Q1 2024 Procore Technologies Inc Earnings Call
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Cameron: The conference will begin momentarily. Good afternoon. Thank you for attending today's Procore Technologies Inc. Fiscal Year 24 Q1 Earnings Call. My name is Cameron, and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. And I would now like to turn the conference over to our host, Matthew. You may proceed.
Cameron: Good afternoon. Thank you for attending today's pro core Technologies, Inc. Fiscal year 2000 for Q1 earnings call. My name is Cameron and I'll be your moderator for today.
Cameron: Lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end and I would like now like to turn the conference over to our host Matthew you May proceed.
Matthew: Hey, thanks, everyone. Good afternoon.
Cameron: Hey, Thanks, everyone. Good afternoon, welcome to <unk> 2024, first quarter earnings call I'm, Matthew Please VP of finance and with me today are two record much founder President and CEO and Howard.
Cameron: CFO.
Matthew Puljiz: Welcome to Procore's 2024 First Quarter Earnings Call. I'm Matthew Puljiz, VP of Finance, and with me today are Thuy Courtemanche, Founder, President, and CEO, and Howard Fu, CFO. Further disclosure of our results can be found in our press release issued today, which is available on the Investor Relations section of our website, and our periodic reports filed with the SEC. This call is being recorded, and a replay will be available following the conclusion of the call.
Cameron: Further disclosure of our results can be found in our press release issued today, which is available on the Investor Relations section of our website and our periodic reports filed with the SEC today's call is being recorded and a replay will be available following the conclusion of the call.
Matthew Puljiz: Comments made on this call may include forward-looking statements regarding our financial results, products, customer demand, operations, and macroeconomic and geopolitical conditions. You should not rely on forward-looking statements as predictions of future events. All forward-looking statements are subject to risks, uncertainties, and assumptions and are based on management's current expectations and views as of today, May 1st, 2024. Procore undertakes no obligation to update any forward-looking statements to reflect new information or unanticipated events, except as required by law.
Cameron: Comments made on this call may include forward looking statements regarding our financial results products customer demand operations and macroeconomic and geopolitical conditions you should not rely on forward looking statements as predictions of future events. All forward looking statements are subject to risks uncertainties and assumptions and are based on management's current expectations and views as them.
Cameron: Today May one 2024 <unk>.
Cameron: <unk> 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 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 while also.
Matthew Puljiz: If this call is replayed or viewed 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'll 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. And so, with that, let me give it to Dewe
Cameron: We'll 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 and so with that let me give it to charity.
Dewey: Hey, thanks, Matt. And thank you, everyone, for joining us today.
Charity: Hey, Thanks, Matt and thank you everyone for joining us today.
Dewey: I'd like to start by expressing gratitude for the team's hard work this past quarter and by thanking all of our customers for their continued trust and partnership with Procore. Some notable highlights include: In Q1, we grew revenue 26% year over year. We continue to make improvements to our efficiency profile, delivering strong margin performance in the quarter, and Procore was ranked number eight among G2's top 100 global software companies for 2024. This is our fourth year of being included on this list and our first time ranking in the top 10.
Charity: Like to start by expressing gratitude for the team's hard work this past quarter and by thanking all of our customers for their continued trust and partnership with <unk>.
Charity: Some notable highlights were in Q1, we grew revenue 26% year over year, we continue to make improvements to our efficiency profile delivering strong margin performance in the quarter and <unk> was ranked number eight LNG two's top 100 global software companies for 2024.
Charity: This is our fourth year of being included on this list and our first time ranking in the top 10.
Dewey: A huge testament to the strength of the Procore brand and the value that we continue to deliver to our customers. The standout event of the quarter was hosting our ECAB, which stands for our Executive Customer Advisory Board, at our Carpinteria office. This is an event that we hold twice a year, and this quarter, we brought together executives from over 30 of our largest owners, GCs, and specialty contractor customers, along with several members of the Procore leadership team from across the organization.
Charity: A huge testament to the strength of the <unk> brand and the value that we continued to deliver to our customers.
Charity: The standout event of the quarter was hosting our E cab, which stands for our executive customer Advisory Board at our Carpenter Ria offices.
Charity: This is an event that we hold twice a year and this quarter. We brought together executives from over 30 of our largest owners gcs and specialty contractor customers along with several members of the <unk> leadership team from across the organization.
Dewey: This event is an invaluable opportunity for us to share Procore's strategy, hear feedback on their needs, discuss construction dynamics, and ultimately determine how Procore can become an even stronger partner to the industry. So I'd like to share five major takeaways I took from the event.
Charity: This event is an invaluable opportunity for us to share pro core strategy here feedback on their needs discuss construction dynamics and ultimately determined how pro Cork in peak I'm, an even stronger partner to the industry.
Charity: So I'd like to share five major takeaways I took from the event.
Dewey: First, industry sentiment. You know, overall, customers expressed more long-term optimism than I had anticipated. Despite the very real uncertainties and challenges in the near term, these customers are increasingly optimistic about the long-term future of construction and their business. They shared that this optimism is in part driven by the pockets of strength that they continue to see in construction. Those that have diversified portfolios are benefiting from increased spend in sectors such as data centers and infrastructure.
Charity: First as industry sentiment.
Charity: Overall customers expressed more long term optimism than I had anticipated.
Charity: The very real uncertainties and challenges in the near term. These customers are increasingly optimistic about the long term future of construction and their businesses.
Charity: They shared that this optimism is in part driven by the pockets of strength that they continue to see in construction.
Charity: Those that have diversified portfolios are benefiting from increased spend in sectors, such as data centers and infrastructure.
Dewey: So while it's clear the environment remains dynamic in the near term, sentiment is trending in a positive direction, and the industry's confidence in the long term is getting stronger. Second, our product roadmap. Last quarter, I shared that a key focus area within our product roadmap would be improving the flexibility, configurability, and connectability of our products to meet the needs of all types of stakeholders. Customers at the event overwhelmingly validated that this roadmap is aligned with where the industry is headed.
Charity: So while it is clear the environment remains dynamic in the near term sentiment is trending in a positive direction and the industry is confidence in the long term is getting stronger.
Charity: Second is our product roadmap last quarter I shared that a key focus area within our product roadmap would be improving the flexibility configure billety and connect ability of our products to meet the needs of all types of stakeholders.
Charity: Customers at the event overwhelmingly validated that our roadmap is aligned with where the industry is headed these customers report that the complexity of projects is increasing placing large demands on workers' time and attention, which cohort can help alleviate by focusing on enhancing our current product capabilities and integrations.
Dewey: These customers report that the complexity of projects is increasing, placing large demands on workers' time and attention, which Procore can help alleviate by focusing on enhancing our current product capabilities and integration. Ultimately, doing so will solidify Procore as the system of record and engagement at the center of our customers' operations.
Charity: Ultimately doing so will solidify pro core as the system of record and engagement at the center of our customers' operations.
Charity: This brings me to my third takeaway, which is data it's clear that these customers who believe that they are at an inflection point dealing with massive amounts of data the biggest challenges with data are aggregating it across systems connecting it from one phase of construction to another and knowing what data to focus on.
Dewey: It's clear that these customers believe that they are at an inflection point dealing with massive amounts of data. The biggest challenges with data are aggregating it across systems, connecting it from one phase of construction to another, and knowing what data to focus on. Our customers see Procore as central to their technology and operations because of our ability to act as a true data aggregator. Unlike other solutions in the market that are comprised of multiple disconnected points, Procore's single platform connects products, stakeholders, and workflows across the entire construction lifecycle and enables customers to centralize data and run analytics across their entire business.
Charity: Our customers see procure as central to their technology and operations because of our ability to act as a true data aggregator.
Charity: Like other solutions in the market that are comprised of multiple disconnected point solutions cocoa, our single platform connects products stakeholders and workflows across the entire construction lifecycle and enables customers to centralized data and run analytics across their entire business.
Dewey: Data is foundational to our connected platform, which creates possibilities for conversational experiences within projects through upcoming products such as Procore Copilot. You know, I had an interesting conversation with one of the most forward-thinking contractors on this topic. And they shared that they are particularly concerned about productivity rates and identifying early warning signs before a job goes sideways. They asked a host of questions that can't be answered by any one system and spent a lot of time putting these answers together to anticipate if a job will be profitable or not. You know, this is why we're so excited about things like Copilot.
Charity: Data is foundational to our connected platform, which creates possibilities for conversational experiences within projects through upcoming products such as <unk> co pilot.
Charity: I had an interesting conversation with one of the most forward thinking contractors on this topic and.
Charity: And they shared that they are particularly concerned about productivity rates and identifying early warning signs before job goes sideways.
Charity: They asked a host of questions that can't be answered by any one system and spent a lot of time, putting these answers together to anticipate if a job will be profitable or not.
Charity: Is why we're so excited about things like co pilot with pro core co pilot, they're going to be able to create custom reports to look across multiple systems and allow them to identify those early warning signs and take action sooner, which is only made possible by our aggregated data platform.
Dewey: With Procore Copilot, they're going to be able to create custom reports to look across multiple systems and allow them to identify those early warning signs and take action sooner, which is only made possible by our aggregated data platform. This is just one example of how Procore's foundational data asset is enabling us to leverage AI to help customers analyze, optimize, and change how they operate their business. Speaking of which, the fourth takeaway is AI.
Charity: This is just one example of how pro course foundational data asset is enabling us to leverage AI to help customers analyze optimized and change how they operate their businesses.
Charity: Speaking of which the four takeaways AI discussions around the use of AI has increased dramatically in the last year.
Dewey: Discussions around the use of AI have increased dramatically in the last year. You know, I'm often asked about the transformational shift in AI and whether or not it may threaten jobs in construction. There was a strong consensus across these customers on two themes. One, the potential for AI to transform how our customers build is real. And two, there are no shortcuts in construction.
Charity: I'm often asked about the transformational shift in AI, and whether or not it may threaten jobs in construction.
Charity: There was a strong consensus across these customers on two things one the potential for AI to transform how our customers build is real and two there are no shortcuts in construction our customers continually seek ways to build more efficiently, but not at the expense of quality or safety.
Dewey: Our customers continually seek ways to build more efficiently, but not at the expense of quality or safety. AI's best use is likely not to do what someone forgot to do or replace what someone might do, but rather to act as a force multiplier by automating processes, surfacing information in real time, and recommending the next best action. Customers are clearly excited about how AI can be used to solve the biggest challenges for the construction industry, and Procore is well positioned to leverage this technology.
Charity: AI is best used is likely not to do what someone forgot to do or replace what someone might do but rather to act as a force multiplier by automating processes surfacing information in real time and recommending next best actions.
Charity: Customers are clearly excited about how AI can be used to solve the biggest challenges for the industry and <unk> is well positioned to leverage this technology.
Dewey: You know, I pride myself on being the earliest customer of our products. And in fact, I am currently an early beta customer of Procore Copilot and have tested it on my own personal construction project. I was recently able to have my first conversation with Copilot on one of my projects, where I asked it to show me which RFIs have an associated scope change.
Speaker Change: Myself I'm being the earliest customer of our products and in fact I am currently in early beta customer appropriate co pilot and tested it on my own personal construction projects.
Dewey: Co-pilot responded with a specific RFI name and number, the scope of work, the estimated cost for the change, which subcontractor was responsible, and the status. You know, previously, this would have taken me hours of going through hundreds of RFIs, cross-checking drawings and change orders, and running several reports to glean this information myself. The simple actions saved me valuable time and eliminated risk.
Speaker Change: I was recently able to have my first conversation with co pilot of one of my projects, where I actually just show me, which RFID having associated scope change.
Speaker Change: Copilot responded with a specific RFID name and number the scope of work the estimated cost for the change, which subcontractor was responsible and the status.
Speaker Change: Previously this would have taken me hours are coming through hundreds of RFID cross checking drawings and change orders and running several reports to glean this information myself.
Speaker Change: The simple action semi valuable time and eliminated risk.
Dewey: While it's still early to predict the full impact of AI on construction, it's clear that the conversational and predictive capabilities of this technology are going to be game changers for the industry. Ultimately, my goal for these types of events is to strengthen our understanding of how we can help our customers tackle challenges in construction, one of the biggest being the persistent labor shortage. Customers are responding in a variety of ways, including instituting mentoring programs, lobbying to incentivize trade school placements in high schools, leveraging AI to support new talent, and focusing more on field staff.
Speaker Change: While it's still early to predict the full impact of AI on construction, it's clear that the conversational and predictive capabilities of this technology are going to be game changers for the industry.
Speaker Change: And finally partnership ultimately my goal for these types of events is to strengthen our understanding of how we can help our customers tackle challenges in construction one of the biggest being the persistent labor shortage.
Speaker Change: Customers are responding in a variety of ways, including instituting mentoring programs lobbying to incentivize trade school placements and high schools leverage AI to support new talent and focusing more on field staff.
Dewey: You know, this clearly aligns with our Procore.org efforts to help bridge the gap for skilled labor and inspire the next generation of construction professionals. This event also underscored just how important it is that we continue to partner with the industry beyond the technology we provide to help solve the challenges of construction. You know, our customers deal with so much complexity. I'd like to share the real world story of a customer that attended the event to help illustrate our partner.
Speaker Change: Clearly aligns with our <unk> dot org efforts to help bridge the gap for skilled labor and inspire the next generation of construction professionals.
Speaker Change: This event underscore just how important it is that we continue to partner with the industry beyond the technology, we provide to help solve for the challenges of construction.
Speaker Change: Our customers deal with so much complexity I'd like to share real World story of a customer that attended the event to help illustrate our partnership.
Dewey: A group of Procore leaders recently joined our customer, Hoglan Group, a large energy and infrastructure contractor, for a site visit to a wind energy project in Long Island, New York. This important project will connect offshore wind farms to the main power grid and involves the construction of a converter station, over 17 miles of trenched power lines, and a final connection station to the grid.
Speaker Change: A group of protocol leaders recently joined our customer Hoglund group, a large energy and infrastructure contractor for a site visit to wind energy project in long Island, New York.
Speaker Change: This important project will connect offshore wind farms to the main power grid and involves the construction of a converter station over 17 miles of trench power lines and a final connection station to the grid.
Dewey: For this project, Hoglund has to contend with a number of regulatory bodies. They have to meet environmental regulations, control traffic and safety, secure multiple permits, get schedule clearance from multiple government agencies, and conduct night work in all types of weather. The sheer complexity and the amount of data involved in these heavy civil projects cannot be overstated. Hoglan, with a reputation in the industry for safety, efficiency, and a tech-forward approach, turned to Procore as a technology solution and partner to manage this project.
Speaker Change: For this project Ogden has to contend with a multiple of regulatory bodies. They have to meet environmental regulations controlled traffic and safety secured multiple permits get schedule clearance from multiple government agencies and conduct night work in all types of weather.
Speaker Change: The sheer complexity and the amount of data involved in these heavy civil projects cannot be overstated.
Speaker Change: Hoglund with a reputation in the industry for safety efficiency and a tech forward approach turned to <unk> as a technology solution and partner to manage this project.
Dewey: Beyond ramping up team usage of Procore's post-implementation, their leaders are working with our team to find better ways to build. They see the opportunity to strategically leverage Procore to identify and roll out new standard operating procedures that reduce risk around quality, safety, schedule, and improve visibility into their project budget. They will be leveraging Procore's action plans to standardize project performance and capture insightful data. Procore empowers Hoglund's management to ensure consistency across projects, powering their analytics, and ultimately helping save costs and meaningfully reduce risks on projects. Hoagland's willingness to collaborate at this level underscores the value of Procore's comprehensive solution, partnership, and industry expertise. This reflects a clear trend we've seen, especially within the enterprise.
Speaker Change: Wrapping team usage of <unk> post implementation, then leaders are working with our team to find better ways to build.
Speaker Change: They see the opportunity to strategically leverage <unk> to identify and rollout new standard operating procedures that reduce risk around quality safety schedule and improved visibility into their project budget.
Speaker Change: They will be leveraging <unk> action plans to standardize project performance and capture insightful data.
Speaker Change: <unk> empowers hoglund's management to ensure consistency across projects powering their analytics, and ultimately, helping save costs and meaningfully reduced risks on projects.
Speaker Change: <unk> willingness to collaborate at this level underscores the value of <unk> comprehensive solution partnership and industry expertise.
Speaker Change: This reflects a clear trend, we've seen especially within the enterprise <unk>.
Dewey: Construction executives want to become better builders to grow their margins in the face of a tougher economic environment and are turning to Procore to help them accomplish this goal. I'm honored that Hoglund chose Procore to help them, and I look forward to continuing to serve them and support them. Speaking of choosing Procore, I'd like to share a few notable customer wins in the quarter. Algarishi is a leading North American construction company that's ranked number 39 on ENR's top 400 contractors list and has been a Procore customer for over five years.
Speaker Change: Construction executives want to become better builders to grow their margins in the face of a tougher economic environment and are turning to pro quarter to help them accomplish this goal.
Speaker Change: Honored that Hog, then chose <unk> to help and I look forward to continuing to serve them and support them.
Dewey: This quarter, Albarece expanded their construction volume with us and decided to implement Procore Pay on top of the robust suite of products that they were already using. This is a great example of how our largest customers believe in our vision to streamline the construction payment process. Albuquerque will continue to use Procore on innovative projects such as Canada's first large-scale lithium-ion battery production plant and the U.S. Navy's Kings Bay facility, which is being overhauled for the very first time in its 30-year history and was nominated for ENR's 2023 Project of the Year.
Speaker Change: Speaking of choosing program I'd like to share a few notable customer wins in the quarter.
Speaker Change: <unk> is a leading north American construction company. That's ranked number 39 on Anr stop 400 contractors list and theres been appropriate customer for over five years.
Speaker Change: This quarter <unk> expanded their construction volume with us and decided to implement pro core pay on top of the robust suite of products that they are already using.
Speaker Change: This is a great example of how our largest customers believe in our vision to streamline the construction payment process.
Speaker Change: <unk> will continue to use <unk> on innovative projects such as Canada's first large scale lithium ion battery production plant and the U S. Navy's Kings Bay facility, which has been overhaul for the very first time in its 30 year history and was nominated for INR 2023 project of the year.
Dewey: We continue to strengthen our relationships with leading general contractors, and I'd like to share another example of our deepening partnership with the ENR 400. McGough is an ENR 400 contractor with a nearly 70-year legacy serving the commercial, educational, and government sectors.
Speaker Change: We continue to strengthen our relationships with leading general contractors and I'd like to share. Another example of our deepening partnership with the Anr 400.
Speaker Change: <unk> is an in our 400 contractor with a nearly 70 year legacy of serving the commercial educational and government sectors.
Dewey: They recently expanded significantly with us, deploying Procore enterprise-wide across their business. Initially, they had purchased Procore as part of a rigorous two-year pilot program, and I am happy to share that they ultimately chose Procore over competitive solutions due to our ability to streamline the field-to-office experience, integrate with their existing technology solutions, and support their data strategies and ambitious growth plans over the next several years. Additionally, McGaugh saw Procore as a tool to help them attract and retain top talent, given how adamantly their field teams advocated for it.
Speaker Change: They recently expanded significantly with us deploying pro core enterprise wide across their business. Initially they had purchased <unk> as part of a rigorous two year pilot program and I am happy to share that they ultimately chose <unk> over competitive solutions due to our ability to streamline the field the office experience integrate with their.
Speaker Change: Existing technology solutions and support their data strategies and ambitious growth plans over the next several years.
Speaker Change: Additionally, <unk> is a tool to help them attract and retain top talent given how adamantly their field teams advocated for it not.
Dewey: Not only did their employees want to use Procore, but McGough also saw the value of using a platform that many recruits had already used through university programs or at their prior companies. With Procore, McGough plans to continue to expand into markets like healthcare, industrial, and multifamily and renew their focus on data centers and federal projects. In addition to expanding with customers, we continue to build new customer relationships. Data Bank Holdings is a leading provider of enterprise-class data center, cloud, and interconnection services in the US and became a Procore customer in Q1. They have an infrastructure footprint consisting of over 65 data centers representing over 3 million square feet of combined square footage.
Speaker Change: Not only did their employees want to use pro core Mcgough also saw the value of using the platform that many recruits have already used through university programs or at their prior companies.
Speaker Change: With pro <unk> got plans to continue to expand into markets like healthcare industrial and multifamily and renew their focus on data centers and federal projects.
Speaker Change: In addition to expanding with customers, we continued to build new customer relationships.
Speaker Change: Data Bank Holdings is a leading provider of enterprise class data center cloud and interconnection services in the U S and became a <unk> customer in Q1.
Speaker Change: We have an infrastructure footprint consisting of over 65 data centers, representing over $3 million of combined square footage.
Dewey: Their team was looking for a solution that could standardize processes across their business, provide a single source of truth to better manage their growing number of projects, provide portfolio level reporting, and help them scale efficiently as they set out to double the number of their capital projects in the next five to seven years. After in-depth research of available technology solutions, I am happy to share that they chose Procore as their primary construction management platform, and they shared that the unmatched value Procore provides far outweighs the cost.
Speaker Change: Their team was looking for a solution that could standardize processes across their business provide a single source of truth to better manage their growing number of projects provide portfolio level reporting and to help them scale efficiently as they set out to double the number of their capital projects in the next five to seven years.
Speaker Change: After in depth research of available technology solutions, I am happy to share that they chose <unk> as their primary construction management platform and they shared that the unmatched value Pro court provides far outweighs the cost.
Dewey: So before I close, I'd like to leave you with an anecdote that brings to life the ROI that Procore provides. You know, in construction, our customers allocate a budget for BIM expenses. These expenses effectively reflect the large amount of high-priced labor hours spent on design coordination, fixing design issues, minimizing rework, and ensuring the designs are feasible for builders in the field.
Speaker Change: So before I close I'd like to leave you with an anecdote that brings to life. The ROI that <unk> provides.
Speaker Change: The construction of our customers allocate a budget for Bam expenses.
Speaker Change: These expenses effectively reflect the large amount of high price labor hours spent on design coordination fixing design issues minimizing rework and ensuring the designs are feasible for builders in the field.
Dewey: Every labor hour saved on this process increases our customer's profit margin. Recently, one of our ENR 400 general contractor customers, Bernard's, began deploying our BIM solution on their project. Their VP of BIM shared the following quote, "Based on the initial set of projects that we have deployed Procore's BIM solution on, we've been able to reduce our BIM expenses by anywhere from 50 to 80 percent. These significant savings allow us to reduce our BIM budget, which our estimators are going to leverage to make us more competitive on future bids." end quote
Speaker Change: Every labor hour saved on this process increases our customers' profit margins.
Speaker Change: Recently, one of our Anr 400 general contractor customers Bernard's began deploying our <unk> solution on their projects their VP of Ben shared the following quote.
Bernard: Based on the initial set of projects that we have deployed <unk> solution on we've been able to reduce our <unk> expenses by anywhere from 50% to 80% <unk>.
Ben: These significant savings allow us to reduce our <unk> budget, which are estimated as are going to leverage to make us more competitive on future bids and quote.
Howard: So these stories, along with the conversations I've had with customers at events like our customer advisory board meetings, all directly influence how I think about the strategy and the direction of the business. You've heard me say before that we are greatly emphasizing focus and how we plan and operate. My time with customers not only reinforces that our decision to focus is the right one, but that we're focusing our efforts on the right areas that are going to deliver the greatest value to our customers in both the short and the long term. So with that, I'll turn it over to Howard to walk through the financial results. Thanks, Steve.
Speaker Change: So these stories along with the conversations I've had with customers at events like our customer Advisory Board meeting all directly influence how I think about the strategy and the direction of the business.
Speaker Change: You've heard me say before that we are greatly emphasizing focus and how we plan and operate.
Speaker Change: My time with customers not only reinforces that our decision to focus is the right one but we are focusing our efforts on the right areas that are going to deliver the greatest value to our customers in both the short and the long term.
Speaker Change: So with that let me turn it over to Howard to walk through the financial results.
Howard: Thanks, Thuy, and thank you to everyone for joining us. Today, I'll recap our Q1 financial results, share some color on the quarter, and conclude with our outlook. Total revenue in Q1 was $269 million, up 26% year-over-year, and international revenue grew 32% year-over-year. Our Q1 international results were slightly impacted by currency headwinds. On a year-over-year basis, FX contributed approximately one point of headwind to international revenue growth. Therefore, on a constant currency basis, international revenue grew 33% year over year.
Howard: Thanks, Julie and thank you to everyone for joining us today I'll recap, our Q1 financial results share some color on the quarter and conclude with our outlook.
Howard: Total revenue in Q1 was $269 million.
Howard: Of 26% year over year and.
Howard: And international revenue grew 32% year over year.
Howard: Our Q1 international results were slightly impacted by currency headwinds on a year over year basis.
Howard: <unk> contributed approximately one point of headwind to international revenue growth.
Howard: Therefore on a constant currency basis international revenue grew 33% year over year.
Howard: Q1 non-GAAP operating income was $37 million, representing an operating margin of 14%, and our key backlog metrics, specifically current RPO and current deferred revenue, increased by 20% and 21% year-over-year respectively. Now, let me take a step back and share some additional color on our Q1 performance. First, as Thuy described, while the industry is beginning to develop a stronger sense of long-term optimism, we continue to see the challenges we saw last year. However, the theme that persisted when reviewing the quarter's business results was stability within our renewal activity. Specifically, the higher than historical contraction we began to experience last year has not worsened but has held steady.
Howard: Q1, non-GAAP operating income was $37 million.
Howard: Representing an operating margin of 14%.
Howard: And our key backlog metrics, specifically current RP O in current deferred revenue grew 20% and 21% year over year, respectively.
Howard: While Q1 is an early indicator of the year, it is an important data point given the large size of the renewal. Furthermore, the results appear to validate one of our planning assumptions for the year, which was that the demand environment would remain challenging throughout 2024. Second, we continue to believe that the back half of the year will be stronger than the first half, driven primarily by our expansion motion. The stability we saw in our Q1 renewals is just one data point. It is an encouraging outcome that reinforces this perspective.
Speaker Change: Now, let me take a step back and share some additional color on our Q1 performance.
Speaker Change: First as TUI described while the industry is beginning to develop a stronger sense of long term optimism. We continue to see the challenges. We saw last year. However, the theme that persisted when reviewing the quarter's business results with stability within our renewal activity.
Speaker Change: Specifically the higher than historical contraction, we began to experience last year has not worsened, but rather has held steady while.
Speaker Change: While Q1 is an early indicator of the year. It is an important data point given the large size of the renewal book.
Speaker Change: Furthermore, the results appear to validate one of our planning assumptions for the year, which was that the demand environment remained challenging throughout 2024.
Speaker Change: Second we continue to believe that the back half of the year will be stronger than the first half driven primarily by our expansion motion.
Speaker Change: While the stability we saw in our Q1 renewals is just one data point.
Speaker Change: It is an encouraging outcome that reinforces this perspective.
Howard: Based on this trajectory, we expect CRPO growth to decelerate further in Q2 before stabilizing and subsequently improving. Third, we continued to improve our margin profile in the first quarter. This is yet another proof point of our continued focus on improving efficiency and driving operating leverage across all areas of the business, particularly in times of softening demand. As we said before, our entire leadership team is aligned with being disciplined stewards of capital and challenging ourselves to deploy resources in order to generate the most optimized ROI.
Speaker Change: Based on this trajectory, we expect <unk> growth to decelerate further in Q2 before stabilizing and subsequently improving.
Speaker Change: Third we continued to improve our margin profile in the first quarter.
Speaker Change: This is yet another proof point of our continued focus on improving efficiency and driving operating leverage across all areas of the business, particularly in times of softening demand.
Speaker Change: As we said before our entire leadership team is aligned on being disciplined stewards of capital and challenging ourselves to deploy resources in order to generate the most optimized ROI.
Howard: Our priority remains in striking the right balance of driving top-line growth, improving our margin profile, and allowing ourselves the flexibility to react to our business landscape. As such, we intend to manage the business with enough flexibility to either invest and go to market should attractive near-term growth opportunities arise, or, in the absence of those opportunities, prioritize even greater margin improvement this year. In both cases, we intend to continue investing in long-term R&D opportunities to strengthen our platform capabilities and release solutions to better serve construction.
Speaker Change: Our priority remains on striking the right balance of driving top line growth, improving our margin profile and allowing ourselves the flexibility to react to our business landscape.
Speaker Change: As such we intend to manage the business with enough flexibility to either invest in go to market should attractive near term growth opportunities arise where in the absence of those opportunities prioritize even greater margin improvement this year.
Speaker Change: Both cases, we intend to continue investing in long term R&D opportunities to strengthen our platform capabilities and release solutions to better serve construction.
Howard: And fourth, we continue to be excited and optimistic about the opportunity for Procore Pay. Q1 was the first full quarter that this product was available in the market, and early customer adoption has been promising. By the end of Q1, we had approximately 100 total customers, primarily upmarket logos, that adopted Pay.
Speaker Change: And fourth we continue to be excited and optimistic about the opportunity for <unk> pay.
Speaker Change: Q1 was the first full quarter that this product was available in the market and early customer adoption has been promising.
Speaker Change: By the end of Q1, we had approximately 100 total customers primarily upmarket logos.
Speaker Change: Not to pay.
Howard: We are particularly encouraged that some of the largest and highest-profile firms in construction, like Alparisi, are adopting pay and entrusting us to help manage and streamline their payment processes. As a reminder, given the ramp period required for customers to onboard pay, we do not anticipate material financial benefit from this offering this year. However, over the long term, we expect our payments offering to be a contributor to overall growth. Moving on to our, As a reminder, our guidance philosophy remains unchanged from 90 days ago.
Speaker Change: We are particularly encouraged that some of the largest and highest profile forms and construction like alpha <unk> are adopting PE and entrusting us to help them manage and streamline their payment processes.
Speaker Change: As a reminder, given the ramp period required for customers to onboard pay we do not anticipate material financial benefit from this offering this year.
Speaker Change: However over the long term, we expect our payments offering to be a contributor to overall growth.
Speaker Change: Moving onto our outlook.
Speaker Change: As a reminder, our guidance philosophy remains unchanged from 90 days ago.
Howard: The magnitude of our revenue outperformance versus our guidance is consistent with the commentary we shared last quarter and generally in line with what investors should expect this year. I would encourage you to refer to our remarks on last quarter's earnings, Paul, for more color on our guidance philosophy. With that, here is our guidance for Q2 and full year 2024. For the second quarter of 2024, we expect revenue between $274 million and $276 million, representing year-over-year growth of 20% and 21%.
Speaker Change: Magnitude of our revenue outperformance versus our guidance is consistent with the commentary we shared last quarter and generally in line with what investors should expect this year.
Speaker Change: I would encourage you to refer to our remarks on last quarter's earnings call for more color on our guidance philosophy.
Howard: Q2 non-GAAP operating margin is expected to be between 11% and 12%. For the full year of fiscal 2024, we expect revenue between $1.14 billion and $1.144 billion, representing total year-over-year growth of 20%. Non-GAAP operating margin for the year is expected to be between 9% and 10%, which implies year-over-year margin expansion between 700 and 800 basis points. To wrap up, while we continue to operate in a challenging demand environment in the near term, we remain excited about the long-term opportunity ahead.
Speaker Change: With that here's our guidance for Q2 and full year 2024.
Speaker Change: For the second quarter of 2024, we expect revenue between $274 million and $276 million.
Speaker Change: Representing year over year growth of 20% and 21%.
Speaker Change: Q2, non-GAAP operating margin is expected to be between 11% and 12%.
Speaker Change: For the full year fiscal 2024, we expect revenue between 114 billion and $1 144 billion.
Speaker Change: Representing total year over year growth of 20%.
Speaker Change: non-GAAP operating margin for the year is expected to be between 9% and 10%, which.
Speaker Change: Which implies year over year margin expansion between 708 hundred basis points.
Speaker Change: To wrap up while we continue to operate in a challenging demand environment in the near term we remain excited about the long term opportunity ahead.
Howard: We will continue to manage the business thoughtfully to optimize our efficiency profile while continuing to invest in the areas we believe will expand our market leadership and drive long-term growth. I'd like to close again by thanking our customers, partners, employees, shareholders, and the industry, as well as the communities we serve for giving us this opportunity. With that, let's turn it over to the operator for Q&A.
Speaker Change: We will continue to manage the business thoughtfully to optimize our efficiency profile, while continuing to invest in the areas. We believe will expand our market leadership and drive long term growth.
Speaker Change: I'd like to close again by thanking our customers partners employees shareholders and the industry as well as the communities we serve for giving us this opportunity.
Speaker Change: With that let's turn it over to the operator for Q&A.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. And as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. And we will pause here briefly as questions are registered. And the first question is from the line of Saket Kalia with Barclays. You may proceed.
Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star followed by one on your telephone keypad.
Operator: Any reason you would like to remove that question.
Operator: <unk> Press Star followed by two again to ask a question press Star one and as a reminder, if you were using a speaker phone. Please remember to pick up your handset before asking a question and we will pause here briefly as questions are registered.
Operator: And the first question is from the line of <unk> <unk> with Barclays. You May proceed.
Saket Kalia: Okay, great. Hey guys, thanks for taking my questions here. Really appreciate it. Sure, Tui, maybe just to start with you, I'd love to zoom out a little bit and just get your perspective on the competitive environment and whether that's changed at all. You know, despite sort of the macro discussion and uncertainties out there, this is still very clearly a rising tide market. And so maybe the question is:
Barclays: Okay great.
Barclays: Guys. Thanks for taking my questions here really appreciate it.
Operator: Sure.
Barclays: Two we truly maybe just to start with you.
Barclays: Zoom out a little bit and just get your perspective on the competitive environment and whether thats changed at all.
Barclays: <unk>.
Barclays: The macro discussion then.
Barclays: And uncertainties out there. This is still very clearly a rising tide market and so maybe the question is what are you seeing out there from competitors vis view pro core.
Dewey: Well, Saket, nice to hear your voice, first and foremost. But I have to say that there has really been no change at all in wind rates.
Speaker Change: Well the second nice to hear your voice first and foremost.
Speaker Change: I have to say that Theres really been no.
Speaker Change: It all went away when rates and really that's been true for for a long time so.
Speaker Change: There's really no news on that on that front.
Speaker Change: As you know <unk> <unk> is a premium product and we do command a premium price but.
Speaker Change: What I said earlier about Bernard saving 50% to 80% on there Ben.
Speaker Change: Expenditures.
Barclays: The industry recognizes that we drive a tremendous amount of value and as we've just met with all of our enterprise customer Advisory Board members. The industry is rooting for our success because they know that all we do is focus on them and we get rewarded for that because that's all we do so.
Dewey: And really, that's been true for, you know, for a long time. So there's really no news on that front. But you know, as you know, Saket, Procore is a premium product, and we do command a premium price. But, you know, when I said earlier about Bernard saving 50 to 80% on their BIM expenditures, the industry recognizes that we drive a tremendous amount of value. And as we've just met with all of our Enterprise Customer Advisory Board members, the industry is rooting for our success because they know that all we do is focus on them, and we get rewarded for that because that's all we do. So, yeah, really nothing to report on the competitive side, but it is encouraging to see the industry really pulling for us.
Barclays: Yes, it really nothing to report on the competitive side, but it is encouraging to see the industry really pulling for us.
unknown: Absolutely. That's good to hear.
Speaker Change: Absolutely that's good to hear Howard maybe maybe for my follow up for you.
Howard: Howard, maybe for my follow-up for you, you know, there are a lot of great E&R 400 examples in the prepared remarks. And so maybe the question is, as Procore starts selling to larger enterprise customers, maybe more so in the back half of this year, how do you sort of feel about how your sales resources are aligned, you know, to that objective? And are there any early signs of success in sort of that pivot to go to market? Does that make sense?
Speaker Change: A lot of great 400 examples in the prepared remarks, and so maybe the question is.
Howard: As <unk> starts selling to larger enterprise customers, maybe more so in the back half of this year, how do you sort of feel feel about how your sales resources are aligned.
Howard: To that objective.
Barclays: Are there any early signs of success in sort of that pivot in the go to market if that makes sense.
Howard: Yeah, that makes sense. Hey, Saket, how are you?
Speaker Change: Yes, it makes sense Hey, how are you.
Speaker Change: Yes. So first thing is there is a.
Speaker Change: There is a nuance I want to make sure I clarify we are not just starting to sell to the enterprise. This is more of a shift that we started to make towards the back part of last year. When we started to see relative strength in our enterprise end market and in our expansion motion and at that time is when we really started to make that shift in terms of the law.
Howard: Yeah, so the first thing is, there is a nuance I want to make sure I clarify. We are not just starting to sell to the enterprise. This is more of a shift that we started to make towards the back part of last year when we started to see relative strength in our enterprise and our market and in our expansion motion. And at that time, we really started to make that shift in terms of aligning our resources to where that relative strength is.
Speaker Change: Our resources to where that that relative strength is so it's not something that we started or pivoted or started this year. It's really a progression of what we started to see last year and a shift to an extension of what we had already been doing and selling into the enterprise market.
Howard: So it's not something that we started or pivoted or started this year. It's really a progression of what we started to see last year and a shift and an extension of what we have already been doing and selling into the enterprise market.
unknown: Got it. Very helpful, guys. Thanks very much.
Speaker Change: Got it very helpful guys. Thanks very much.
Speaker Change: Thank you.
Dylan Tyler Becker: Thank you. The next question is from the line of Dylan Becker with William Blair. You may proceed.
Speaker Change: Thank you. The next question is from the line of Dylan Becker with William Blair You May proceed.
Dylan Tyler Becker: Hey, guys.
Dylan Tyler Becker: quick question on kind of I wanted to pair two together to maybe on infrastructure and international because infrastructure seems to be an area of focus to there's certainly US mandates in play but there's a ton globally as well and I'm sure US and international businesses will focus on so I guess given your focus on both of those segments how do you think about maybe the infrastructure opportunity help serving as a wedge to catalyze international adoption too just given kind of some of the network dynamics there maybe as a support vector for for both kind of compounding on each other?
Dylan Tyler Becker: Quick question on kind of I wanted to pair two together, maybe on infrastructure and international because infrastructure seems to be an area of focus too Theres certainly U S mandates in play, but theres, a ton globally as well and I'm sure U S and international businesses will focus on so I guess given your focus on both of those.
Dylan Tyler Becker: Segment, how do you think about maybe the infrastructure opportunity help serving as a wedge to catalyze international adoption too just given kind of some of the network dynamics there maybe.
Speaker Change: Maybe it's a support vector for for both kind of compounding on each other.
Dewey: Yeah, Dylan, that's actually a really good question, and it really speaks to something that we say rather often on these calls. But the industry itself is made up of lots of different segments and components, some of which are firing on all cylinders, some of which may be, you know, not performing as well as others. And so clearly, especially in the US market right now, the infrastructure investment is very large. It's a bit of a mixed bag when you look at it internationally, globally. Some countries have large investment in infrastructure, and others not quite so much. And I've been speaking a lot to our global international customers.
Speaker Change: Yes, that's actually a really good question and it really speaks to something that we say rather often in these calls but the industry.
Speaker Change: <unk> itself is made up of lots of different segments and components some of which are firing on all cylinders some of which may be.
Speaker Change: Not not performing as well as others and so clearly.
Speaker Change: Especially in the U S market right now the infrastructure investment.
Speaker Change: Investment is very large.
Speaker Change: A bit of a mixed bag when you look at internationally globally. Some countries have large investment in infrastructure and others, others not quite so much and I've been speaking a lot too low our global international customers and where they see strength in infrastructure spend it.
Speaker Change: Usually just part of their portfolio. So it's not really distorting anything in their book of business. It's just one component of their portfolio and where they see weakness in fact I talked to several of our customers in the UK market, where they think that the that the infrastructure spend is going to be relatively flat. This year, given a few things like the fact.
Dewey: And where they see strength in infrastructure spending, it's usually just part of their portfolio, so it's not really distorting anything in their book of business. It's just one component of their portfolio and where they see weakness. In fact, I talked to several of our customers in the UK market where they think that the infrastructure spend is going to be relatively flat this year, given a few things like the fact that there's going to be an election and a few other things that they just think there's not going to be a lot of investment.
Speaker Change: There's going to be an election and a few other things that they just think theres not going to be a lot of investment this year, but the rest of their portfolio mix is strong mostly on the private sector. So it's always that mixed bag, which is infrastructure as a component of it but in aggregate our customers are running those diversified.
Dewey: But the rest of their portfolio mix is strong, mostly in the private sector. So it's always that mixed bag, which is infrastructure. But in aggregate, our customers are running those diversified portfolios. So it really doesn't distort anything as it relates to Procore.
Speaker Change: So it really doesn't distort anything as it relates to protocols.
Howard: Okay, that makes sense. Maybe switching over to Howard one for you as well, to just kind of pair the commentary, some improving long-term sentiment here, we're coming up on some renewal cycles where we've noted some initial volume conservatism, I guess, how to think about those with the stabilization comments you've seen kind of sequentially, as it relates to maybe some of the back half ramp, if that makes sense. So, look what we how we feel about that.
Speaker Change: Okay that makes sense.
Speaker Change: Switching over to Howard one for you as well too just kind of pairing that commentary.
Howard: Improving long term sentiment here, we're coming up on some renewal cycles.
Howard: Where we've noted some initial volume conservatism I guess, how to think about those with the stabilization comments, you've seen kind of sequentially as it relates to maybe some of the back half.
Howard: If that makes sense.
Howard: Yeah, so look, how we feel about that back half is the same as we felt 90 days ago. In fact, this ability that we saw in Q1 actually reinforces some of those assumptions. And we still expect the back half of the year to be stronger than the first half from a booking standpoint, and we still expect that to come from the enterprise and upmarket as well as the expansion. So things are playing out as we had expected, and there's no change in terms of how we feel about the back half of the year.
Howard: Yes, so look what we how we feel about that back half is the same as we felt 90 days ago. In fact, the stability that we saw in Q1 actually reinforces some of those assumptions and we still expect the back half of the year to be stronger than the first half from a bookings standpoint.
Brent Alan Bracelin: Thank you. The next question is from the line of Brent Bracelin with Piper Sandler. You may proceed.
Howard: And we still expect that to come from.
Howard: The enterprise it up market as well as the expansion motion. So things are playing out as we as we had expected and there is no change in terms of how we feel about the back half of the year.
Speaker Change: Okay, great. Thanks, guys.
Speaker Change: Thanks, Kevin.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Brent Embracement with Piper Sandler you May proceed.
Speaker Change: Yes.
Brent Alan Bracelin: Thank you. I guess, Thuy, we should continue with the demand thread here. Long-term optimism, some near-term challenges. My question is specifically around the data center. I'm getting a lot of excitement around data center expansion and builds. Microsoft is spending a ton of money here. Is the data center big enough to help offset some of these near-term challenges? Or should we think of that as more incremental to help stabilize the business in a challenging environment?
Brent Alan Bracelin: Thank you I guess TUI.
Brent Alan Bracelin: Continue with the demand thread here long term optimism some near term challenges.
Brent Alan Bracelin: My question is specifically around the data centers are getting a lot of excitement around data center expansion and builds Microsoft spending that amount of money here.
Brent Alan Bracelin: Data center Big enough will help offset some of these near term challenges or should we think of that as more incremental to help stabilize the business in a challenging environment.
Dewey: Brent, I hate to give you the same answer I gave Dylan, but it's very much in the same vein, which is where you see these really strong portions of the construction economy are generally kind of making up for other sectors, which may not be performing as well. So, in aggregate, the overall construction volume isn't increasing all that much, but you're just reading a lot about these data centers. And by the way, I had the opportunity about a month ago to visit a bunch of data centers up in the Pacific Northwest.
Speaker Change: So Brian I hate to give you the same answer I gave dealing but it's very much in the same vein, which is where you see these really strong.
Speaker Change: Portions of the construction economy.
Speaker Change: They are generally kind of making up for other sectors, which may or may not be performing as well so in aggregate. The overall construction volume isn't increasing all that much.
Brent Alan Bracelin: But youre just reading a lot about these data centers and by the way I had the opportunity of about a month ago to visit.
Brent Alan Bracelin: Bunch of data centers up in the Pacific Northwest and when your client in and you see these data centers.
Dewey: And when you're flying in, and you see these data centers from miles away, because there are so many, and they're so big, you get a sense of how big they are, but it doesn't, it doesn't create any sort of distortion in our business because our customers, that's just part of their diversified portfolio. As a matter of fact, I'm taking the leadership team to Madrid next in two weeks, and we're going to go tour some more data centers. It's fun to see them because they're big, and they're kind of exciting to view.
Brent Alan Bracelin: Miles away because theres. So many of them are so big you can get a sense of how big they are but it doesn't it doesn't create any sort of distortion in our business because our customers. That's just part of their diversified portfolio.
Brent Alan Bracelin: As a matter of fact I'm, taking the leadership team to Madrid next in two weeks. So we're going to go to where some more data centers, it's fun to see because they are big and they are kind of exciting to view, but.
Dewey: But I wouldn't over index on that, but I do want to say one thing. I personally don't believe that there's any software company out there that builds more data centers or supports the building of more data centers than Pro Core technologies. And it's something I am really, really proud of, and it's an area where we have a tremendous fit and our brand is strong. And frankly, there's no reason why we shouldn't be in every data center getting built on the planet.
Brent Alan Bracelin: But I wouldn't over index on that but I do want to say one thing I don't I personally don't believe that there is any software company out there that builds more datacenters or supports the build of more data centers than <unk> technologies and its something that I am really really proud of.
Brent Alan Bracelin: And it's an area, where we have a tremendous fit and our brand is strong and.
Brent Alan Bracelin: And frankly, there's not a there's no reason why we shouldnt be on every data center getting built on the planet.
Brent Alan Bracelin: Okay.
unknown: Make sense here. And then, as a follow-up for Howard, I apologize. I'm actually on the streets of New York.
Speaker Change: Makes sense here and then as a follow up for Howard I apologize I'm actually on the streets of New York Theres still a lot of construction happening in New York.
Speaker Change: For you backlog Rps here.
Speaker Change: <unk> year over year growth was actually healthier than we had expected just trying to parse that out and you talked about stability look a little stronger than we thought was there. Some maybe early renewals that aided RPM. This quarter that came out of that next quarter or is it got pulled forward just trying to think through.
Howard: There's still a lot of construction happening in New York. Howard, for you, a backlog. RPO and CRPO year-over-year growth was actually healthier than we'd expected. Just trying to sort that out.
Speaker Change: Through the <unk>.
Speaker Change: Commentary around renewals and the strength you saw in our <unk> this quarter versus kind of what you're expecting.
Howard: You talked about stability. It looked a little stronger than we thought. Was there some maybe early renewals that aided RPO this quarter that came out a lot next quarter that got pulled forward? Just trying to think through the commentary around renewals and the strength we saw in RPO and CRPO this quarter versus kind of what you expect to expect.
Speaker Change: There was nothing extraordinary from from that perspective in terms of nuances or anything specific that caused that Q1 actually turned out the way that we expected and in fact Q1.
Howard: You know, from that perspective, in terms of nuances or anything, anything specific that caused that. Q1 actually turned out the way that we expected. And in fact, the way that Q1 turned out is actually consistent with our expectation of the back half of the year being stronger. And with that, you're going to, we're going to expect to see our CRPO growth continue to go down in Q2 before it levels off and turns around. And that's consistent with the seasonality that we mentioned. So there's nothing specific or nuanced about Q1 that caused those deltas. It's just in some of the noise that happens in any particular quarter.
Speaker Change: That Q1 turned out is actually consistent with our expectation of the back half of the year being stronger.
Speaker Change: And with that you're going to we're going to expect to see <unk> growth continue to go down in Q2 before it levels off and turns around and Thats consistent with the seasonality that we mentioned so there is nothing specific or nothing nuanced about Q1 that caused those deltas. It's just in some of the noise that happens in any particular quarter.
unknown: Looks good, guys. Thanks.
Speaker Change: Helpful color looks good guys. Thanks.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you.
David E. Hynes: The next question is from the line of D.J. Hynes with Canaccord Genuity. You may proceed.
Speaker Change: The next question is from the line of DJ Hynes with Canaccord Genuity you May proceed.
Ryan: Hey, guys, this is Ryan. I'm for DJ.
Speaker Change: Hey, guys. This is Ryan on for DJ.
Ryan: I just had a quick question. So I guess a few months ago, we spoke about that contemplated I guess professional services buildout to kind of like cultivate and bring home. These enterprise relationships that will limit. This through core attributed insurance you guys put any more thought into that.
Ryan: I'm just curious if any like internal external metrics that you're tracking that would kind of make that case more appealing.
Ryan: I just have a quick question. So, I guess a few months ago, we spoke about a contemplated, I guess, professional services build out to kind of like cultivate and bring home these enterprise relationships and limit this Procore attributed churn. Have you guys put any more thought into that? I'm just curious if you have any like internal or external metrics that you're tracking that would kind of make that case more appealing?
Speaker Change: Look we continue to make sure that we invest in our professional services with the intent to make our customers more successful.
Howard: Look, we continue to make sure that we invest in our professional services with the intent to make our customers more successful, and our shift towards that upmarket motion and enterprise is consistent with that shift. And so we continue to do that, and we continue to make progress there. There's nothing extraordinary to give an update on. Professional services, from a top-line standpoint, is still a very small part of our revenue, but we still continue to make investments there to make our customers successful.
Speaker Change: Our shift towards that of market motion in enterprise is consistent with that.
Speaker Change: With that with that shift and so we continue to do that and we'll continue to make progress there. There's nothing extraordinary to two two to give an update on professional services from a top line standpoint is still very small part of our our revenue, but we still continue to make investments there to make our customer successful.
unknown: Okay, great. And then I guess just a quick follow up.
Speaker Change: Okay great.
Speaker Change: Just a quick follow up.
Ryan: So, you know, we spoke about labor demand being usually a pretty acute pain point in construction. To what extent do you think copilot is going to alleviate these pressures? Because, you know, I think we all hear about AI having a really strong value proposition for, I guess, a traditional knowledge worker. So I'm just kind of curious what kind of effects it'll have on more like a boots on the ground, hands-on environment.
Speaker Change: We spoke about no labor demand is usually pretty acute pain point and construction.
Speaker Change: Extent do you think co pilot is going to alleviate these pressures because I think we all hear about AI hasn't really strong value prop for I guess that traditional knowledge worker. So I'm just kind of curious what kind of effects. It will have on more like it's.
Speaker Change: On the ground and hands on environment.
Dewey: Yeah, right. And a good question, because, as I mentioned in my opening remarks, that was a topic that came up in our enterprise customer advisory board, which was really like, "what is the impact of AI on construction?" And it's very, the consensus across, and remember, these are 30 of the largest owners, GCs, and specialty contractors around. And the consensus across these folks, who are, you know, pretty well versed in all of this, was that this wasn't really about taking jobs and eliminating jobs.
Speaker Change: Yes, Ryan good question, because as I mentioned in the opening remarks that that was a topic that came up in our enterprise customer Advisory Board, which was really like how what is the impact of AI on construction and its very the consensus across then you'll remember these are 30 of the largest owners gcs and specialty contractors around and the consensus.
Speaker Change: Across these folks who are pretty well versed in all of this was that this wasn't really about taking jobs and eliminating jobs. It was about making people who have their jobs more effective at doing their job and getting them back to doing what they what they got into this industry to do which is to build and not to do double data entry and not to do.
Dewey: It was about making people who have their jobs more effective at doing their jobs and getting them back to doing what they got into this industry to do, which is to build and not do double data entry and not to do, you know, searching through Excel spreadsheets and Word documents on some foreign drive system somewhere. So it is a force multiplier, for sure. And it's seen that way.
Speaker Change: Perching through excel spreadsheets and word docs on a.
Speaker Change: On some foreign.
Dewey: And I'm, I'm reaping the benefits of it myself in our beta program. So I think it's going to have a good, a big impact on our industry, but not necessarily. I don't think we're going to see it lay the foundation anytime soon. Okay. All right. Thanks, guys.
Speaker Change: Drive system somewhere so.
Speaker Change: It is a force multiplier for sure and it seem that way.
Speaker Change: Reaping the benefits of it myself in our beta program.
Speaker Change: So I think it is going to have a good.
Speaker Change: Big impact on our industry, but not necessarily I don't think we're going to see it.
Speaker Change: Pouring the foundation anytime soon.
unknown: Okay, thanks guys, I appreciate it.
Speaker Change: Okay.
Speaker Change: Thanks, guys I appreciate it.
Speaker Change: Thank you.
Speaker Change: Thank you.
Brent John Thill: The next question is from the line of Brent Thill with Jeffries. You may proceed.
Speaker Change: The next question is from the line of Brent Thill with Jefferies. You May proceed.
Speaker Change: Yes.
Howard: Howard, Tui kicked off talking about the good efficiency gains you're seeing in the margin improvement, and I'm curious if you could just lay out, you know, assuming we kind of stick in a tougher environment in the short term, how you're going to lean on those efficiency gains as a lever. Where are you going to see those? How are you getting those? Can you give us just a little more color in terms of where the biggest opportunity is and how you're getting that? Thank you.
Brent John Thill: Howard <unk> kicked off talking about to get efficiency gains you're seeing in the margin improvement and I'm curious if you could just lay out.
Brent John Thill: Assuming we kind of stick in a tougher environment in the short term.
Brent John Thill: How youre going to lean on those efficiency gains as the lever.
Brent John Thill: Where you're going to see those how are you gaining those can you can you give us just a little more color in terms of.
Brent John Thill: The biggest opportunity is in and how youre getting that thank you.
Howard: Yeah, hey, Brent, how are you? Look, the efficiency gains have been the same as we've seen in prior quarters, which means that it's
Speaker Change: Yeah, Hey, Brad how are you.
Howard: Yeah, look, the efficiency gains have been the same as we've seen in prior quarters, which is that it's really coming from across all the different functional areas. And in terms of what we're investing in and how we're investing, keep in mind that regardless of what happens, we still continue to invest in our product technology and R&D organization to make sure that we make progress on our roadmap and continue to bring value to our customers. And in the more short and medium term, the levers that we pull are particularly around the go to market side of things in terms of how to flex based on the demand environment.
Brad: Look the efficiency gains has been the same as we've seen in prior quarters, which that it's really coming from across all the different functional areas.
Howard: And in terms of what we're investing in and how we are investing keep in mind that regardless of what happens we still continue to invest in our product technology and R&D organization to make sure that we make progress on our roadmap and to continue to bring value to our customers and the more short and medium term the levers that we pull or particularly around the go to market side of things.
Brad: In terms of how to flex based on the demand environment and then Youll continue to see Youll continue to see that specifically for Q1 and for the remainder of the year. What Youre seeing is that remember we built flexibility into our plan to be able to have that flexibility to invest back into the business or take it back to margin depending on what we're seeing and what we're comfortable with.
Howard: And then you'll continue to see you'll continue to see that specifically for Q1 and for the remainder of the year. What you're seeing is that, remember, we've built flexibility into our plan to be able to have that flexibility to invest back into the business or take it back to margin, depending on what we're seeing and what we're comfortable with. And in Q1, you saw most of that pour back into the margin profile. But even with our guide for the year and for Q2, we still have room to continue to have that flexibility to invest back into the business.
Howard: And in Q1, you saw most of that pour back into the margin profile, but even with our guide for the year and for Q2, we still have room to continue to have that flexibility to invest back into the business.
Speaker Change: Thank you.
Speaker Change: Thanks, Brett.
unknown: Thank you, Brent. The next question is from the line of Ken Wong with Oppenheimer.
Brad: Thank you Brian. The next question is from the line of Ken Wong with Oppenheimer.
Speaker Change: You May proceed.
Ken Wong: Great, fantastic. The first one for you, for you, Howard, and we're probably kind of splitting hairs here.
Ken Wong: Great Fantastic.
Ken Wong: The first one for you Howard and we're probably kind of splitting hairs here, but when thinking about that <unk> commentary I think last quarter. It was.
Ken Wong: But, you know, when thinking about that CRPO commentary, I think last quarter it was kind of assumed that it would rise in the second half. And I think this time around, we've got a kind of stabilizing Q3 and then kind of improving Q4. I guess, would you characterize kind of how you're thinking about CRPO going forward as similar to three months ago, or has there been any kind of adjustment in kind of the trough and rebound?
Brent: Kind of assume that it would rise in the second half and I think this time around we've got kind of stabilize in Q3, and then kind of improve in Q4, I guess would you characterize kind of how youre thinking about <unk> going forward is similar to three months ago or or has there been any any kind of adjustment in kind of the trough and.
Ken Wong: And.
Howard: You know, our perspective really hasn't really changed in terms of what that trajectory is going to look like. You know, still, H2 stronger than H1 from a booking standpoint, and how that's going to flow through to CRPO is a further drop in growth in Q2 and then stabilization. Now, remember, having said that, Q3 and Q4 are our biggest quarters, so we've got some ways to go to execute against the back half of the year, but particularly with our results in Q1 and the renewal base, that actually is reinforcing our perspective and our assumption that that that will happen at this point. So nothing has really changed, Ken, from 90 days ago.
Speaker Change: Our perspective really Hasnt really hasnt changed in terms of what that trajectory is going to look like still still H two stronger than each one from a bookings standpoint, and how thats going to flow through to <unk> as it is a further drop in growth in Q2, and then stabilization now.
Howard: Having said that Q3 and Q4, our biggest quarter. So we've got some some ways to go to to.
Howard: Execute against the back half of the year, but particularly with our results in Q1 and the renewal base that actually is reinforcing our perspective and our assumption that that will that will happen at this point. So there's nothing that's really changed Ken over over from 90 days ago.
Howard: Got it. Okay, perfect.
Speaker Change: Got it okay perfect and then two just wanted to maybe pick your brain on the enterprise side I mean, just looking at the metrics total RPM is a lot better long term our appeals a lot better.
Ken Wong: I know you guys are still cautious on the environment, but would you characterize kind of the what you guys are seeing at enterprise as being maybe a little more upbeat than how you were thinking three months ago.
Dewey: And then Tui, I just wanted to maybe pick your brain on the enterprise side. I mean, just looking at the metrics, total RPO is a lot better, and long-term RPO is a lot better. And I know you guys are still cautious about the environment, but would you characterize kind of what you guys are seeing at enterprise as maybe a little more upbeat than you were thinking three months ago?
Speaker Change: Yes, it was interesting so Ken and I had our executive customer Advisory Board here.
Speaker Change: I asked the same question.
Dewey: Yeah, it was interesting. So Ken, when I had our executive customer advice report here, I asked the same question. And so the first question I asked him was, you know, how do you all feel about the future?
Howard: And so the first question I had was like how do you all feel about the future and interestingly enough they are optimism level.
Howard: Was really high for the long term, but in the short term they realize that there are macro headwinds there were challenges that they had to face. So it was almost the exact same story that <unk> been telling that over time, there was a little bit more optimism over the long run which came out in those calls.
Dewey: And interestingly enough, their optimism level was really high for the long term. But in the short term, they realized that there were macro headwinds, and there were challenges that they had to face. So it was almost the exact same story that they've been telling us over time. There was a little bit more optimism over the long run, which came out in those calls about backlogs being big and getting bigger. So the best way to characterize it is that they're facing the challenges of a tough economic environment right now, but they're really excited about the pent-up demand for the future and how their backlogs are shaping up.
Ken Wong: Backlogs being big and getting bigger so.
Dewey: The best way to characterize it as they're facing.
Dewey: The challenges of a tough economic environment right now, but they're really excited about the pent up demand for the future and how the backlog is shaping up.
unknown: Got it. Okay, perfect. Thank you for that.
Speaker Change: Got it okay perfect. Thank you for that.
unknown: Sure. Thanks, Ken.
Speaker Change: Sure. Thanks, Ken.
Aaron Simpson: Thank you. The next question is from the line of Aaron Simpson with Citizens JMP. You may proceed.
unknown: Thank you. The next question is from the line of Aaron Simpson would say this is JMP you may proceed.
Aaron Simpson: Hi, thank you for the question. I'm going back to the operating margin guidance, but I'd like a little more color there. So you did a 4% rift a month into Q1. This did 13.8% adjusted operating margin and guided 9 to 10% of the year. I know you talked about the flexibility built in there, Howard. Can you talk about where that investment might go and how much conservatism is in that number?
Aaron Simpson: Hi, Thank you for the question.
Aaron Simpson: Just going back to the operating margin guidance, but I'd like a little more color theres, so little 4% risk a month into Q1 2000.
Aaron Simpson: 13, 8% adjusted operating margin and guide at 9% to 10% of the year I know you've talked about the flexibility to help them. There Howard can you talk about where that investment might go and how much conservatism is in that number.
Howard: Where the investment work goes, I think I've already talked about a little bit. In all cases, we continue to invest in our R&D organization because we want to make sure that we continue to make progress on that long-term product roadmap. In the short term, we will flex and invest in our go-to-market as we see fit, specifically as it relates to the workforce reduction that we did, about 4%. It was roughly about a $4 million impact or so in Q1.
Howard: The worthy investment we go where it go I think I've already talked about a little bit.
Howard: In all cases, we continue to invest in our R&D organization.
Howard: And because we want to make sure that we continue to make progress on that long term product roadmap in the short term, we will flex and invest in our go to market as we see fit specifically as it relates to the workforce reduction that we did about 4%. It was roughly about a $4 million impact or so in Q1.
Howard: Great, thank you. And then just as a follow-up, so Larry Stack is now a full quarter in as your CRO. What changes has he made to the go-to-market process thus far? Uh, well, Aaron, by the way, I think he might argue with you. I don't think he's...
Speaker Change: Great. Thank you and then just as a follow up so Larry back is now a full quarter in <unk>.
Howard: Crow what changes if any estimates of the go to market motion thus far.
Dewey: Well, Aaron, by the way, I think he might argue with you. I don't think he's, I think he's almost a full quarter in. So, but, Larry has been on the road, and really, the first several months have been, you know, he's been all over the earth, visiting our offices and visiting our customers and visiting job sites and just really immersing himself in everything that, you know, he needs to know to do his job.
Howard: Thank you.
Howard: Well, Eric by the way.
Speaker Change: Thinking about argue with you I don't think he's I think he is almost a full quarter ends.
Dewey: But.
Dewey: So Larry Larry has been.
Dewey: On the road and really the first several months has been he's been all over the Earth visiting our offices and visiting our customers and visiting job sites, and just really steeping himself and everything.
Dewey: He needs to know to do his job.
Dewey: And just doing a wonderful wonderful job at that Im really enjoying working with them but.
Dewey: And just doing a wonderful, wonderful job at that. I'm really enjoying working with him. But it's still early days for him. I want to give him a little chance to get settled and learn where the cafeteria is. But, in general, he's a really great person to work with, and I'm enjoying every minute of it.
Dewey: Still early days for him and give him a chance to get settled and learn where the where the cafeterias.
Dewey: But in general is really he is really a great person to work with and I'm enjoying every minute of it.
Speaker Change: Great. Thank you guys.
Speaker Change: Yes, Thank you Ed.
unknown: Thank you. The next question is from the line of Alexei Gogolev, who is with JP Morgan. You may proceed. One moment. It looks like their line may have disconnected. I do apologize. The next question is from the line of Jason Celino with KeyBank.
Speaker Change: Thank you. The next question is from the line of Mike say, Gogo Man, who with Jpmorgan you May proceed.
Speaker Change: One moment it looks like your line may have disconnected I do apologize. The next question is from the line of Jason <unk> with Keybanc you.
Jason Vincent Celino: You May proceed.
unknown: Yeah.
Alexei Gogolev: Hi, this is Devin on for Jason today. Thanks for taking our questions. I want to ask about Procore Pay. I'm encouraged to hear that, you know, now you guys have around 100 customers adopting it. I know, reading your remarks, you kind of talked about one customer adopting Procore Pay. Could you just dive into that a little bit more? You know, what ultimately drove them to go to Procore instead? And, you know, with Procore Pay now as one of your product suites, does that help your win rate as you move out the market?
Jason Vincent Celino: Hi, this is <unk>.
Kevin: Kevin on for Jason.
Dewey: So, Albarisi is the one that you're referring to. It's actually been a customer for five years, and they have adopted many of our products. And they were well-positioned to become a Procore Pay customer because they were already running our financials product, as well as our invoicing and our ERP connector. So, they were very well-prepared, and they knew that the benefits of having all of that in place, and then tacking on Procore Pay, we're gonna be, you know, gonna deliver some tremendous value. And, you know, maybe if you come to Groundbreak, you can ask them directly as to their opinion on all this, but I'll say they've been nothing but great partners.
Speaker Change: Thanks for taking my questions.
Dewey: And there are, you know, there's a lot of customers that are really excited about Procore Pay. But I do always like to caution people, it does take time to get these accounts fully online because they're not gonna bring a job online that's halfway done, because it wouldn't make sense to start paying people differently during the middle of a job. And the way construction companies run is that new jobs come online every, you know, month or so.
Dewey: Can I ask about <unk> pay.
Dewey: So, it takes a bit of time to get these folks ramped up, but the good news is that it's a very solid product, and it's just being very well-received. And we're just loving the feedback we're getting from the market.
Speaker Change: <unk> to hear that you guys have around on our customers are adopting it.
Devin: I understand. Thanks for the context.
Devin: I know <unk> remarks, you kind of talked about one customer adopting broker pay could you just dive into that a little bit more what ultimately drove them to go to a pro core instead and with broker pay now.
Speaker Change: One of your products suite, I mean does that help.
Devin: Win rate as you move up market.
Speaker Change: So Albert <unk> is the one that you are that you are referring to is actually been a customer for five years and they have adopted many of our products.
Devin: They were.
Devin: They were well positioned to become a pro for paid customer because they were already running our financials product as well as our our invoicing and our ERP connector. So they were they were very well primed and they knew they knew what.
Speaker Change: The benefits of having all of that in place and then tacking on <unk>, we're going to be.
Devin: We're going to deliver some tremendous value and maybe if you come to ground break you can ask them directly as to their opinion on all this but I will say they've been nothing but great partners.
Devin: And there is.
Devin: There's a lot of.
Devin: A lot of customers that are really excited about <unk>.
Devin: But I do what I always like to caution people. It does take time to get.
Devin: Yet these accounts fully online because they're not going to bring a job online thats a half halfway done because it wouldn't make sense to start paying people differently during the middle of a job in the way construction companies run as new jobs come online.
Devin: Or so so it takes it takes a bit of time to get these folks ramped up.
Devin: But the good news is is that it's a it's a very solid product and it has been very well received.
Devin: We'd just love and the feedback we're getting from the from the market.
Howard: And just one follow-up on the customer addition in the quarter. I mean, it seems like NetAds is, you know, continuing to de-sell. Any additional color you can show there? Is that just a function of, you know, your efforts targeting the enterprise segment? And also just curious how NetAds has kind of performed across different geos versus your expectations? Thanks.
Speaker Change: Understood. Thanks for the context, and just one follow up on the customer addition in the quarter.
Howard: Seems like net adds.
Howard: We'll continue to do so.
Howard: Additional color you can share there is that just a function of your efforts targeting the enterprise segment and also just curious how net adds have kind of performed across the different geos versus your expectations. Thanks.
Howard: You know, your assumption is correct is that it is a function of us making that shift towards the upper end of the market, keeping in mind that most of our customer count is going to be concentrated down market in the S&B. Now, there is likely to be a bit of a macro challenge impact in terms of the S&B customer count, but it is that and our focus and our shift towards the upper end of the market.
Howard: Your assumption is correct is that.
Howard: Is that it is a function of us making that shift towards the upper end of the market keeping in mind that most of our customer count is going to be concentrated down market and the SMB now theres still is likely a bit of a macro challenge impact in terms of the SMB customer count, but it is that and our folks.
Howard: And our shift towards the upper end of the market. The other thing to keep in mind is it's.
Howard: The other thing to keep in mind is, one, that's not – customer count is not something that we actively manage. I'd rather point you to our actual gross retention rate, which is still in the healthy mid-90 percent range or 95 percent, and that is indicative of customers actually not leaving us, and so that's a much better number to look at.
Howard: It's not customer account is not something that we actively manage to.
Howard: Rather point you to our actual gross retention rate, which is still in the healthy mid 90% range of 95%.
Howard: And that is indicative of actually customers not leaving us and so that's a much better number to look at.
Devin: That makes a lot of sense. Thanks, Howard.
Speaker Change: Thanks Howard.
Howard: Thank you. Thank you.
Unknown Executive: Thank you. That concludes all questions. I would now like to pass the conference over to the management team for closing remarks.
Speaker Change: Thank you that concludes all the questions I would now like to pass the conference over to the management team for closing remarks.
Unknown Executive: Thanks, everybody. Talk soon.
Speaker Change: Thanks, everybody we'll talk soon.
Unknown Executive: That concludes the Procore Technologies Inc. Fiscal Year 24 Q1 Earnings Call. Thank you for your participation, and enjoy the rest of your day.
Speaker Change: That concludes the pro core technologies, Inc. Fiscal year 2000, and for Q1 earnings call. Thank you for your participation and enjoy the rest of your day.