Q4 2021 Procore Technologies Inc Earnings Call
Good evening. Thank you for attending today's pro core Technologies, Inc. FY 'twenty, one Q4 earnings call. My name is Selena and I will be your moderator all lines will be muted during the presentation.
Some portion of the call with an opportunity for questions and answers at the end if you like to ask a question. Please press star one on your telephone keypad I would now like to pass the conference over to our host Matthew Please with the pro core technologies. Please go ahead.
Thanks, Good afternoon, and welcome to <unk> 2021 fourth quarter earnings call automatically VP of Investor Relations with me today are TUI quarter March founder President and CEO , Paul we address CFO .
Complete 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.
Comments made on this call may include forward looking statements regarding our financial results product 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 February 22.
2022.
Brokaw undertakes no obligation to update any forward looking statements to reflect new information or unanticipated events, except as required by law.
This call is replayed or 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.
Also refer to certain non-GAAP financial measures to provide additional information to investors a reconciliation of non-GAAP to GAAP measures is provided in our press release. Additionally, we may refer to certain result is organic which we generally define as business performance or results that exclude the recent acquisition of wobbles that however, with respect to our customer count.
We define organic committed customers under <unk> contracts with that let me turn the call over to Julie.
Thank you, Matt and thank you everyone for joining us today in the fourth quarter, we delivered excellent results and continued to make great progress towards our mission of connecting everyone and construction on our global platform.
I am very proud of the work our team did by closing out the year strong continuing to integrate our recent acquisitions expanding the depth and breadth of our platform and as always investing in our people and culture.
Today I'll start by providing additional color on our results and I'll share what I'm looking forward to this year and beyond so let's dive in.
Annual revenue surpassed the half a billion dollars for the first time in our history and I am very grateful to our customers and employees for getting us to this milestone are deep and expanding customer relationships drove this outstanding performance.
On an organic basis, we ended 2021 with greater than 12000 customers. The number of organic customers contributing more than $100000 in <unk> grew by 32% to end the year North of 1100, we.
We also had a 2021 with a total of 30 organic customers contributing more than $1 million and they are an increase of over 50% from the previous year.
Most of these customers initially landed with much smaller contract sizes and grew to surpass the $1 billion in IRR in just a few years.
This progression underscores how we are really just beginning to digitize this industry are.
Customers are also heavily engaged with our platform. We now have over 2 million active users. These users I put it 400 million photos documents and inspections last year, reflecting continued growth in our platform usage.
We expanded the depth and breadth of our platform, adding nearly 100, new partners to our App marketplace in 2021, bringing total integrations to nearly 350 by the end of the year.
Today, 91% of our customers use at least one integration up from approximately 81% a year ago.
This is important because higher adoption of marketplace integrations is strongly correlated with logo retention and customer success on the platform.
2021 provided further evidence that once our customers adopt our leading platform solution they stay with us.
Our gross retention rate improved to 95%, reflecting the value our platform brings to the industry.
Customers are not only staying with us they're expanding B E N K building group a U S based general contractor expanded and deployed pro core enterprise wide after an initial evaluation.
Selected pro core due to our comprehensive and unified platform that allowed them to replace multiple disparate solutions, including competitors.
We also added new G series to the platform now.
<unk> construction is growing into new regions in the U S where pro core is already heavily used by owners of specialty contractors.
After a competitive evaluation it became clear that <unk> was a solution that can grow with them and will enable them to best partner with their new stakeholders outside.
Outside the U S. We continued to expand internationally.
Ferrovial construction is one of the largest global builders they operate across several continents with unique requirements and regulations after.
After evaluating several systems they chose to partner with pro core given our flexible yet standardized platform.
So of course, gaining significant momentum with owners as well.
In Q4, two major multinational pharmaceutical companies became pro core customers. The largest of these two deals relates to the expansion of their facilities to increase capacity for the development of life saving products their leadership identified pro core as being optimal solution to improve efficiencies while managing there.
The increase in construction volumes and.
And finally Pueblo mechanical our U S specialty contractor is pursuing an aggressive growth strategy and.
Order to scale they needed to implement standardized processes across all of their subsidiaries.
<unk> pro forma because of our robust platform and the flexibility it provides them to connect to various erp's across their subsidiaries.
I enjoyed my time that was able to spend with the Pueblo team and I really admire their ambition and focus.
I'm not only pleased with the customers that joined us and the financial results that we delivered I am really most proud of our ability to grow the business, while maintaining the culture and partnership that sets procure apart.
And we continue to be recognized for this in November we were named the 2021. So that's our best of the year, but the United States minority contractors Association.
More recently, we were ranked as the number one construction project management software by the JV knowledge construction technology report for the fifth year in a row.
And we were just named as one of the best places to work in glass doors Employee's Choice Awards I am, particularly proud of this recognition by our employees as this signifies our ability to maintain our unique and values driven culture, even as we rapidly scale.
So the results we delivered the customer relationships, we developed and the recognition we received reflect how well positioned <unk> to lead the construction industry and its digital transformation.
Change is constant in construction and in 2020 . One we continued to support an industry do a highly dynamic environment over the last few years, you've heard us and many others talk about the broader macro environment.
I'd like to share our perspective on this topic.
We see 2020 , one as a transition year from playing defense and navigating unprecedented challenges in 2020 to playing offense and capitalizing on opportunities in 2022.
Listen some very real headwinds continued to impact the construction industry that we do expect that many of these challenges will resolve themselves over time.
With that said there are some favorable and lasting tailwind with regard to <unk> business above and beyond the catalysts we've shared before.
First the hybrid working model made possible by cloud solutions like pro core is likely here to stay for some of the folks who were previously expected to be on the job site every single day.
And second the labor shortage exacerbated by an uptick in early retirements as prompted an increased reliance on younger members of the workforce and this future generation of builders have expectations of using consumer grade and mobile centric technology like pro court in their work.
Ultimately, we believe there's enough tailwind offsetting the headwinds that we're not anticipating any outsized positive or negative impact on <unk> performance due to external forces as such we are more confident than ever that we should be leaning into the opportunity.
This past year was an excellent example of that.
Now, let's get into what we're planning for 2022 and beyond.
Look I've been doing this for 20 years and I firmly believe that we're entering one of the most exciting and transformative chapters in <unk> history.
We're starting the year confident with an exceptional caliber talent and a brand and a platform that have never been stronger.
So here's what's top of mind for me as I look towards the future.
First the opportunity is massive and we have multiple avenues for continued growth ahead of us.
You've heard me say this many times that we're operating in a truly massive global market, that's significantly under digitized and Underpenetrated.
I believe that nothing will illustrate this more clearly and if we zoom in on the U S market.
Look in 2021, the U S. Construction industry was approximately $1 five trillion dollars in annual construction volume keep in mind. The majority of the spend flows through all three stakeholders the owner the general contractors and especially for the contractors that he said we estimate the true opportunity for <unk> in the U S is approximately 3.5.
Five trillion.
So when you drill down and just U S General contractors, and then you drill down even further to a U S enterprise General contractors, there's about 2500 logos in this cohort alone.
These 2500 logos represents close to $900 billion in annual construction volume of which we are just under 25% penetrated.
This cohort is thought to be the most digitized and we still have so much more runway.
So if you take a step back and look at it the broader spectrum of customer sizes, all three stakeholders and geographies beyond the U S. It becomes abundantly clear just how large brokers global opportunity actually is in fact, we believe that we have single digit construction volume penetration across just the markets. We're in today it is really amazing.
When you think about it like that.
We also continue to see a lot of growth potential in cross selling additional products to our existing customers are newer products outside of project management quality and safety continue to be well received by our customers.
Nothing is more important than managing time and money in construction and I'm continually hearing that our approach to financial is revolutionizing how construction is done for all stakeholders.
Currently 59% of our customers use financial management and more than 75% of our 1100 six figure customers have adopted at least one product within this category. We expect to see this adoption increase even further as the impact of shortages and delays will likely lead more customers prioritize risk mitigation and seek better.
Control over their project financials.
Second the power of our connected platform continues to be one of our differentiators.
As founder and CEO My focus is always first and foremost on our mission to connect everyone in the industry, our customers stakeholders and collaborators on our global platform. So I spend a lot of my time with our product team to ensure we're continuing to lay the foundation to truly connect all people systems and data in one place.
The surface area of all our products is very large but the real power comes from the Interconnectivity of our platform.
This interconnectivity not only helps our customers run better projects and businesses enables us to develop new ways to connect and serve the industry. For example last quarter, we announced that were building <unk> construction network. This network would not only give the industry new ways to find more reliable partners, but it will give us the ability to better convert.
<unk> into customers and expand and accelerate our existing flywheel.
Many of the products on our platform are interconnected, allowing our customers to seamlessly move from each phase of the construction process in one place.
So typically by making an enhancement to one product we by extension are enhancing adjacent products.
For example, our customers use our product to solicit and award bids during pre construction.
He accepted bids are automatically converted into contracts within our financial product, which would then subsequently converted into the budget against which actual performance can be compared the more.
The customer uses the more automation in synergies they benefit.
Third we are laying the groundwork for longer term strategic initiatives and beginning to build out our future Fintech solution.
A single global cloud based platform generates a massive amount of data that we can harness to help our customers run better businesses. It's important for investors to remember that many folks involved the construction manager highly complex high risk businesses with low margins and challenging cash flow dynamics. That's why <unk> is committed to building.
B right Fintech solutions to help our customers manage risk and accelerate growth and ultimately run better businesses.
Back in September we announced our intent to acquire level set and shared the strategic value would bring to our long term initiatives since closing.
The acquisition in November our teams have begun to not only formulate our plans, but also to operate against that.
I look forward to updating you later this year on our progress I do want to stress that this journey is going to take years and will require investment experimentation and thoughtful execution.
As a major shareholder I am committed to getting this right and I am confident that this will benefit both the industry and my fellow long term shareholders.
Finally, none of this would be possible without the continual investment in our people and culture.
A big focus of mine in 2022 and beyond will be to continue developing world class leaders engaging our people and scaling our organization alongside our business, especially as we continue to grow.
Our healthy culture is felt by our customers every single day and it's one of the reasons why we can provide them with unparalleled partnership and service because we never stop working to ensure everyone. At <unk> is aligned with the needs of our customers.
So there you have it I found it broke where 20 years ago to digitally transform the industry that I love I am so proud of what we've accomplished to date, but we're really just getting started in our journey of building, an even broader platform to serve an evolving industry.
What really gets me excited is the opportunity to deliver an elegant combination of software and Fintech solutions that will ultimately address the industry's biggest priorities are managing risk and accelerating growth.
This industry is so special the people that are quite literally building the world around us deserve a best in class solution to perform their life's best work with.
With that I'll hand, it over to Paul.
Thanks, Julie and thank you to everyone for joining us today.
As Tony described Q4 was a very strong close to an important year for cohort I'm incredibly proud of our performance in 2021 and I'd like to share some specific highlights as I reflect on our fourth quarter and full year.
Revenue in Q4 was $146 million up 33% year over year and up 30% organically when excluding levels, that's $4 million contribution non.
non-GAAP operating margin was negative 13% in Q4, and this includes approximately 130 basis points of headwind from levels that as.
As we shared during our Q3 earnings call our organic operating margin declined meaningfully from Q3 Q4 due to an acceleration of attractive growth investments.
I'll share more on how investors should view, our investment levels and run rate expenses in a moment turning.
Turning to the balance sheet metrics short term deferred revenue in Q4 was $302 million up 41% year over year total RPM in Q4 with $603 million with short term RP O, representing approximately 70% of that and growing 35% year over year.
In addition to strong new business and renewal performance, our backlog metrics benefited from better invoice duration mix as well as earlier renewal timing and invoicing. This dynamic contributed to why short term Dr is growing faster than short term RPM.
It's worth noting that level sets revenue contribution came in higher than our guidance, primarily driven by our early adoption of the new purchase accounting standard issued by the FASB late last year. This new standard allows acquirers to essentially forego the deferred revenue write down that was originally factored into our guidance, we no longer expect.
Correct any deferred revenue write down from levels that or future acquisitions, given our early adoption of this new standard.
Taking a step back our strong Q4 results are a reflection of several positive trends. We saw in the year you heard me describe 2021 as a transition year for the industry and the business. Therefore, it is important not to look at 2021 in a vacuum, but rather was part of a broader multiyear backdrop.
I'd like to share some color on what this multiyear backdrop looked like for us by going back to 2020.
During 2020, the construction industry and our business faced unprecedented challenges, though we chose to continue investing in R&D.
Due to the pandemic sales and marketing growth decelerated meaningfully our strategy was to remain resilient through the pandemic toughest periods on construction, while widening our product's advantage. This led to our 2020 P&L showing substantial year over year margin improvement approximately 20 percentage points and durable revenue growth.
Stemming from our excellent 2019 performance.
Entering 2021, we anticipated that the industry's recovery would begin and wanted to best position ourselves to capitalize on that across the organization. We identified numerous attractive opportunities to pull forward 2022 hiring into 2021, we continued investing in R&D, while it reaccelerate sales and marketing investments.
We ended the year with over 2800 employees of which over 1200 are within sales and marketing and grew head count within this part of the organization by 47% year over year.
These investments ultimately translated to accelerated revenue growth throughout 2021 intangible benefits to our business here are a few notable highlights.
First this is a very strong year for our financial management offerings. This product category is our second biggest after project management and is one of our fastest growers.
Second we continued to see the strength of our broader platform strategy with 71% of total IRR generated from customers using four or more products and 37% generated from customers using six or more products. This is up 305 hundred basis points, respectively from 2020 and as a test.
It to the value customers are obtaining from the platform as a whole.
Third our growth benefited from continued improvement in renewal dynamics and improved churn, which is notable given the increasing renewal book and total book of business.
Finally, our international business continued to strengthen as we entered into the UAE and Singapore and began preparations for France and Germany's launch later this year in Q4 International revenue grew 56% year over year and now comprises 15% of total revenue up 200 basis points year over year.
As we enter 2022, we are expecting another year of investment in the business, which will lead to a second year of declining operating margins and make 2022 look outsized from a spend perspective.
However, these investments are providing returns in both the near and long term, helping to drive durable outer year growth and fuel longer term Fintech solutions, while also enabling us to deliver operating margin expansion beginning in 2023.
With that backdrop, here's our guidance for full year and Q1 2022.
For the full fiscal year 2022, we expect revenue between 661 $666 million, including a contribution of $25 million from level set and representing total year over year growth between 28 and 29%.
non-GAAP operating margin for the year is expected to be between negative <unk> 15, and negative 16% and includes a margin headwind of 400 basis points level stuff.
For the first quarter of 2022, we expect revenue between 149, and 151 million representing year over year growth between 31 and 33% Q.
Q1, non-GAAP operating margin is expected to be between negative <unk> 15 and negative 16%.
Finally regarding free cash flow margin investors can expect a year over year trend line that it is similar to that of our operating margin outlook.
In summary, we delivered very strong results in the year, we're more bullish than ever on the long term opportunity in front of us as we enter 2022, we believe we are making the right investments to fuel continued growth.
Build towards our longer term vision.
I'd like to close out by again thanking our customers the construction industry, our partners employees and shareholders 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.
Thank you if you'd like to ask a question. Please press star one on your telephone keypad. If for any reason you liked to him that question. Please press star followed by two again to ask a question press Star one.
Minder, if you are using a speaker phone. Please remember to pick up your handset before asking your question. We will pause briefly ask questions are registered.
The first question comes from Brent Thill with Jefferies. Please proceed.
Hi, This is no slowdown on for Brent Thill. Thank you for taking my question.
Do we maybe first one for you.
Wanted to ask about.
You mentioned the construction demand environment.
And playing off in 2022.
Can you talk a little bit about the dynamics impacting the industry.
From inflation to labor tightness, and how that will impact.
Look in 2022.
Absolutely loved so yeah, no I'm glad you asked that question because that is probably the number one question that people ask me.
So the way we look at it is pretty simple first we look at the the fact that the industry is facing some significant headwinds like I, just said a few minutes ago.
And that is around the cost of commodities.
The challenge with getting actually.
Cereals and equipment to job sites with all the supply chain challenges as.
As well as inflation all of those things are creating a headwind for the industry before.
Before I move into the tailwind, though I do want to assure you that I talked to our customers every day and they all remain very optimistic about the future.
But beyond that we also see that we have these tailwind and the way I look at it as the there's like I said from today's vantage point Theres really a net neutral impact on coke or the tail winds are real these are the the overall digital transformation and these new ideas around people working remote now having to use a platform like pro core.
The fact that the older generations, leaving the industry faster than we had anticipated. So those are all all tailwind, but ultimately that out to be against the headwinds to be very net neutral on how we look at the world The <unk>.
Reason I remain highly optimistic is that the these tailwind that I keep talking about they are not going away. They are going to be with us for the long haul. The fact that our digital transformation is only going to accelerate across this 14 trillion dollar opportunity over time, and we look at the headwinds we really do think that those headwinds will work themselves.
Out to some degree or another over time so.
Over the long run I remain very optimistic about the opportunity ahead of us, but don't want to discount the challenges that we face today.
Got it and maybe a quick one for Paul if I could.
Thank you for disclosing those additional metrics in terms of the number of customers using.
And Pittsburgh Corning could you maybe tell us how to think about.
The contribution to growth from new customers versus existing.
Existing customers and your expectations for the future.
Yeah look I think we continue to believe that there's a massive opportunity within our existing installed base and that's a reflection of what you heard us talk about in the earnings script around you know continue to see the platform pay off and continue to see further penetration with our customers at the same time too we talked a lot about where we are within just the overall market opportunity in his comment.
Single digit penetration into today, we continue to see our revenue being driven by a healthy combination of both of those and when we forecast out in the future. We don't foresee that changing we have tremendous opportunity that still remains within our install base and our new logo and were pretty focused on going after both.
Got it thank you.
Thanks, Bob.
Thank you. The next question comes from Brent <unk> with Piper Sandler. Please proceed.
Thank you for taking the question and good afternoon at TUI will start with you.
Rest of here to see the highest number of new customer adds I think in two years also putting up the highest billings growth in two years, how much of this acceleration would you attribute to improving conditions. After this really challenging 2020 versus more company specific share gains in these digitization tailwind.
Really kicking in.
Well, Brian Great too great to hear your voice.
It's hard to parse them apart frankly, I will say that we when we look at what's happened over the last say three years, we do realize that we are returning to a state of normalcy. So things are reverting back to how they were pre COVID-19 and a lot of ways.
However, we are facing like I've mentioned these these headwinds that might not have been there before but.
But yes, there the digital transformation acceleration is something that we're seeing and we're seeing it in lots of places like for instance, I'm really proud of our performance with our international book of business and the fact that it grew 56% last year.
We were able to see the global market opportunity has been so much bigger than.
And then the U S market and we're actually seeing the performance there. So lots of bright spots. We're also seeing a lot of bright spots around adoption of our financial products.
<unk> continued to sell very very well.
The board to all of our stakeholders, so I wish I could tease it apart, but it's hard to say I would I think it's a combination of both.
But over time I think the these tail winds are going to pay off and I think our ability to execute just gets better and better over time with this opportunity. So I'm bullish on both fronts.
Yeah.
Got it and then a quick follow up for Paul in the short term our P O, particularly strong this quarter I think north of 6 million sequential add short term RP O accelerated to 36% could you just maybe compare contrast.
The backlog of the business as it stands today and your visibility into this year versus maybe where you were a year ago any thoughts on just the durability and visibility you have and the growth would be helpful. Here.
Yeah look I think the callout short short term RPI is the right one as we talk to investors that is the metric we would point you to as the closest proxy for how to think about our grouse go forward I would call out we shared that our short term RPI was up 35% year over year, if you back out the impact.
Of M&A that would actually get closer to 33% and so ultimately as we think through our guide in the short term RPI I think those are good numbers to try and get it against when you think about kind of growth go forward and as I hope you've taken from our our our earnings calls so far we're very bullish about the opportunity ahead.
Yeah.
Great great to hear and thanks for the color. Thank you.
Thanks, Brian .
Thank you Brent and next question comes from D. J Hynes with Canaccord. Please proceed.
Hey, guys congrats on the strong results.
Do you I really appreciate the market penetration color, especially in the enterprise D. C market I get that question a lot, but my follow up there would be if.
If you guys have 25% of construction spend in that most penetrated market. The other 75% how much is owned by competitors versus being true white space right and if this end of the market is more replacement like what's typically the catalyst that needs to happen for a prospect to swap out an incumbent.
Yeah. So when we focus in on the and I appreciate you calling that out because we really did want to.
An example of how big this opportunity is the U S enterprise GC Margaret.
So when we look at that particular segment.
The the customers that we are going after in that market tend to be on legacy solutions that they have yet to replace and they they tend to have been old school ERP client server type applications that have some bolt on project management tools for instance, and they just haven't made the leap.
Yet to come over but actually in a lot of cases, we actually will have.
The percentage of that customer's business already be it a owners mandate that we're working with an owner that wants them to use pro corp, or they may be running sort of in a division within their company. So.
We then generally are displacing some legacy solution and.
The way we look at it in general is there so much opportunity ahead of us because of this.
Like I said with only 25% penetration. This is our most digitized market that we actually serve which leads us to be very very optimistic about the global opportunity as the rest of the global.
Construction market actually starts becoming more and more digitized.
So, yes lots of opportunity and I do want to assure you because people ask this question to which is this is not a product market fit challenge our product our product works great across the enterprise. It's a time to adoption challenge, which is a the longer our products have been in market the longer we've been working with customers the more they're going to adopt.
So just it's just for US it's green space for us to capture.
From now and into the mid and the longer term.
Yeah, Yeah, that's great to hear.
And then a follow up for Paul So, 47% head count growth in sales and marketing in 'twenty one.
I don't know if these numbers are in the filing but if we looked at sales and marketing headcount growth over two year period.
What would that kind of look like and then the follow up would be like what's contemplated in the margin guide in terms of sales and marketing head count growth in 'twenty two.
Yeah, I think that the thing I'll actually point, you to and that's important to take away is if you look at that 47% number. It is reflective of the level set acquisition as well and so if you want to think about sales and marketing on an organic perspective, it's closer to the low 30 <unk> in general.
We talked about 2020 was really the biggest slowdown for us in sales and marketing growth I don't have the numbers off top and for 'twenty, one to 'twenty, two but I would tell you that we expect that those numbers will normalize and start to align closer and closer with revenue growth as we get through this catch up period up kind of that three year window I talked about.
Yep Yep, Okay makes sense thanks, guys.
Thanks C J.
Thank you D. J. The next question comes from Kash Rangan with Goldman Sachs. Please proceed.
Hi, Thank you very much congratulations.
Very nice end to the year.
Trio is encourage procure some of the commentary that you've that you've.
Provided one was the net new customer growth was up pretty significantly stronger this quarter than what we had expected I'm curious if you could parse out.
How much of that is because of the.
I know that there are headwinds, which you acknowledged which we appreciate how much of that is real improvement in the fundamentals of the business versus maybe customers that came through the acquisition. Most of secondly, very intrigued by your commentary on Fintech I think I don't think you formally talked about.
About this particular product line can you just take a step back for us and explain what is the big problem that construction industry faces pain.
Payments perspective, what is the uniqueness of what <unk> can do and what kind of impact they're having on your financials, maybe that could be handled by Paul. Thank you so much.
Yeah, that's great to hear your voice well, let me just clear the air on the first question about we're not.
Getting any contribution from M&A on that front. So this is a.
The success that we're seeing is all is based on the fundamentals of the business that you know so well, but you know that I will loved to talk to you about these fintech businesses. Because this is an area where I'm really passionate.
Let me just start by saying <unk>.
<unk> celebrated our 20 year anniversary, so I'm gonna shamelessly plug our 20 year anniversary because I think it's really it's a fun one for cohort.
And we've been providing solutions as industry for those two decades, and if you think about what we do for the industry, we're really helping our customers manage risk right. So project management is really risk management and so we've been doing this for a long time, but we realized over the years that not only are we providing all this risk management solutions to the industry, but because we're a platform.
We're able to capture all of this data.
And Trust me, a tremendous amount of data around project risk and so we realize that we can reflect that data back into insights to our customers today to allow them to run better businesses, but we also realize that there's other services, but the industry needs in order to be successful. So we know we're getting really good at understanding how we're where risk lies in construction.
So the way we're looking at 'twenty 'twenty. Two is is that we're building the foundation for these fintech businesses around creating risk profiles that allow us to better identify how we can do things around let's say material financing, which is one of the areas where we're interested in looking at work and we're pursuing how do we how do we know who a good material.
Finance customer could be well, we know where risk lives and so we can put together these risk profiles and then on the insurance side. All of this is related to risk. So we can put together risk profiles on folks that could allow them to purchase insurance for less money than they're paying today, because we can help them by knowing where risk lie so all of the things that we're <unk>.
Looking on now are building this foundation and then over the long run which is going to take some time as we experiment through 2022 and beyond we will be able to deliver on these on these new fintech businesses, but it is a multiyear journey, but I'll tell you what's really exciting about it to me cashes I'm seeing fingers on keyboards every day delivering on this.
And that's really really exciting and I know you asked about payments should we I believe the new is one of the Fintech, maybe not but that's it.
The other is the other one I didn't yeah. You did so it's just the third area, where we are really encouraged as you know we are acquired level set it would be may.
The announcement in September we actually closed in November and a lot of the things that they're working on are helping us on the compliance side of financial management, which actually gets us closer to being able to deliver on payments and I'm not alone. We are also making headway.
It's a multiyear journey, but we're actually we're actually seeing some progress on our end and we'll talk more about it as we have things to share, but it's all very very exciting.
Yeah, and then maybe just to round out on the couple of other points.
Myself to reinforce the customer count piece cashless to me and said, there's no M&A inclusive in that and if anything frankly, the headwinds that we've talked about on the macro front still do persist largely for the SMB. So it's important to note as we had talked about in the last quarter or that customer count actually still faces some degree of a headwind largely in the SMB and it's why you.
See such a big disparity in the growth rates between our total customer count in the 100 K plus customer.
On the margin impact associated with some of the Fintech investments that too. We just spoke about I'd point, you to where we talked about the headwind associated with the level of site acquisition, we talked about how it's 400 basis points of headwind to our overall guidance that is an area, where we are looking at that acquisition is an acceleration of these investments and a big part of that dollars that.
We're spending with the level that team is going deeper on this data foundation and I'm starting to experiment and really invest in least in tech solutions and so that's a place I would point you to to think about the margin impact.
Got it so Paul these investments in calendar 'twenty two should we expect a positive outcome in calendar 'twenty three.
Because conservatively rightly so you're pointing you're guiding to slower revenue growth in calendar 'twenty two versus 2021 , but should we expect that to reverse course as a result of what.
What could be a positive effect from the investments that's it for me. Thank you so much and happy 20th anniversary.
Hey, Thanks, Kash, we think across the spectrum of the investments we are making across international products. These various areas that we're going to be able to sustain durable growth in the outer years I would not tell you or anyone on this call to model and direct revenue impact associated with these fintech investments anytime in the foreseeable future.
Thank you Kash next question comes from Brian Schwartz with Oppenheimer. Please proceed.
Oh, Yeah, Hi, Yeah, and I'll add my congratulations to a real nice finish to the business for the year and thank you for taking my questions.
I wanted to circle back you mentioned in your opening commentary you talked about the structural changes that the pandemic has unleashed on the end market specifically you talked about the new hybrid work not all and the technology demands of the younger workers in the Labor Force. The question I wanted to ask you maybe in your.
Our stations or you look at the pipeline just specifically for these structural changes how much of this new investment cycle.
He has taken place or maybe add is saying it another way how much of this new investment cycle do you think is still out there in the end market.
That's a tough one.
So.
Yeah, I don't know maybe.
Maybe Paul do you have any can you elaborate when you mean investments in this cycle I'm not sure I follow exactly what you mean there Brian .
Yeah, maybe more directly I think there's a big debate around pull forward demand.
From the structural changes that got unleashed from the pandemic now were in the third year of the pandemic. So just trying to see how much of that add mark at has already made these investments you know versus how much is still left out there to go. Thanks.
Got it I appreciate the clarity there Brian Yeah, I think we are actually one of those industries that had the opposite effect, we did not benefit from pull forward as we think through the structural dynamics that TUI was referencing earlier, we see those as long term tailwind things like digitization picking up in this industry. So we pointed you were still.
Single percent penetrated here. This market has a ton of runway and really what Covid has done is more brought to light the need to digitize for these stakeholders, who otherwise might have sat on the sidelines longer we do not believe it has resulted in a pull forward in any sense.
Thanks, Paul for that color and then the one follow up I actually had it for you unless two he wants to take it you did mention qualitatively that you saw improvements in the net revenue retention number and I was just wondering if you could just provide any clarity around any color on how much of that is coming from increasing <unk>.
Band.
From the existing customers versus those customers, adding the new products that you've disclosed.
It's a combination of both its why we went ahead and wanted to speak to the kind of additional growth we've seen in the forensics customer penetration, it's hard for us to start it out specifically as these deals in many cases customers will come in and they'll expand volume while also buying additional products at the same time, we look at really that adoption of the <unk>.
<unk> and overall are very pleased with the ability to further penetrate into the platform and think there's a lot more runway and that will continue to see construction volume being a driver of expansion, but at the same time, we will continue to see our further and further push into expanding wallet share also help contribute to that.
Great. Thanks for taking my questions and congrats on a real nice finish to the year.
Thanks, Brian .
Thank you Brian . The next question comes from Adam Borg with Stifel. Please proceed.
Hi, this is off against the on trade and board. Thank you for taking the question maybe for TUI.
Of course, it started getting on the market via a direct footprint and just given the start of the year I was curious like how are you thinking about the opportunity for building out the channel, especially if you'd love to increase our international presence in coming years.
Yeah, absolutely so by the way I appreciate the question.
Yes.
When we look at any international expansion and our go to market strategy, we will look.
You know very closely at what the buying patterns are up how are the prospects that want to buy software and so we're very attuned to the fact that some markets are very channel heavy in some markets are.
More direct sales so.
It really depends on which market you're talking about as to how we're going to look at it but ultimately what ends up happening is we.
We will generally have a direct salesforce that augmented by channel partners.
And so it's a big part of our international go to market, but.
Yeah, So it's really market dependent frankly.
Great. That's it for me thank you.
Thank you Austin.
Yeah.
Thank you. The next question comes from Socket Korea.
With Barclays. Please proceed.
Okay, Great Hey, Tim Hey, Paul Thanks for taking my questions here.
Okay can we maybe hey can we maybe just start with you.
It was mentioned earlier, but.
It feels like pro core financials has been doing really well lately and so I was wondering if you could just talk a little bit about what sort of adoption you have within the customer base for financials, specifically and who are you displacing or who or what youre displacing there when when you know what.
When you make that sale.
So thank you for yes, we have been we've.
We've been very bullish on our financial products, because they have been doing very well and they've been very well received so we have we're very fortunate that our financial products are are needed by owners general contractors and specialty contractors and we we like to think about financial product lines has been somewhat of an industry defining solution.
In prior to pro core you would do a lot of your financial management in Excel as a project manager and then you with VPN into your ERP system and try to make sure that the invoices that you're keeping track of it from the job site trailer, making it into the ERP. It was very complicated and it was very prone to have mistakes entered into the <unk>.
Systems.
And so ultimately what we wanted to do was we wanted to bring the coke. We're so good at is bringing the concept of collaboration workflow.
And ease of use to the tools that the folks on the job site needed in order to get all of the financials under control and then connect to the back office ERP solutions through ERP conductors and we've been in this has resonated very well again with all segments of the market are all stakeholders in general it just ACA.
Knowledge is the fact that construction management has done in the job site trailer and financial management.
For the corporate is done in the in the corporate office and we bridge that gap really really nicely and it's being very well received.
Yes.
Got it got it that makes a lot of sense, Paul maybe maybe for you.
France, and Germany, I imagine are really interesting markets.
I guess.
If you were to sort of look at the equation for the market opportunity. There in terms of construction volume and whatever you want to call it sort of take rate or pricing. How do you sort of think about that calculus and sort of sizing the dose the.
Those teams either collectively or individually.
Yeah I appreciate the question I think that you know when we think about our international opportunity. It is important to note that construction is a little different than other market. We really do have to look at you know.
A number of factors from GDP population growth when we think about the impact that our market will have when we expand into it I think it's.
It's no surprise that France, and Germany are among if not really the largest markets we see in continental Europe today.
And represent hundreds of billions of dollars of construction volume, but we think we're a great fit in those respective markets and have a pretty big healthy opportunity to build a multi hundred million dollar opportunity within those regions and so while it's early days and while we do believe that international will be a big opportunity to continue to grow and we think.
That France, and Germany, representing an awesome opportunity ahead, and one that we think we can build really big businesses.
Got it Paul if I could squeeze in a housekeeping question. If that's all right and I apologize I joined late so so I'm not sure. If this was asked but I know we talked about organic growth on revenue and I think also on CRP O just to make sure. The questions asked could we see anything about how much acquisitions add to the deferred revenue balance.
We did it it's about two points.
Yes.
Very helpful. Thanks, guys.
Thank you Craig.
Thank you socket. The next question comes from Jason <unk> with Keybanc. Please proceed.
Great. Thanks for fitting me in maybe to eat really interesting to hear your comment on.
On the hybrid model for construction, but maybe for those of US who haven't necessarily set foot on a construction site.
What are some of the roles that were maybe in the trailer that are now moving to hybrid.
Yes, I'm glad you asked the adjacent because yeah, we we're not super clear on that one.
So there are several jobs that work.
Historically done in the job site trailer, but don't necessarily have to and so if you think about folks that do bidding on projects or pricing on projects are those folks can do that from pretty much anywhere.
And so those are the estimators for instance, also the BDC group, which is a visual design group, which you'll be doing updates to models <unk> updates to designs don't necessarily have to be in the job site trailer every single day to get their job done in fact, I've heard stories time and time again about how much more productive. They are when they are able to work from home and kind of in isolation.
And then come into the job site trailer a day or two a week and it's very similar adjacent to what I think we all experienced in the work world as there are some folks that just are required to have.
Headspace and heads down space and so those are the folks that don't.
Don't necessarily have to be there now if you're pouring concrete of course, you're not going to that from your living room. So you've got a certain jobs actually have to be there every day, but then there are certain.
Folks that don't.
Perfect No. That's a good explanation and then a quick follow up on the sales hiring.
Brokaw It really didn't turn on the sales style until Q2 last year. So my question is how long does it typically take for a salesperson to contribute or reach full productivity.
Yeah, you know unfortunately as with many things Jason it's not a one size fits all answer if you go back and think about our go to market approach, we have customers, who pay a single digit thousands of dollars up to customers, who pay us millions of dollars in the Moe.
Emotions, you would expect to see from a sales rep or pretty consistent with the size of the customer more than anything and so when you look at reps who are very much focused on the SMB youre talking months and when you start to talk about enterprise reps that can be quarters, but nothing atypical in terms of a ramp time relative to other software companies.
Okay excellent that's helpful. Thanks.
Thanks, Jason.
Thank you Jason that concludes today's Q&A session I would like to pass the conference back to the management team for closing remarks.
Thank you everyone talk to you soon.
That concludes the pro core Technologies, Inc. FY 'twenty, one Q4 earnings call. Thank you for your participation you may now disconnect your line.
Okay.
Okay.