter.

10 years later I jumped at the chance to work as of real estate developer before of discovery in the world of software.

Being immersed in the Silicon Valley Tech Boom inspired me to found my first startup.

It's show me firsthand the impact of the digital transformation could have on many different industries.

Several years later I found my way back into construction when I started building my own home.

I was shocked to discover that despite the sweeping impact technology was having across most sectors, but the construction industry still largely relied on manual processes occur.

Across the industry inefficient practices and costly rework led the uncertain profitability and immense physical waste that's when I became obsessed obsessed with the idea of helping to transform the industry. The I grew up in and love.

I started of pro core based on my steadfast belief in the power of connecting people through technology to transform this industry and to improve the lives of everyone in construction.

For the past 19 years per course partnered with 1 of the world's most important industries ushering of into the digital age.

Our mission of connecting everyone and construction on our global platform has never felt more urgent or inevitable.

Like so many other industries the pandemic had a significant impact on construction.

The challenge of remote work and the need for greater efficiencies validated the importance of our mission and has begun to accelerate the rate of which digital transformation is occurring in construction.

Cohort is be trusted partner to lead this transformation with our customers and ultimately the entire industry and.

In summary, we build the software for the people that build the world.

The construction industry is just massive making up 13% of the global GDP and 7% of the global work force in 2017, it's.

It is responsible for building the world around us and that challenge is only growing over the next 40 years. The UN estimates that we will have to build over 2.5 trillion with of T square feet of new construction just to keep pace with population growth.

It's like building a city the size of New York every single month for the next 40 years.

More while Covid has been a once in the century disruption to the construction industry. It's enabled an increasingly mobile workforce.

With greater workforce mobility comes the need for more construction to build infrastructure, workspaces and homes and large city centers and less dense areas as the demand for construction grows. So does the spending by 2025 annual global construction spend is estimated to reach 14 trillion dollars.

The growth does not equal productivity in the last 2 decades construction saw an average of only 1% labor productivity growth annually. That's 1 third of the average of the global growth rate.

Moreover, our customers are telling us, it's only getting harder to get projects done on time and on budget.

So what makes the construction so fundamentally difficult first of all of its a custom business. Every project is a prototype never be built again.

Imagine if the auto industry work like construction of.

The consumer can design of car with 7 wheels, and for Windshields and 11 bumpers and then they can tell the automaker I need this done in 10 months or else Youre going to Omi money and then the end, we're likely going to end up in litigation anyway, that's simply how construction works today.

Second the work force is mobile and decentralized construction happens both in the field and at the office all the stakeholders involved are working on different pieces of the same projects at the same time.

That's Y mobile real time access the data is so critical.

Also of stakeholder dynamics are complex there are multiple groups coming together to deliver a project and it's likely that they've never worked together before and on top of that the often have conflicting business interest.

But theyre all dependent upon each other and ultimately they all share the risk.

And finally changes constant designs schedules and budgets are affected by real world conditions or decisions made during the process of building.

The folks who power of this industry navigate massive complexity constant uncertainty and unending risk that's why the construction industry needs of platform tailor made for each stakeholder and that's why the time is now for protocol.

So to understand why let's look at the catalysts, enabling the industry the entered the digital age.

First technology could not drive change in this industry without mobile and Wi Fi neither of which made it to the job site until around 2012.

Today, approximately 93% of construction workers use a smartphone every single day.

Second there is a massive labor shortage and this cannot be overstated. This is the number 1 issue I hear from our customers even during the pandemic 83 per cent of contractors are having a hard time finding skilled workers.

Third there is growing regulatory and contractual complexity in construction in my lifetime alone regulations of the increased 11 full we're.

We're talking about thousands of regulations from health and safety to environmental and compliance to much much more and Covid has only added to this list.

And finally data is severely underutilized.

Actual data is going from being a competitive advantage to a must have and yet around 96 per cent of all engineering and construction day that goes unused.

Mckinsey reports that construction firms could increase their productivity by as much as 55 zero percent by implementing cloud based tools to aggregate and analyze even a small portion of their data in real time.

Look this industry is complex and the problems are big <unk>.

Construction is high risk low margin and curious the weight of building the world around us.

It needs technology, that's up to the tax let me be clear the industry has no shortage of technology of this disposal.

Some of that construction is collaborative at its core and this technology has been siloed and destroying the by its nature.

These siloed solutions, whether point solutions or group of construction management tools stitched together by a few large aggregators ultimately create new challenges.

Valuable data becomes trapped in silos and stakeholders can't gained access to actionable real time information.

Even with all of this technology available 50% of the industry is still relies on analog solutions like pen and paper and spreadsheets.

We believe to transform this industry all stakeholders need to be connected on 1 easy to use platform that facilitates and automates complex workflows spanning multiple stakeholders and tools.

We started our journey with our project management solution success of which planted the seeds for our platform.

We know of 13 products across 4 categories, including pre construction project management resource management and financial management all of them built on a single platform.

The platform value comes from how these products seamlessly connect owners gcs, the specialty contractors across complex workflows.

We connect everyone to the tools that they need to get the job done while breaking down the communication and data silos that had been holding the industry back.

Our platform provides a real time consolidated view of the entire project and a single source of accurate data, reducing miscommunications errors and reward.

Because all of the data lives in 1 place, we're able to provide customers with actionable insights to help them continually improve and run better businesses.

And while our platform focuses on solving the constructions, most foundational and impactful challenges our vast ecosystem of integration partners extends the functionality of our platform to deliver even greater value to our customers.

Today, I'm really excited to share that we have over 300 partners in our marketplace that seamlessly connect with our platform further, allowing our customers to connect all of our people systems and data in 1 place.

Our ecosystem is also been a great source of strategic acquisitions.

We have deep relationships with our marketplace partners, which provides us with significant visibility into customer adoption quality of their technology and the strength of their company culture.

His insights are invaluable as we selectively pursue M&A opportunities to expand our relationships with our customers. While also accelerating our long term business goals.

Look I come from this industry and I know that being a leader in construction technology. It's not just about building the best products and services for the industry, It's all about being a true partner.

Our connected platform focus and dedication to partnership are what sets us apart.

At <unk>, we live and breathe construction.

It is our only focus in our products and our business models are purpose built for.

Our annual construction volume pricing means we offer unlimited seat licenses to our customers.

This means that our customers can invite every project team member to use broke or whether they're a paying customer or not and this is critical because of a project is going to be successful all team members must communicate effectively. It's just 1 project team member it doesn't have access to the right information the workflows break periods.

Our customers don't have to sacrifice communication to save on costs, we know that the seat license pricing models are antithetical to how projects are built.

We even offer unlimited support the every single user on the projects not just paying customers and this support is provided by construction experts and as a result is award winning.

We have maintained our customer satisfaction score of over 90% for years and our average response time for customer requests as provided in under 60 seconds.

Look the paint I felt building my home was the Genesis of Pro course mission to connect everyone in construction on a global platform and the key word here is everyone are of limited user model is valuable to our customers in the near term, but it also creates an incredible long term opportunity for our customers and the industry.

<unk> go to market strategy and business model of designed to encourage rapid adoption and facilitates a flywheel effect our customers can invite everyone that they work with onto our platform.

And because of this over 60% of the users on our platform are non paint and we call. These folks collaborators.

They represent potential customers, who may advocate for procure on future projects or help convert companies into paying customers.

The data generated by our users creates powerful insights for our customers are.

Our platform collects granular data like costs materials safety outcomes and much much more in real time.

This data represents a valuable and unique asset for our stakeholders. The more users we have on the platform the more meaningful our data becomes.

Broker represents an incredible opportunity to transform 1 of the largest oldest and most important industries on earth.

For me the past 2 decades of been a deeply personal pursuit to revolutionize the industry that I love.

And we're just getting started and we feel fortunate to be at the heart of transforming this essential industry.

For those looking for a Great example of this transformation. Please check out the video that we published on our website showcasing our customers' Mccarthy building companies and Mortensen and their efforts to build Allegiant Stadium in Las Vegas, Nevada.

Is truly remarkable that they were able to finish the project of that size and complexity of ahead of schedule and under budget by connecting everyone on the project on the <unk> platform.

Now, let's discuss the second quarter in more detail.

Q2 marked the 1 year anniversary of the pandemic not only for <unk>, but for the entire construction industry.

I talked to our customers almost every day and what's clear to me is that there is significant optimism and that things are trending in the right direction.

Customers tell me that their backlogs are healthy getting stronger and the they're eager and excited about the work ahead.

But that being said there are still pockets of challenges.

In the near term supply chain disruptions commodity shortages and price increases are all putting significant pressure on already low margin businesses.

The skilled labor shortage has been a chronic issue affecting the construction industry for many years and it continues to impede the industry's ability to keep up with demand.

These challenges further emphasize the importance of finding ways to do more with less and the work more efficiently.

And speaking with our customers. Many of told me that <unk> has enabled them to transition seamlessly to this new working model and has provided the efficiency gains they've long needed.

We've been working to address these industry challenges in various ways for years in 1 recent example is our partnership with loves.

This partnership is designed to streamline materials procurement for general and specialty contractors by offering pro core customers at discount of material purchases.

Pro core customers in the United States can access lows in store and online products at a 5% to 20% tiered discount.

And now I'd like to share some additional updates from the quarter.

We ended Q2 with 11149 customers and we grew revenue 2 of $122.8 million up 27% year over year.

We are also initiating full year revenue of got guidance of $499 million at the high end of the range.

So here of some notable customers I'd like to share who contributed to this growth.

In Q2, we closed 1 of our largest European customers. That's a leader in sustainable energy. They employ over 25000 people globally and have over 65000 wind turbines across a dozen countries. They chose <unk> because they needed a solution that was easy to use in the field and integrated well with their back office.

The valued our deep knowledge of the construction industry and our strong references in the renewable energy space and our App marketplace, which extends our platform capabilities without the need for custom development.

Once pro of course fully rolled out they plan to build all future wind turbines, you're using protocol.

We are excited to further expand our footprint within the sustainable energy build outs, which is a large and growing area for us.

Great construction and Ian are top ranked general contractor here in the U S became a new customer who moved to us from a competitive solution that did not meet their needs.

They migrated to procure because they were looking for a true partner that is collaborative and has invested in their success.

This became evident as we cultivated a strong relationship with 1 another during their evaluation.

Additionally, the team at Gray was impressed with the rapid adoption of procure tools by their teams of the field during the pilot.

He also noted how easy our products where to use by their field teams.

Standardizing umbrella of <unk> is going to enable the team the gray to share data and knowledge across all projects and enable their teams for success.

Also 1 of the largest municipal utilities in the U S meaningfully expanded the relationship with <unk> in the quarter.

This agency serves a few million residents and needed greater visibility and workflow controls over their projects.

Prior to <unk>, they didn't have full visibility into project tracking and partial sharing of information by projects teams was leading to unexpected change orders.

<unk>, we're consistently coming in over budget and behind schedule and <unk> was selected to be the system of record now for all of their projects.

<unk> will unlock the existing data silos and helped deliver projects on time on budget and within compliance.

We also continued to expand internationally as a percentage of revenue from international has steadily increased.

We're already have customers all over the globe, we recently announced our formal expansion into the UAE and Singapore.

This means that we are now focused on 9 countries.

Earlier I shared that the global construction market is projected to grow to 14 trillion dollars in 2025, most of that growth will happen internationally.

The massive opportunity and we have lots of room for expansion within these existing markets and we're going to add more countries in the coming years.

We are continuing to invest in expanding out of our platform capabilities and product offerings to deliver greater value to our customers. In Q2, we made some notable announcements I'd like to highlight particularly in our financial management offering.

These tools provide accurate and real time data insights into the financial health of construction projects, while connecting the entire project teams on a single secure platform.

The new tools include advanced forecasting to better forecast cash flow.

Improved financial reporting with robust and flexible work breakdown structure the.

The ability to connect time of material tickets to change orders and an enhanced ERP connector platform.

The team is doing great work on expanding our offering but look it's not just about how many features we ship. What's most important to me is how these solutions ultimately improve the lives of our customers.

It's just down the San Diego with the client who shared that for a decade. They have been searching for a financial solution for their field teams that could integrate with their back office and I was really proud to hear how cohort solve this problem for them.

They can finally connect their system. So they have of 360 degree real time view of their jobs.

So these are the types of stories of get me fired up and motivated every single day.

So in summary, Q2 was a very successful first quarter for <unk> as a public company.

We're very pleased with our performance and excited about the customers that began their partnership with US we enhanced our products and integrations as well as expanded international.

And the funds that we raised from our recent IPO will provide capital to continue to invest in our growth.

Additionally, it created new relationship with shareholders that I personally look forward to working with over the coming years and I'd also be remiss, if I didn't give a huge big thank you to our employees.

I am humbled by your unwavering commitment to our customers and our industry.

As to every challenge and you raised the bar every single day of.

Grateful to have you here of <unk>, helping us transform this industry.

I also want to give a big thank you to our customers in the industry that we serve many of you have been with us for years and your partnership and insights have helped shape of <unk> into what we are today.

You are building the world around us and we're honored to be working alongside.

Before I hand, it over to Paul I do want to encourage all of you to join us of groundbreaking on October 12 through 14.

Groundbreaking of our annual construction conference where industry leaders from all over the globe come together to learn network and shape the future of construction. It is such a powerful event. These are the leaders who are building, new horizons and safety inclusion and diversity technology workforce development and Theyre coming together.

The find creative and innovative solutions to constructions biggest challenges.

We call. These folks groundbreaker, we're humbled every day to work alongside the mall.

We encourage you to join US This October now I'd like to hand, it over to our CFO Paul the Andrus.

Thanks, Steve and thank you to everyone for joining us today first and foremost I'd like to reiterate <unk> comments, recognizing the entire per car team for all of <unk> accomplished in our journey to become a public company, though we are only getting started without your collective determination and dedication we wouldn't be here today.

I'd also like to welcome and thank our new shareholders. Your partnership goes a long way in helping us transform and support 1 of the oldest largest and least digitize the industries in the world.

As to we mentioned earlier, we had a strong quarter in Q2 with solid execution across the business. However, before I talk about the quarter. As this is our first earnings call I'd like to spend a few minutes outlining per course business model and go to market.

I want to start by reviewing our pricing model because as we mentioned we see our unlimited use of pricing model is a key part of achieving our mission of connecting everyone and construction on our global platform.

Unlike many software companies, we do not price based on individual users we base price on the construction volume of customer will run on our platform and the mix of number of products that they might not.

Not only does this allow for unlimited users to collaborate on a project, but it is also how our industry thinks about their capacity the built how they buy their insurance and think about their profit.

Once the annual subscription price is determined we recognize revenue daily over the contract term, we do not charge our customers based on consumption or on a per project basis, nearly all of our customers sign up for annual or multi year contracts and our revenue was nearly all subscription providing us with excellent visibility and predictability.

<unk> into the business.

We organize our go to market by stakeholder region inside of our tailored and focused approach is a big reason why we are able to have such close partnerships with our customers. The 3 stakeholders, we serve our owners general contractors and specialty contractors.

Each of these stakeholders are critical to the overall success of the job and require constant collaboration for a project to be successful well.

While each of these stakeholders share common challenges the each possess unique characteristics that are best served by a dedicated personnel.

In terms of geographic expansion, we initially focus of our go to market in the U S. As it had the strongest product market share we.

We began of more deliberate international expansion in 2018 and have seen continued success overseas since then.

Outside of the U S. We currently have a focus on Canada, Mexico, The UK, Ireland, Australia, New Zealand, Singapore, and the UAE with intentions to expand further and leverage these operations to service the broader regions across EMEA APAC and Latin America.

In addition of stakeholders and geography, we also operate our business by customer size, we sort of stakeholders with a few million dollars from construction volume to the largest builders in the world overseeing billions and annual volume.

We operate our go to market on the same metrics, we price our customers the annual construction volume they manage.

We define the emerging category as firms with annual construction volume of $2.5 million to $20 million mid.

The mid market customers are defined as firms between $20 million and $100 million in annual construction volume, while enterprise customers are defined as firms with the construction volumes greater than $100 million.

Today, each of these stakeholders geographies and segments represent material opportunities within profile. So all of them are still early in their market penetration and we believe we of meaningful runway across these dimensions.

Now, let's turn to our second quarter results.

Overall, we are pleased with the performance in the quarter as we saw growth across every geography segment and stakeholders that we serve today.

A few things in particular I want to call out with respect to Q2.

Burst of TUI mentioned customer sentiment continues to improve.

Practically this means we are beginning to see retention trends gradually return to more normalized levels. Additionally, customers are increasing versus decreasing their forecast of construction volume as their sentiment and backlog of growth.

Our international performance was strong.

We continue to see increasing demand across all our geographies and remain excited about the potential of these markets going forward international.

The international now represents 14% of total revenue, which is an increase of 200 basis points year over year.

Third related to the enhancements within our financial management offerings that TUI mentioned.

We are continuing to see strong customer demand and momentum and are pleased with the product attach rates. We saw in the quarter 4 of financial offerings. Lastly, M&A continues to be a core focus area for US. We are excited about the customer reception. We have received since acquiring asked to come and in the study and continue to be on track.

With respect to our plans to integrate both businesses.

We remain committed to ensuring we deliver a single connected platform as we believe a connected ecosystem is critical to the success of all stakeholders and construction.

Now, let's dive into the specific financial outcomes for Q2.

Revenue in the quarter was $122.8 million up 27% year over year and total customers grew to 11149 up 9.

And 19% year over year with respect to expenses gross margin was 84% in the quarter, representing a year over year improvement of 100 basis points recall that gross margin includes expenses associated with supporting not only our paying users, but also our collaborators.

Our sales and marketing spend came in at $55.4 million up 42% year over year.

As we see the industry recover as well as the opportunity within the current and future market. We will continue to invest to enable sustained growth. Additionally.

Additionally, we continue to invest in R&D, which was $34.9 million up 43% year over year.

As you can see from our historical financials R&D has been a priority for us and we intend to continue this effort. The construction industry has no shortage of opportunities for software to drive efficiencies. We are in the early days of transforming this industry and do not intend to slow down our investments in existing and new products, nor deepening the robot.

Justice of our platform as we look to further drive innovation.

Moving the G&A, which came in at $18.8 million growing 56% year over year, our biggest investment areas and G&A, we're focused on scaling our operations for public company readiness and to support the sustained revenue growth.

Overall these investments led to an operating loss of 5.5 million, representing an operating margin of negative 4%.

Finally, operating cash outflow was $3.1 million Capex was $1.8 million capitalized software was $3.5 million all leading to free cash outflow of negative $8.4 million.

Before I turn the guidance as you review of our results and outlook note that our year over year trends are impacted by the comparison periods from 2020.

If you recall Q2 of 2020 was an incredibly challenging period for the construction industry as a result of COVID-19.

The industry began to see incremental improvements as we entered Q3 of last year with more meaningful improvement continuing through Q4 of 2020.

It is important to note that our performance is correlated to the industry's performance as a result, our compare periods will have atypical trends, which investors should take into consideration when evaluating 2021 year over year growth.

With that I'd like to provide context to our guidance arent.

Our financial philosophy is to prioritize growth, while also focusing on the long term opportunity in front of the.

Though the industry recovery may be gradual we intend to invest and build for the future of.

Our guidance reflects this investment philosophy, while also considering that expenses will ramp slower than we had originally anticipated. This is primarily due to the remaining uncertainties around the pandemic delaying both return of office <unk> as well as the increasingly competitive hiring market facing the entire technology industry today.

The rationale driving the strategy is to not only benefit from the industry's recovery, but also our unwavering belief. This is an industry that will continue to grow and the only path to meeting their end demand is by getting more efficient and leveraging technology in.

In short this is of tremendous opportunity and we of grand ambitions to be the industry's leading partner.

Our guidance for Q3, and FY 2021 is as follows.

For the third quarter, we expect revenue to be $125 million to $127 million, while non-GAAP operating margin is expected to be negative 7% to negative 8 per cent for.

For the full fiscal year, we expect revenue to be $496 million to $499 million, while non-GAAP operating margin is expected to be negative 6 to negative 7%.

I'd like to close by again sharing my gratitude to the industry our partners employees as well as the communities we serve for giving us this opportunity.

Now, let's turn it over to the operator to begin the Q&A session.

As a reminder to ask the question you will need the press star 1 on your telephone.

Forever first of question, we have Sterling Auty from J P. Morgan.

Your line is open.

Thanks, Hi, guys.

To get started you talked about the improving sentiment out of your customers improving pipelines, but then talked about the challenges that they're facing in the supply chain are you concerned at all of those supply chain risks may actually start to bubble up in and caused projects to get put on hold.

Hey, Sterling.

It's to me, yes, or no to answer your question as you know I say this all the time I I get the chance to talk to our customers every single day and prospects as well.

The there are some headwinds definitely supply chain is 1 of the commodity prices is another but what what I find so fascinating is pretty much across the board everyone I talk to.

The very positive sentiment pri.

Primarily around their backlog. So that's all of the future work that theyre going to get the.

The biggest challenges that they talk about our staffing.

So just finding the right people to do the work it tends to be the what I asked them to force rank their challenges that seems to be at but.

But when they talk about their backlog. They are very excited about the opportunity ahead, and so as you probably know, but I'll explain it to everybody backlog of future work. The future work has to become shovel ready it has to actually turn into an actual project before of flows through the pro force. So it leaves us very optimistic.

About the future and I do think that these challenges around supply chain and materials pricing are somewhat temporary.

Seem to be getting better, but I'm not a predictor of the future but.

Again, the sentiment is very positive.

Well that's good to hear and then 1 follow up question <unk> for you payments was something that investors. During the road show were very interested in can you give us the sense of where you see pro core participating in the payments opportunity within the construction industry.

Absolutely well, it's not a matter of if sterling that's a matter of win with payment. So what we are as I mentioned on the road show. This is something that is a priority for <unk>.

We have to get it right. So we're taking we're going to take our time and we're staffing up for it but.

Just want to set the expectation that I'd say.

It's not in any of the models that we've shared with you all and it's but it is coming.

I just would.

I would say that we're still building the team at this point and we're looking forward to.

Keep asking the questions and I'll keep giving you the updates.

Sounds good thank you guys.

Thanks Sterling.

For every next question Hans Jakob <unk> from Barclays.

Your line is open.

Okay, Great Hey, guys. Thanks for taking my questions here and congrats on becoming a public company.

Okay. Thanks I appreciate it.

Well, Hey, maybe maybe first for you too we.

Can you just talk a little bit about customer interest across the portfolio.

I think the project management part of the business has always been popular but can you just talk a little bit about interest across the other 3 sort of product families meeting pre construction resource management financials, maybe just broad brushes.

Sure well, yeah, no absolutely and we've mentioned this before but I think the best way to look at this is by the way I should say thank you for asking this question because we are so much more than the project management tool for general contractors. So the way we look at this is if you looked at any 1 of those product lines. The older product lines like project management are going to be bigger businesses of <unk>.

So there's just been of market longer than the other ones, but the newer ones are they're still smaller but they are growing faster.

And so the other way to look at it too is we get kind of pigeonholed of being project management for general contractors, but when you look at our stakeholders across owners general contractors and specialty contractors.

The owners and the specialty contractors businesses are big as well, so I'd never want to Miss the opportunity to explain the the breadth of what we're doing and as you remember our mission is to connect everyone in construction on the global platform.

So that's why we have this kind of a broad view of everything now.

Mentioned in the in the lead into the on the financial management side.

I would say that that product, we have some exciting announcements that I had mentioned.

It definitely is a product that is changing and creating the category and.

And I'm, just kind of heartened by the adoption rates of that product gets.

That's great very helpful. Maybe from my follow up for you Paul It's great to see the billings growth. This quarter I think it was 40% can.

Can you just talk about just high level of billings as a metric and what we should sort of keep in mind on that metric in terms of puts and takes or just anything you want us to know about billings as the metric as we sort of gauge the health of the business.

Yeah No I appreciate the question.

We certainly understand that investors are going to use that to evaluate how to think about the quarter, but we do caution them not to overly rely on them. This is not a metric that we manage the business to it as a metric that is based on invoicing and by nature of that it does have quite of bit of noise, particularly from any quarter to quarter period.

And it is especially important as you've heard me say in the earnings earlier today that there is going to be some atypical compare periods. Remember Q2 was a really rough period for the industry and of last year, I should say and it only got better from there, but because of that you will see very strange a type of.

The comparison I would caution you all to not overly rely there specifically this year.

Got it very helpful I'll get back in queue. Thanks, guys.

Thank you.

The next question, we have Kash Rangan from Goldman Sachs cash your line is open.

Thank you very much and hearty congratulations on becoming a public company.

That's awesome.

So you TUI most of all come to the 1 for you Paul So to you when he looked at you're talking about construction 14 trillion dollars of opportunity I believe count of 2025.

Broadly how much of that spending do you think.

Protocol could target realistically with the current product portfolio.

Hypothetically if you would just humor me per se. If you had all of the distribution in the world and you could target really skew what the product could.

The solve for customers how much of the spend do you see as being applicable to procure and also over the long term if I do some rough math again, just monkey math caught of $500 million of all great business, you've got 11000 plus customers.

It would seem to me that you of collecting roughly 10, 12.13 basis points of construction volume as you expand your of value.

Over the long term what.

What percentage of how many basis points of the construction spending do you see yourself of capturing so that's for you too I know that's a lot of styled pause.

That's fine Paul.

Again, great question on that 1 cash flow. Thank you.

So the way pro core has approach solving the problems for the industry is we've always focused on solving the most of the foundational problem. So when you think about project management resource management or was it just.

When you think about project management that is the core you can't tell me about the project that doesn't require some form of project management.

The the nature of project projects are in resource management allows you to manage your people.

Financial management allows you to manage your money and and pre con tools basically let you plan so very little white space in terms of what pro core can address globally in the construction world, which is why we have always stayed so focused on what we're doing.

And remember our business model was made for the industry, we of our unlimited the seat license model and the the unlimited support for all and it just allows us to provide all of this value to it doesn't matter again, if you're an owner of GC or sub.

I think in particular the <unk> the.

The industry is looking for a.

Provider like <unk>, that's focused that's a single platform and also believes in partnership and I think that that's you know.

That's essentially the the value prop so yeah.

Yeah, and what was the second part of that question.

Yes.

Over the long term, how many basis points of.

The construction project of your senior so being capable of attaching from a revenue perspective, let's say the starting basis I hope not.

Publishes but let's say, it's 10 to 12.13 or something.

Fully penetrated fine Thats got all of the sophistication of the pro forma hostile offer could you double your relative share of that construction of wallet or triple or maybe the number of Douglas just some.

Some feel for how much that wallet share it could be long term. Thank you.

Cash so I would caution you not to create an average because we sell to the high end of the market to the low end of the market. We sell the owner of she sees in subs and so like it's the averages don't work really well in this math.

I'll, let Paul kind of add to that because I know he has something yeah. The other part to tech <unk> sentiment that will skew the average as the number of products. The customer has recall that we are rapidly growing the number of products of our customers have and our own product portfolio. We are rapidly introducing new products and so while I would say that today. If you just look at the.

Value of what we can get from our customers on top of the core module of project management. It is many multiples of what they what we price for project management at the same time. This is a constant evolution and I think from our vantage point. We continue to believe that we are just scratching the surface in terms of the market share and the wallet share we can catch.

From a customer.

Got it Paul of the question for you is going to be so you said sentiment is improving and people are feeling really good about backlogs coming up.

The later part of this year in your forecast are you assuming that kind of improvement are you or are you looking at you know what let them sign up and that's just signed the contract and let them put the construction volume through our system and then I'll think about killing.

The wall Street crude price or numbers.

And that.

You know I think we are constantly trying to evaluate what's going on the industry and be thoughtful I do think that we look at the sentiment we look at the leading indicators that you all see in the public domain and we believe that that optimism will continue at the same time I will remind everyone that our industry is massive and it does take.

Time for things to move and so we like to think of it more as a.

That's an oil tanker and not a speed boat and so we're being very cautious and thoughtful about the rate of that expansion, but we do believe that the sentiment is a good indicator of where the market is going.

Wonderful. Thank you so much.

Cash.

For the next question, we have DJ Hynes from Canaccord. Your line is open.

Hey, guys. Good start here congrats on the IPO and everything that's happened since.

To me I wanted to ask about the product roadmap as it pertains to the immense data asset you have and I'm going to leave it intentionally open ended like what are some of the most interesting things you could do with all of the data that you see that you're not doing today.

Sure well I love that you brought that up because I think as you and I have spoken in the past about the.

The data is of tremendous asset both for our customers as we're able to reflect the back and allow them to make great decisions through insights and run better businesses, but it does provide the ability for us to look at the industry.

In a much broader way and then to utilize the state of we have.

1.6 million users plus on our platform generating a ton of structured data like like bidding and quality and safety of materials and labor costs. When you think about labor productivity is the big 1 so who knows more about how construction gets done the pro core and so yes, there are a lot of opportunities.

<unk>.

I don't really want to speculate on all of the future things that we can do with it but the the real value D. J is the fact that we do know about we know about materials. We know about labor, we know about true costs and it really does get me fired up as I mentioned on the Roadshow. It's 1 of the areas, where I'm spending a lot of my time in real.

Really kind of the exciting future for <unk>.

Yes, I can imagine makes sense and then Paul just a quick follow up for you you mentioned some of the atypical compares as we look backwards in the calendar 'twenty can you just talk about like seasonality and customer adds are there any.

Orders of times of year of that.

Our stronger or weaker from broker that we should be aware of.

Yeah in general I think we follow a pretty typical of dynamic to our peers in the SaaS industry of where we have stronger Q4s in general I wouldn't say, there's any broad seasonality of that would point to.

This for me when I talk about atypical is much more reflection of COVID-19, and how that impacted 2020 than it is to say a standard kind of seasonality that we see in our own business.

Perfect. Thank you guys. Thanks.

Thanks Peter.

For the next question, we have Brent Thill from Jefferies. Brent Your line is open.

Thanks, Paul as it relates to the last quarter. It looks like you had a really good expansion corner.

Looking at the numbers.

I was just curious if you could unpack.

What was due to volume coming back versus selling additional pro core products and then had a quick follow up for TUI.

Yeah. It really is a combination of them both when we go out to our new customers. We are having a broad conversation with them about their needs their own growth plans and how we can be a partner to them.

Really when we think about it we don't tactically break it down by those 2 dynamics as much as we try to partner with our customers and do the best we can to you had said.

Definitely were pleased with our attach rate and the financial management product, but frankly, we continue to see great traction across our product broader product portfolio as well as I had said that our customers are starting to see that optimism in that sense of minutes translating to them expanding their vision on what they will do in the coming year around volume. So it really was the <unk>.

On the nation of boat.

And 2 ive been very clear that the vast majority of your Tam of lives outside the U S.

The today is the only 14% of revenue how hard do you want to be on that approach to capture that international opportunity maybe back to pulse super tanker versus.

I forgot the other word to use but how are you.

Thinking about <unk>.

Yeah, So I guess Youre, maybe does that supertanker analogy apply to the international push.

Well I think just to clarify what Paul is talking about the super the.

The oil tanker is really just the speed in which once the once the economy is starting to spend on construction of our ingredients, but the amount of the time. It takes for those dollars to become active projects and flow through <unk>. So just to be clear, but when I think about international expansion, which youre right.

It kind of depends on how you slice the data, but you can make the argument that 90% of every construction dollars spent outside of the United States.

We definitely take it seriously in fact, I would like to call out for Q2, our international team.

Really performed well and it's something the another area of the business I'm very proud of we believe that our strategy starts with establishing beachheads and regional areas that are going to allow us to go and our approach has always been Brent we want to we don't want of dabble right. We're not going to go in and just try and try to sell some software when we go in.

The market is very intentional and we go deep, but the <unk>.

Pushing these beachheads because first and foremost construction is very hyperlocal. So it allows us to get closer to the buyer and the customer and number 1 and number 2 is it gives us the ability to expand into those regions and I think you've heard me say it before but opening up the UAE and Singapore. In Q2 is just another example of the kind of the pace in which we're going in with like I said, we're trying to do.

Quality over quantity, but youre going to see more in the coming quarters.

Thank you.

Sure. Thanks, Brian.

For the next question, we have Brent <unk> from Piper Sandler Your line is open.

Thank you and the good afternoon, guys I wanted to drill down into international a little bit more to you I know, it's only 40 per cent of the business, but as you think about the.

International is developing what have you learned in the last couple of years is it kind of developing faster you talked about the momentum this quarter loved the to just understand the pace of change there in light of kind of the post COVID-19 and the type of business and then 2 for Paul I'd Love to see if you could.

Just break out the <unk>.

Momentum of the business the recovery how much of it's driven on the commercial side versus on the corporate side is there any delineation on the piece of recovery by segment, that's really the 2 questions I had thanks.

Got it Brent so on the international front.

Let's say the learnings over the last few years had been that the the fact that we again are focused on the foundational challenges of building means of our product lines translate very nicely into each market that we go into I mean, everybody has to manage schedules everyone has to manage budgets everyone else to manage people everyone has to coordinate the.

<unk> and so it fits very nicely with the product with our product offering today.

And so it's really been more about the rate of adoption of technology in countries. Some countries feel like maybe the U S day like 4 of 5 years ago. Other countries and in some cases are ahead and what's really cool Brent is really depending on what the regulatory environments are like in each 1 of those countries.

The needs might be a little bit more sophisticated or advance, but we'll rebuild features of reconfigured the tool through our configuration tools.

To work for those countries, we find that the other countries that were selling in value that but they just haven't got the regular regulatory requirements up and running yet. So we've been I think the learnings are as that construction.

Construction, regardless of where you go in a lot of ways.

And we're still focusing on the foundational needs of the industry. Therefore of the adoption rate has been it's been very nice.

Helpful color and great to see some some early wins there and some large enterprise wins and then Paul just as you think about the breakdown of the momentum of the recovery here and kind of reopening tailwind.

Is it different between kind of commercial and corporate or any color. There you could give us as you think about what part of the business is kind of recovering faster than the others.

Yeah, I think that's 1 of the the great things about our industry and 1 of the benefits of our business is that when we think about our customers and the type of work that they do baseband commercial industrial residential.

What we saw in Covid was that when a particular segment of the industry of the construction industry struggled that our customers went out and really bid out work in the parts of the industry that we're doing well.

Day, when we look at that recovery, we still find the dynamic to be similar where our customers are going and winning business, where the demand is and you see the same public data. We do it's certainly not linear across every sub segment of the industry, but we do believe that there will be growth across those different markets and that our customers will benefit and as.

Growth varies from segment to segment, our customers will react and we will be there with them.

Yes.

Thank you.

Sure. Thanks Brent.

For the next question, we have Bevin Suri from William Blair. Your line is open.

Great. Thank you.

Congrats guys.

Thanks, a lot of state they're absolutely the pleasure.

I wanted to touch all of it on the network effects.

We've got we've talked about some of the.

We users and I'm not the biggest unlike the go to market to monetize the like what specific tactics of you guys doing sort of say, okay. I've got so many users and the types of the network, but how do I start monetizing of how do you think about that.

Yeah, So and we talked a little bit about this on the roadshow, which is 60.

The 60% of our users on the platform today are what we call collaborators right in the this is really what you are talking about it.

The general contractors of customer of <unk> and they bring all of their specialty contractors.

Those folks are engaged on our platform and see the value and pro core and so thus are likely to want to become <unk> customers because they face a lot of the same need so there's a lot of different ways for us to to address this.

We know definitely who's in the application we have a lot of ways of knowing who to talk to the beauty is is that a lot of times people just see the value of pro forma of by using it and they pick up the phone and call us So and I know Paul we'd love to add to the I think the 1 thing I'd add pavan as this is something we're already seeing today. So when we look.

At a number of the new users that come or the new customers I should say that come to procure these are folks who have been collaborators in the past and whether they came to us through our marketing channel through our direct sales effort referrals, there's certainly still opportunity to optimize how we touched the how we find them in the moment of need but we would say this is an error.

Area that has certainly contributed to our growth and something Thats still early days in the huge opportunity to continue to convert those collaborators to paying customers exactly.

Gotcha Gotcha, and then let's touch on the competition just a little bit.

Do you have the sort of partnerships last competition with money to provide the replay you always kind of links you to get the data, but a lot of them sort of all.

What kind of the supplement heal of trying to take pieces of it I'd love to get an update on the competitive environment. You are friends of the charcoal keeps having cloud from avera, which.

I'm, just gonna laugh about it but let's talk about some of the newer guys. All the guys actually does in the periphery of and Theres sort of the number going into the core the never going to be your material system, but the starting even on the edge of the little bit how do you see them. How do you perceive that love to get an update there. Thank you.

Yes, I'm sorry in your a little hard to hear but I think I got it in particular.

So just to remind everybody of.

The highest level the opportunity in the marketplace is still greenfield, there's such a huge massive massive opportunity 14 trillion by 2025.

So and then when we look at just our how we if you're getting the competitive win rates.

Things have not changed it very much in the last few years.

And but our focus still remains on solving the kind of the foundational challenges, but when it comes to what you were talking about about the how those folks.

The act with US the funny thing is is that the people that you were talking about they a lot of them have integrations with brokered they're part of the 300 partners and of our App marketplace. So it's kind of of front of me type thing maybe in a certain certain way but.

But in general like the the partners that we have in the App marketplace are solving discrete needs of our customers need in order to get construction done and if you take anything away from any of this it's number 1 is the industry is huge and number 2 is the needs of the industry are so big because it's so broken and it's so complicated.

That there's a lot of opportunity out there for all of us.

Gotcha. Okay. Thanks, taking my question the guidance Congrats again.

Thanks, a lot.

For the next question, we have Tom Roderick from Stifel from.

Your line is open.

Hey, Tony Hi, Paul Great to hear from you congratulations on a great first quarter out of the gates here.

The strength of <unk> started with the question here that was a great. When I saw them just about some of the the labor shortages in the cost of raw materials going up.

And if that was perhaps may be slowing some projects I guess, the kind of a lot of turn that question on its ear of just a little bit and think about the ripple through effect of perhaps the impacts of some of those costs going up impacting construction volume itself the size and dollar volumes of projects sort of naturally has to go higher to sort of match the threat of inflation worried a little bit.

So 2 questions I'd ask you round that EE.

Is that of positive dynamics to the business model at all just the ripple through effect on on the construction volumes of project volumes and then B is there anything you're doing with your customers to sort of rightsize that I know last year in the middle of the pandemic you worked with your customers to be flexible on that front and the tough time and is there a way to sort of.

Our work with them now in a way that construction volumes are going up.

I am kind of curious how you're managing through that process.

Yeah. So there's a lot of in there, but yes in general.

When when you talk about the the challenges with supply chain of material costs. You would think that that would have a material impact on most folks backlog now I have hurt you hear the stories about this project was postponed or delayed because of material costs, but that doesn't mean that the backlog still arent getting big and getting bigger and I'm trying not to.

Overstate it but the.

Theres a lot of optimism about the projects that are in the pipeline.

The kind of to what you alluded to broker does price on on construction volume.

So that I suppose might have some sort of a some sort of an impact but the.

I think the the.

The worst is behind us in terms of what we saw during Covid, which was Q2 of last year and the industry has been getting better quarter over quarter. So I would say, we're having less and less of those kind of conversations today. Paul you want to add anything no I just reinforced with 2 of its AD of it certainly creates uncertainty and challenges for our customers.

But the industry is incredibly resilient and they continue to find ways to work through and partner with their collaborators to get projects done and we are there to be of partner and so as these different dynamics evolve we will certainly work with our customers.

If prices go up it does drive construction volume up but we believe more of that the long term benefits here for our industry is that the industry has to grow because population growth because we need to rebuild our aging infrastructure and that in general. We just are very bullish about construction volumes over the long term.

From being the thing to focus on.

Yes.

Perfect. That's helpful and 2 of your pretty darn clear on the topic of payments being a matter of when not if.

As you evaluate the weight of kind of get that onto the platform you get that into the hands of your customers. Do you think that's something that can sort of be fairly easily integrated through through M&A activity is that of tuck in or is that something you'd be really committed to building from the ground up with them.

Well I don't want to lead.

Too much on this 1 but if you think about what our financial management solution does from the.

For me of tracking the budget to the contraction of the change orders to the invoicing.

The natural next step as payments of course, so it's an area, where we're putting a lot of focus.

I suppose you could answer the question, but there are a lot of people get really fixated on the payments section, but in order to make a payment you have to be in compliance and so theres a lot of pieces that go into getting somebody paid in construction through lean waiver management, and making sure people of insurance and the there's just a lot of details that have to happen. So I guess I can answer the question.

There's probably a mix in there but.

But ultimately.

We will get to the point, where we are providing the payments platform.

Excellent well standby from more news on that but but thank you both from the details looks great.

And thanks, Tom Thanks, Tom.

That's all of our last question for today I would like to turn the call over to Matt P. Thank you <unk>.

Thanks, Thanks for all of them, joining us and we hope to see you all of that ground break. Thanks again. Thanks.

Thanks, everyone.

And ladies and gentlemen. This concludes today's conference call. Thank you all for participating you may now disconnect.

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