Q3 2024 Procore Technologies Inc Earnings Call

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Today's call, very core technologies in 4-year 24, so called to an in-school will be starting in a moment's time. My name is Breaker and I will be all parade on today's call.

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breaker: Good evening all and thank you all for attending the ProCourt Technologies 4-year 24, 3rd Quarter Annnings School. My name is Breaker and I will be your moderator for today's The ProCourt Technologies 4-year 24, 3rd

All lines will be muted during the presentation portion of the court worth an opportunity for questions at the end.

Speaker Change: I would now like to pass the conference over to your host, Alex Andrga, head as investor relations to begin. Thank you, you may proceed, Alexander.

Thanks, good afternoon and welcome to ProCourse 2024 Third Order Irons call.

I'm Alexander Geller, head of Investor Relations.

with me today are Tui Courtamunch, founder, president and CEO, and Howard Fu, CFO.

Speaker Change: Further disclosure of our results can be found in our press release issue today, which is available on the Investor Relations Section of our website, and our Periodical Ports filed with the SEC.

Today's call is being recorded and a replay will be available following the conclusion of the call.

comments made on this call include forward-looking statements regarding among other things. Our financial outlook, go to market-tradition, products, customer demand, operations, stock research program 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, October 30, 2024.

Procourt undertakes no obligation to update any forward-looking statements to reflect new information or unanticipated events except as required by law. 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 day.

will also refer to certain non-gap financial measures to provide additional information to investors. A reconciliation of non-gap to get measures is provided in our press release and our

with that, let me turn the call over to Tui.

Thanks, Alex, and thank you everyone for joining us today. So I'd like to start with some highlights from the quarter. In Q3 revenue grew 19% year over year. You know, pro quo wins because we have the most connected platform in the industry, and our partnership with construction is simply unmatched.

Speaker Change: Let me be clear, we are the undisputed leader in construction software, which is reflected in our consistently high wind rates against our main competitors. All of which have much smaller construction software revenue than ProCore.

Speaker Change: As expected, non-gap operating margins were 9%, which is lower than Q2 due to the various one-time and seasonal investments. But we are on track to expand operating margins by 900 basis points for the full year at the high end of guidance and we intend to continue expanding margins next year.

In Q3, we began communicating as well as implementing the Go to Market Changes we previously announced.

The two primary focus areas of our Go-to-Market Evolution are moving to a general manager model. It's going to localize our Go-to-Market Motion and better serve the regions in which we operate.

and introducing new technical roles to support all buyer personas and realizing the full value of the ProCore platform.

We believe this evolution will position us to become a multi-billion revenue company, while building deeper, lasting partnerships with our customers.

Speaker Change: We have received overwhelmingly positive feedback from our employees, customers and partners. Our sellers tell us that these changes are exactly what they've been asking for.

are in the National Teams of Long-Wing advocating for a local go-to-market approach to drive a more connected customer experience.

Speaker Change: Our sellers and all regions are thrilled to have technical product experts to help them convey the ROI of our platform to a diverse group of buyer personas.

Our customers tell us that our platform has unlocked invaluable insights about their businesses and operations. And they're excited to have technical specialists and deeper relationships with ProGwar to unlock even more value.

This feedback tells me that we have correctly identified areas of opportunity within our sales motion, that once executed will accelerate value creation for our customers while better supporting our sellers.

Speaker Change: As part of these changes, we also shared that we are investing in our sales teams, part of which involves bringing on a couple hundred net new go-to-market resources with the intent of hiring quickly to get them ramped and productive.

We're only about a quarter in but we are pacing well. All general managers and their leadership teams are expected to be in place by the end of the year.

We've also done a configurable amount of hiring, both for generalist sellers and the new technical roles.

I am pleased to report that we are hitting our weekly hiring targets and we are on track to hit the goals that we set for next year.

In order to onboard and ramp these employees, we are building out specific role-based learning paths and have launched a weekly onboarding series focused on scenario workshops, deep dive training and leadership panels.

We will also be distributing territory and compensation plans at our sales kickoff this coming January. As we do at the beginning of every fiscal year.

Well, we're making good progress on our go-to-market evolution. We recognize that it's going to take some time to work through this transition. And there will continue to be moving parts in the coming borders.

So I'm going to remind you that we have strong conviction in these go-to-market changes because we have seen this model play out with a number of enterprise customers.

Speaker Change: When we support our customers with a tailored approach and ample technical resources, it generates improvement and retention and expansion rates.

So for example, an Australian mining customer had an inconsistent application of ProCore within their standard operating procedures.

Our technical teams conducted an in-depth process mapping analysis to embed ProCore into their day-to-day operations.

This resulted in significant ROI by streamlining the onboarding experience for deeper subcontractor engagement.

This allows the customers to confidently leverage the robustness of our platform, which leads to more effective and standardized processes and increased adoption by the project teams.

Speaker Change: In addition to furthering their strategic partnership with ProCore, this technical deep dive created a pathway to capture the customer's entire annual construction volume across 90 global locations, and they're evaluating additional products including financials.

This engagement demonstrates the value of leveraging technical teams to focus on the unique needs of our customers. It's just one of many examples that give us the confidence and our ability to accelerate time to value for our customers under this new model.

Speaker Change: You know, throughout the quarter I continue to connect with customers around the world and their perspective on the band environment remains largely unchanged.

We are operating in a challenging and mixed environment. Our many of our larger customers continue to grow and they're seen strength within infrastructure, manufacturing and data centers.

You can see this dynamic layout in our customer wins this quarter.

One of the biggest general contractors in the U.S. and a longtime pro-core customer had a seven-figure expansion to add a more volume for new projects, including stadiums, data centers, and high-risers.

This Q3 expansion followed a 7-figure expansion just last quarter. Although this firm is one of our largest customers, there is still considerable room to grow their ProCorp footprint both with volume and new products.

Suffolk Construction, a top 25 E&R contractor, already had all of their volume on ProGore, but this quarter, they expanded with us to support their growing business.

Renown for their innovative approach in the construction industry. Suffolk focuses on integrating cutting-edge technology, modern project delivery methods, and data-driven solutions in its operations, setting the gold standard for innovative construction.

Speaker Change: Procourt is proud to continue to partner with Suffolk, in its efforts to integrate the entire building life cycle into a seamless platform to redefine how America builds.

So you just heard the reference to large ENR 400 expansions. As we continue to demonstrate, there remains a significant growth opportunity for us within the ENR 400.

But you know when I speak to investors, I've noticed that there's a misconception that the ENR 400 represents the entirety of ProCourse Growth Opportunity. I want to be very clear, it does not.

While the General Contractors listed within the ENR are an important cohort, they represent less than half of the GC opportunity within the US. It also completely excludes owners and specialty contractors.

We've continued to demonstrate strong traction with owners and specialty contractors in Q3, including all side-on real estate company, a leading real estate developer in Saudi Arabia who faced significant project management limitations with their existing ERP vendor due to numerous manual processes.

In Q3, they became a folklore customer to streamline all processes and communications with stakeholders on a single platform. To house all project information in one place and generate real-time reporting and dashboards, not only at the project level, but more importantly at the portfolio level.

Speaker Change: VSC Fire and Security is a leading specialty contractor for fire safety and security. They have previously been using point solutions that were unable to provide a holistic view of project performance or how certain areas of the project were progressing.

They began looking for a single unified solution to enhance data accuracy, reduced cost, while increasing profitability, and ensure everyone was working up the same information.

They also wanted to find a solution that's seamlessly integrated with their financial solution.

and to offer dashboards for both the office and the field, helping to ensure everyone had real-time visibility into project budgets. VSC will be using ProCore across all of their projects, primarily focused on fire suppression systems across the U.S.

So, as you can see, ProCourse Business is diversified across all three types of stakeholders, and the opportunity becomes even more significant when you factor in the international construction market.

Speaker Change: Furthermore, we have seen that owners can be as large if not larger than our NR-400 customers. In fact, today, two of our top five largest customers are owners.

We believe our new Go to Market Model will best position us to capitalize on the growth opportunity across all global stakeholders.

At our upcoming investor day, we'll discuss this dynamic further and why we believe our runway for growth continues to be very attractive.

So speaking of Investor Day and our upcoming round break conference, I look forward to showcasing how ProCourt is the only truly unified construction platform that connects all people, products, processes, and data across the entire construction life cycle.

Speaker Change: Each product that we offer helps our customers build more efficiently and productively, but the real power comes from our connected platform.

When a customer purchases any ProCourse solution, they immediately get access to our enterprise-grade platform capabilities, capabilities unmatched by any other solution in the market.

Speaker Change: With over 2 million construction professionals around the world collaborating on our platform, we have an unmatched corpus of construction data.

This data allows us to provide customers with actionable insights that do not limit into one product or workflow but rather span projects and portfolios, giving our customers a comprehensive view of their projects and their businesses.

We believe that because ProPort is the only truly connected platform in the industry, we are the only solution that can fully harness the power of AI for our customers. You simply cannot maximize the benefit of these technologies if data is stuck in silence.

Back in August, I had the privilege of hosting a dozen leading construction CIOs at our CIO Forum in Austin.

Their feedback was unanimous. In order for them to be successful, they must build their business on top of a truly connected platform. So they can connect all stakeholders, gain insights, leverage AI and more.

You know it's incredible to be at the forefront of digitizing this industry and to see the momentum building around connected technology. And to see how we have become a core component of how leading construction companies run their businesses.

So we're going to be covering all of this and much more at next month's Groundbreak Conference in Denver. We're going to showcase how we're continuously innovating and evolving our platform.

We'll be unveiling exciting new developments that leverage platform functionality to make all of our products more powerful as well as the investments we're making to better support owners, general contractors, and specialty contractors and deliver all types and sizes of construction projects.

You know, this groundbreaking shaping up to be our biggest and most impactful event yet. And I cannot wait to see our customers, prospects, partners, employees, and shareholders, and to share our latest product innovations with all of them.

So before I turn it over to Howard, I'd like to announce that we have authorized a stock repurchase program of up to $300 million.

Speaker Change: This program reflects our conviction in the business and allows us to flexibly leverage our balance sheet to efficiently deliver returns to our shareholders.

The Repurchase Authorization is intended to be deployed opportunistically and judiciously.

We are excited about expanding the levers within our capital allocation philosophy, and Howard's going to elaborate further on this in a moment.

Speaker Change: So, wrap up, I am confident in our go-to-market evolution and the progress that we made so far. This is an incredibly exciting chapter for ProCore as we move towards our goal of becoming a multi-billion revenue enterprise.

and now with that, let me hand it over to Howard.

Howard: Thanks to you and thank you to everyone for joining us. The main topics I would like to cover today include our Q3 Financial Results, additional color on the business and our capital, allocation philosophy.

Howard: Total revenue in Q3 was $296 million, up 19% year over year, and international revenue grew 26% year over year.

R2-3 International Results were slightly impacted by currency hitlives.

Howard: On a year over your basis, FX contributed approximately one point of headwind to international revenue growth.

Therefore, on a constant currency basis, international revenue grew 27% you over year.

Q3 non-gap operating income was $26 million, representing a non-gap operating margin of 9%.

R. Key backlog metrics, specifically current RPO, and current deferred revenue, grew 6% and 18% year over year, respectively.

Now let me share some additional color on the business.

Howard: As our guidance indicates, we expect to deliver 900 basis points of margin improvement at the high-end this year.

This includes various one-time and seasonal investments in the second half of the year.

The youth investments range across technology and marketing, including our annual customer conference, ground break, and will result in operating and cash flow margins in the second half of the year that are lower than the first half.

Investors should not assume our second half margins represent our expectations for fiscal 25.

and, instead, please refer to our margin guidance for next year. Note that we will be expanding margins on a full year basis in fiscal 25.

Howard: Moving to our Go to Market Transition, at this stage we are focused on communication, change management, enablement, as well as onboarding these sellers.

We are pleased with the positive feedback so far from employees and customers.

are hiring plans on track. And our progress further reinforces our belief that these changes will enable long-term growth for the business.

Since we are early in this transition, it is premature to provide an update on specific benefits of the new operating model. We expect to have better insight into these benefits as we approach the staff of fiscal 25.

Taking a step back, the business is going through two distinct transitions. The first is a challenging and mixed construction demand environment, which began in 2023.

The second is a good-a-market operating model shift, which began in the third order.

Both of these represent near-term headlines to Red and Growth, but we believe these impacts are temporary.

Howard: The power of our platform and brand continues to be a strong competitive advantage.

In fact, the combined average win rate against our top competitors over the last few fiscal years is north of 60% and has improved year to date.

and against our largest competitor, the average win rate is even higher.

These stats are undeniable, and we believe our business will be even stronger when the macro headwind in go-to-market transition is behind us.

Lastly, let me turn to our capital allocation for philosophy.

Howard: As you hear me say many times, we are committed to increasing free cash flow per share and we have multiple levers to compound its growth over time.

First, our top investment priority continues to be driving organic and efficient revenue growth, which is the primary lever to compound per share metrics and deliver shareholder value.

We are the technology leader in a projected 15 trillion dollar construction industry that remains in the early stages of the legislation with significant market opportunity ahead.

Howard: At this stage of our business and market evolution, we believe we will consistently generate free cash flow going forward, and thus have sufficient capital to fund our organic business objectives.

Howard: The second lever is investment in a creative M&A.

Our M&A strategy has primarily focused on accelerating our product roadmap to deliver the most comprehensive platform that solves the unique challenges with instruction.

The acquisitions we have made in the past have generally been smaller tuck in companies that we know very well.

Howard: Most of these companies came from our app marketplace and were already integrated into the ProCore platform, which further insurers that our products come together in an elegant solution.

Howard: Although we are not actively considering large scale M&A at this time. In the future, we may choose to pursue larger, more transformative M&A with financial synergies that are a creative to our long-term per share objectives.

The third lever is returning capital to shareholders.

The $300 million stock we purchased on the Resetion we announced today is intended to be deployed opportunistically during the one year authorization period depending on market conditions.

Our guiding principle is to repurchase shares to provide notable accretion to per share targets in order to optimize long-term shareholder value.

Howard: As always, we will regularly evaluate and optimize our capital allocation strategy across these levers to do what's best for the business and to optimize long-term shareholder value.

Now I'm moving on to our outlook.

As a reminder, our guidance to the loss of the fiscal 24 remains unchanged from 90 days ago.

For the fourth quarter of 2024, we expect revenue between $296 million and $298 million. Representing total year of year growth of 14% to 15%.

Howard: Q4 non-gap operating margin is expected to be between 3% and 4%.

Howard: For the full year of fiscal 2024, we are raising our revenue guy to be between $1.146 billion and $1.148 billion. Representing total year of year growth of 21%.

We are maintaining the high end of our non-gap operating margins for the year between 10.5% and 11%.

which implies year over your margin expansion between 850 and 900 basis points.

We have not previously provided any quantification of our outlook beyond the current fiscal year. As such, we would like to address the dispersion across the cell-site estimates by providing an initial guide for fiscal 25.

Given we are providing the guidance a few months earlier than typical, we are applying incremental conservatism.

We recommend investors, do you just revenue outlook both as a floor for fiscal 25 as well as guidance?

For the full year of fiscal 2025, we expect revenue to be $1.275 billion. Representing total year of year growth of 11%.

Howard: and we expect the non-gap operating margins of 13% which implies your over your margin expansion of 200 to 250 basis points.

Howard: To wrap up, we are pleased with the early progress of our Go-to-Market Evolution. And we have conviction that these changes will generate returns to both the top and bottom line.

Long-term growth remains our priority, and we are confident that these investments will best position ProCorp to capture the massive and under-penetrated opportunity ahead of us.

Howard: 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 that's turned it over to the operator for Q&A.

Thank you, Howard. We will now begin the question and answer session. If you would like to ask a question please press star for lib by one on your telephone keypad.

If any reason you would like to remove that question, please press star for LeBois 2.

Howard: and again please press star for the by one to ask any questions.

Howard: and please note if you are using a speaker phone, please remember to take up your handset before asking me a question.

We have the first question from DJ Heinz with chemical. Please go ahead.

Hey guys, thanks for the early look at 25. I appreciate that. I think maybe that's a good place to start. So I don't know if this is for you too, or Howard, but...

Look, I know calculate fillings and CRP obeys bookings aren't a perfect indicator for you guys, but if I look at the growth rates there, year to date, it doesn't look like we're setting up for 11% growth next year. So I guess the question is...

What are you guys seeing the business that these metrics might not be picking up that gives you reason to guide growth as you have for 2025?

Hey DJ, this is Howard. Thanks for the question.

Look, I'm going to reiterate that the fiscal 25 guide that we provided, both on the top light and the bottom line, but specifically on the top line, it's an early guide. And so we are applying that incremental conservatism there. We've always talked about in your guides on our revenue, something that we have high confidence that we can achieve, and there's incremental conservatism on top of that.

and remember that it's not only an early guide, we've got our biggest quarter that we still have to get through in Q4 and we've just gotten into the early stages of this good-a-market transformation and so the early guide couple with those pieces really makes it such that we want to provide something that's a little bit more conservative.

and the other thing, the other thing on that is when we get into, when we get into next year, we'll have a better sense of what this transformation is going to, is going to hold.

Yeah, yeah, okay. Maybe that's a good segue to the follow-up. I think it was in Q3 of last year that we really first started talking about customers showing up to ProCore with more conservative commitments.

Speaker Change: Now that we're starting to anniversary those deals, like how have those customers fair relative to the lower commitments that they were making the pro-core?

Yeah, we talked about the cohort data that we were seeing in the first two quarters the year, and the third quarter cohort has remained largely consistent with what we saw in the first half of the year.

Speaker Change: and so we look at folks that in the cohort from Q1 and Q2 and into Q3.

Those that expanded continued to expand those that remained flat, started to expand a little bit more and so forth and that has remained consistent. Keeping in mind, though, those expansion rates are still not at the levels that we had seen historically prior to this downturn.

Okay, all right, great, I'll hop back in the queue. Thank you guys.

Thank you.

The next question comes from Joe Runwick of Bad.

Speaker Change: Julian Deity.

Great to be on the call and thanks for taking my questions.

just on the early June 2020, but when you say the Go to Market Changes, you'll see the benefits more in the back-to-out.

does that also translate to revenue growth rates that are likely higher in the bad-a-cast and relatedly is there anything you would point to during the first house that we on the outside it can be watching as evidence things are moving in the right direction.

At this point, I'm not going to comment about the shape of anything in terms of from a poorly basis.

but what I will say is that in fiscal 25.

It does represent conservatism, but we're doing this such that it's going to eventually result in better top-line growth as well as bottom-line growth.

The other thing I'll just add on top of that is we recognize that fiscal 25 is a transition year and the piano and our guidance reflects that. The thing that I would note that is going into fiscal 26.

The P&L is going to look better than it does in fiscal 25. And that's the way that I would think about fiscal 25. In terms of some of the things that you'll start to see, the progression of that, and internally, is going to be things like...

Pipeline generation is going to be the loss of the pipeline. It's going to be conversion rates.

and that's ultimately going to result in a higher-key productivity, better retention metrics.

and then eventually has those flows through. It will show up in our financial results.

Speaker Change: The last thing I'll add to that is keep in mind we've always talked about this transition, causing a disruption to our go-to market and that's going to dovetail in to fiscal 2025. And again, that's why we talk about fiscal 25 and view that as a transition year. As we've done exit fiscal 25 going to fiscal 26, you'll see a better piano.

Thanks for that. I appreciate most of your opportunity and Tim Bowenleads are still greenfield, but

when the largest company in the category announces a go-to-market change that doesn't go on notice by competition. Very clear and appreciated the comments on competitive win rates here today. Maybe what's your expectation going forward and how that might play out?

Yeah, so this is Turing. Look, we, um...

I'm going to start by saying that we released those competitive win rates because we actually wanted to once and for all to just

put to rest the question around how are we doing in the competitive environment. I think that those numbers speak for themselves. If you've been following us for a while, you know that we've been saying these are consistent numbers quarter over quarter. And so what I can tell you is that...

Speaker Change: getting more customer centric and being a better partner to your customer and putting your salespeople up for success.

will set us up, we believe, for tremendous amount of success in 2025 and 26. So we thank from a competitive environment that we are setting ourselves up for even better position going forward.

Your next question comes from Brent Phil with Jeffrey.

Speaker Change: Your line bacon.

Thank you. This is the last photo on for Brent Hill. Thank you to Ian Howard for taking my question. Maybe first one for to Ian to be appreciated.

Speaker Change: in your attraction on the large customer side. Could you just dissect what you saw in terms of the macro-discordor across the customer base?

you know, appreciate some of the alternative data that we track and to be mixed. So what are you seeing out there that gives you hope that 26 will be better than 25?

By the way, love, great question. I think the key word in there is hope because I do talk to many many folks in the industry all throughout the quarter. I will say that though the overall sentiment is very similar to what has been over the last.

and the short term.

Pretty conservative, you know, a little uncertain, look, we're facing an election, you know, I think people are hoping for more interest rates drops, so there's, there's still a lot of uncertainty, but there is a, I would say, a slightly elevated amount of hope.

and the election will be coming up. So from a macro environment, I think it's long term, it's looking better. But again, we still mix because of the overall macro headwinds.

Speaker Change: Court.

and Howard, I know you don't have this guy cut quarter by quarter for next year, but...

you are guiding to some margin expansion next year. Could you just...

Talk about maybe, you know, how that will flow through throughout the year and will you be through making the go to market changes by the end of this year? Thank you.

Yeah, the first of all, we are really happy with how we're progressing in terms of the foundational aspects of the transition and the changes. So those are all on track.

Speaker Change: Remember, we also talked about the disruption that this is going to cause and we've anticipated those and it's playing out as we expected. And we've also always talked about how this transition and the impact of this transition moving into fiscal 25 and that's still holding we still believe that.

and in terms of the margin profile and our initial guide again, which is early for next year at 13%. We do believe that there is room to continue to execute to that and to continue to have a cadence of beaten raise on that.

Remember that it's still very early at this point and so there are intent in providing both the margin guide and the revenue guide for next year is really to address the variability that we're seeing particularly on the top line.

Speaker Change: to make sure that folks got better clarity in terms of where our expectations are given that is quite early at this time. So that's the bet that I can tell you at this point. And while I want to add, I think I heard in there, are we going to be done with this transition by the end of the year? We are in the early stage. We're one quarter in to this. And as I mentioned, I hope any remarks.

We're in the process, but this is really around hiring. This is really about enabling. This is onboarding. This is ramping.

Speaker Change: This is putting together all of the, you know, assembling the teams.

and Terry Chorries in place. But all of those complex interchorries are not going to be released until sales kickoff, which is going to be in January. So I like to tell the team internally, the real work starts then because that's when the machine is actually started.

So it will definitely not be done this year, but phase one of getting us ready will be done.

Speaker Change: Board of thank you.

love: Thanks Love.

You now have socket can they are with bottling, the line is now waiting

Okay, great. Hey, two of you, Howard. Thanks for taking my questions here.

So maybe just a stay on the go to hey guys, Evan.

to me, maybe just a stay on the go-to market, transition. Sorry if I missed it in the prepared remarks, but can we just talk about how many sales people you brought on this quarter, where you want to be by the end of the year, broad brush, of course.

Speaker Change: and how you're sort of planning on minimizing that disruption. I think we're doing the really smart thing of sort of, you know, main handling estimates for next year, but from a tactical perspective, how do you minimize disruption next year?

Speaker Change: Yeah, so, probably not going to go into the detail of the way how many heads and which roles and all that. It's just too many too many too and it's a year but as I mentioned in the opening remarks.

It's a couple hundred.

Speaker Change: I'm Net New.

Speaker Change: and so it is a considerable amount of changes. There's a lot of work that goes into it. But how we manage it and the calories can add to the juice. But how we manage it really starts with a great plan and then communicating that plan effectively and so people understand the not only what is happening but why we're doing what we're doing.

Yeah, absolutely. Communication is definitely a part of that second, making sure that folks are brought into the process of enablement, compensation planning and the actual design and organization of the GM structures and the technical roles.

That's what we're doing right now. Keep in mind that a lot of these changes, particularly around things like territories and comp plans.

Speaker Change: are not going to take effect until January. And so it's really human nature to want to look ahead. And so part of what we're doing to make sure that we communicate early, bring folks into the fold and to participate in this evolution is to really balance looking ahead and being prepared for that. But also making sure that they're focused on delivering Q4, which we still have to get through two-thirds of, which is the biggest quarter of the year. And so really focusing on those communications enablement is key for us. [inaudible]

Well, I think that's really prudent, Tui, maybe if I follow up for you on a totally different topic, but I'd love to just touch on ProCorp Pay. What's been the reception and how are you feeling about it? I'm sure we'll hear more at ground break, but can you give us a preview?

Yeah, I'm not going to I'm not going to divulge too much because there is going to be a lot of ground break to talk About but as you remember last ground break is when we announced Pro Corp A

And I think the last thing that we told you all about was in Q1 that we had over a hundred customers on the platform. I would say that the enthusiasm has not waned by any measure. It is still a very big bright spot at Procore, which we're all happy about. And it's just another reason why we win.

Speaker Change: And Sackett, I got to say that, you know, just, just, you know, it's still, it's still very, very minimal in terms of the financial impact for both this year and next year. And, but we are excited about it.

Makes sense. Thanks, guys.

Speaker Change: Thank you.

We now have Brent Braceland with Piper Sandler. Please go ahead when you're ready.

Thank you. Have a great week.

Thank you. Thank you.

Brent Braceland: Thank you. Good afternoon, Howard. Really appreciate the preliminary look on next year. As we think about the 11% guide here, I'm curious, how much weight did you put on

The internal challenges given the go-to-market overhaul versus external being challenging. Just trying to think, is it 50-50? Is it 80-20? Any sort of color as you think about headwinds next year, you have two majors. How did you bake that into the preliminary look here?

Thank you.

Speaker Change: Yeah, in terms of the external environment, you know, we are right now still anticipating that the challenging demand environment that we've seen this year continues through continues through next year. So that was what we've contemplated in that guide. But the major factor beyond that, from an internal standpoint, is that now we've got another quarter under our belt.

We've got just over a quarter of how we're executing to the foundational pieces and how we're tracking against that, which is good, and then really it's the early guidance.

being several months earlier, making sure that we apply an incremental level of conservatism in that in terms of how we're progressing, which is what we expected to.

It's really considering it that way in terms of the fiscal 25-25 guide, and I'll just say again, it is a floor that we have high confidence that we'll achieve incremental and above what we would typically do within a fiscal year.

And then, too, I guess, just as we take a step back here, you have these external challenges. You've got some internal challenges as you make the go-to-market overhaul.

But you're still going to grow double digits next year. You still have a, you know, best-in-class gross retention, 94, 95 percent here.

What's your best guess when the cyclical headwinds turn into potential tailwinds? Do we need to wait another year? Is it another two years? I love the framework of folks that you're talking to are slightly more hopeful. But walk us through your best guess at this point.

Speaker Change: when you can actually start to see some headwinds turn to tailwinds for you. Thanks.

Yeah, Brent, I wish I knew that answer because I would be...

Probably doing a different job if I knew the answer that quick, but let me tell you what, let me tell you what I think.

Speaker Change: I know about this industry having worked in it my entire life.

Nothing rapidly changes in one direction, one way or another, really.

Speaker Change: The optimism that's there is...

Speaker Change: I should always kind of couch this with the, it is incremental optimism, it's not exuberant optimism, right? So,

I would say if you got a couple more rate cuts and we get past this election, that the optimism level will have increased a little bit more, but I still, I don't think our industry moves at such a fast pace that it's going to make a huge difference in a short term or short period of time.

Speaker Change: Thank you.

Helpful color. Thanks, guys.

Speaker Change: Operator, are you there?

We now have Adam Org with Stifel. Your line is open.

Awesome and thanks so much for taking the question and I do appreciate the early look into next year. Maybe for TUI, you know, in the past a lot of growth has come from

ACV, and we've talked a little bit earlier about how things have been kind of status quo this quarter versus earlier in the year. And as I think about kind of the go-to-market evolution, and then we think about the opportunity to further penetrate module adoption. How do you think about how that mix evolves over time and the incremental opportunity to sell more of the platform to your customer base?

Well, that is one of the big driving forces behind why we're making this change, Adam, is that we believe that demonstrating the value of our adjacent products to project management

When we do it effectively, we we sell a lot of products. So for us.

changing the way we do our go-to-market to really be more customer-centric and then create these tiger teams that are really effective at helping share the value of the of the different products.

Because remember, we used to sell to just project managers, right? We're selling now to the CFO. We're selling now to the head of the VDC department. We're selling now to the head of safety for an organization. So these sales motions are all unique and they require specialists. So for us, the mix.

Speaker Change: will definitely move more towards new product when this new model comes to fruition because we were really heavily weighted towards volume increases for a long time and we believe that that's going to change.

Speaker Change: That's really helpful. That's it for now. Thanks so much.

Speaker Change: Sure. Thanks, Adam.

Thank you Adam. We now have Dylan Becker with William Blair. Please go ahead.

Hey guys, appreciate the questions here. We may be starting for you since you called it out, kind of the ample opportunity on the owner's side of the equation.

Dylan Becker: not to a front-run groundbreak here either, but could you dive a bit deeper there? Because I do think the general perception is that's kind of largely bucketed as developers, but it feels like there's ample opportunity as we think about kind of global CapEx from other large enterprises.

Speaker Change: Yeah, no, absolutely. By the way, this is one of my favorite topics because people don't give us enough credit for the owner's business that we built. I'm very proud of our owner's business.

So, yeah, people think of owners, they usually think of real estate developers, and that's such a small portion of it. A great way to think about owners, and the way I do, is...

I can tell you a thousand of them right now. The Fortune 1000 are all owners, right? All of those.

Speaker Change: represent some form of opportunity for Procore and you know then you get into hospitality, you get a university, you get into the you know the the pub sector where you know those folks are our owners as well. Every project has an owner and frankly every owner has more money than the contractor they're working they're working with so it to me it's just a very very large opportunity in an area where we've already demonstrated tremendous success across all of those sectors.

Speaker Change: But, yeah, it's just an area where doing more is going to yield, I think, great results.

Okay, yeah, that's really helpful.

And maybe sticking with you two here, as we talk about the cadence of hiring, getting more aggressive as we think about bringing these teams on board, I guess, you give us a general sense of where these people are coming from, maybe more importantly, how you're ensuring that you're going to bring in those right people on board to sustain maybe the differentiated culture that you guys have done such an exceptional job of building and maintaining over the years.

Speaker Change: Yeah, Dylan, by the way, I'm really glad you brought that up because I've been heavily involved in this process. I meet with every new onboarding class, get to know a lot of the folks that are in there, and the caliber and the quality of the folks that we're able to attract has just been remarkable. But you're right, it all starts with our hiring process, and our hiring process always starts with our values.

Speaker Change: And we make sure that we're hiring people that will live to the pro core values and people who are, you know, hungry, humble and smart and people that are

Speaker Change: very, very interested in solving the problems for the industry that we serve.

And so we've been very fortunate. So a lot of these folks, some of them come from industry, some of them come from other sales organizations elsewhere.

They kind of are coming from all over. We really are looking for the best and the brightest.

I'm very happy with how we've gotten through the...

are hiring numbers, but more excited about the quality and the caliber of the talent that we brought in. I also should say too, this isn't just those 200 net new.

Larry has done a wonderful job building out his general manager team. Those folks are all in place now, and their teams underneath them are almost all in place and will be done by the end of the year. And so, you know, getting the right leadership in place.

as well as bringing in the right folks that are going to be doing the frontline work is all part of the game, and it is progressing to plan, and that gives me some optimism.

The only other thing I'll add, Dylan, is that the process from a culture standpoint, in terms of caliber standpoint, doesn't stop when these folks step foot in the proverbial door.

There's a tremendous amount of enablement that we provide and have orchestrated around this transformation That is critical and integral to the success of the organization and to the individuals that we bring in and so it's not just one Component it's all these components put together and Dylan by the way I've made my entire leadership team of myself go through all of the sales enablement that we make all of our new hires go through So we're eating our own dog food

That was great. Thanks, guys.

Speaker Change: Thank you.

We now have Jason Salino with KeyBang. Please go ahead.

Hey, Tui. Hey, Howard. Thanks for fitting me in. So maybe one question on the quarter. So the 16.5%, 16.4% CRPO growth really didn't budge from last quarter. It's kind of impossible to know or quantify,

What level of go-to-market changes was disruptive in the quarter, if you're able to maybe anecdotally think about it?

Speaker Change: Hello?

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Speaker Change: Thank you.

You are back in the live call. We have our speakers connected.

Yeah, Jason, sorry about that. Let me just open Jason's line.

Yeah, did you guys want me to say the question again? Yeah, just gotta say it real quick. Sorry, the line got cut off.

Okay, perfect. So, in the quarter, you saw 16.4% therapeutic growth, really didn't budge from last quarter. So, with these go-to-market changes, I guess, any way to quantify how disruptive they were? Because the numbers themselves, you know, look pretty good.

Speaker Change: Yeah, look, we are seeing the disruption, Jason, that we anticipated.

The CRPO may not be, from a sequential standpoint, reflective of that, it's just...

There's going to be some noise in that, but we are seeing the disruption that we anticipated, and that's going to continue into Q4. And as I talked about before, it's going to continue into fiscal 25, but things are progressing as we expected, and we're addressing those things proactively to make sure that we still focus on Q4. But it's progressing as expected in terms of the impacts.

Speaker Change: OK.

Speaker Change: Excellent. And then, you know, we know that, you know, RPO and

and out-year revenue growth, you know, those are, you know, correlated, they tie together.

So your initial outlook for next year, this 11% growth, this floor.

Speaker Change: You know, is it appropriate to think that this is maybe also kind of a framework for how to think about Q4?

I think you can take that 11% and re-extrapolate it to what that would imply in Q4, and I think that's the right way to think about it. And I think the main thing you said is what we reiterated, which is that it's a floor.

Speaker Change: Okay, thank you.

Thanks, Jason.

Speaker Change: Thank you.

We now have Nick Altman with Scotiabank. Please go ahead.

Thank you.

Awesome, thank you. Thuy, in your prepared remarks you guys talked about how you're seeing some encouraging signs on the go-to-market changes, how it's resonating with reps and international leaders.

Speaker Change: but can you maybe share how it's resonated from the customer's perspective? I know it's kind of early days and maybe it's a little bit more of a 2025 dynamic, but maybe just kind of share how it's resonating with the install-based.

No, I'm glad you asked that question, because I've obviously talked to our customers a lot about this and get their feedback.

Speaker Change: A lot of our customers are just really excited about the customer centricity.

We have a customer on site today that was talking about the fact that we surround them with resources. And this is one of our test cases that we're running and what a difference it makes that we bring the right people in at the right time to help them be successful.

and it's just a much more coordinated and kind of purposeful engagement. So the customers are really excited about it.

Yeah, I have not heard anything negative, but you can imagine from their perspective. They're getting more resources, and they're going to be able to realize more value out of the dollars you're spending with Procore every day, which is great for Procore, and it's great for them.

Right, and then I wanted to circle back to the two of the top five customers being owners. I found that really interesting.

When you think about the go-to-market changes, is there any particular stakeholder where you think the changes can be a little bit more impactful in the near term? And then just going back to Adam's question on what has historically driven the customer expansion, is the opportunity on the owner side for module upsell to drive the expansion maybe a little bit more prevalent than the GC side or the sub side? Thanks.

Speaker Change: Sure, so when you talk about stakeholders, no, there's not one particular stakeholder that's going to benefit any more than the others.

Customer centricity starts with the customer, it doesn't have to be an owner, GC, or specialty contractor.

And then when it comes to cross-sell, I wouldn't look at any one of the stakeholders as being any more susceptible or more interested in buying more products from us than any other ones. Our products are very,

We make them available to all the different stakeholders, and there's a lot of reasons why our stakeholders should buy more Procore products, and it's kind of our responsibility to help them understand the value that we're offering.

Hey Nick, this is Howard. The way I think about it is there's different cross-sections of our business across geos and segments and stakeholders.

that are maybe at different stages in terms of their digitization and adoption. And so the typical progression that you'll see is you'll start to see new loans that start with maybe a small set of products, and then they'll then transition into expanding volume, and then they'll eventually transition into additional modules. And when you look across the business, there's different cross-sections that are at different stages, and there's opportunities across all of them.

Great, thank you.

Speaker Change: Yeah, thanks, man.

Thank you Nick. We have our final question from Siti Sunzunini with Mizuho. Please go ahead when you're ready.

Hi, this is Samir calling InfoCity. Thanks for taking the question.

I just wanted to get a sense of the the GTM roles that you were hiring for. You mentioned you're 25% along in the plans.

Are you like able to hire the talent as you need or any any challenges you see in especially the technology?

side of things. And second part to that is, when you expect these new reps to be fully productive, you mentioned that you'll have all sales quotas and territories assigned in Q1, but how long does it take for the sales reps to be 100% productive?

Thank you. So, yeah, sure. So, we're not seeing, Samir, any challenges in any particular roles that we're trying to fill. That's a very big bright spot for us. On the technical roles, interestingly enough,

A fair number of people we're hiring for those technical roles come from industry, so they actually understand.

at a very fundamental basis that the problem space in which they're helping to solve for. In a lot of cases, they're Procore users, so they actually understand the solution to that problem as well. And they're very, very effective at speaking to prospects and customers about these products. So in general, no, no particular challenges on the hiring front. Yeah, we've seen a tremendous amount of enthusiasm and receptiveness to these roles as we've gone out to hire. So I don't think there's an issue there. To your question about when these folks will be will be granted.

It's going to depend on the segment that they're in. Obviously, when you start to get into the enterprise and above segments, those ramp times are going to be a little bit longer and they get shorter as you go mid-market and down. Part of that is the reason why we wanted to get started as early as possible in the middle of this year to make sure that we get those folks on board and they get started on the ramping so that they are well more ramped as we go into the start of next year.

Speaker Change: Great, thank you.

Speaker Change: Sure. Thanks, Jimmy.

Speaker Change: Thank you.

Thank you. And thank you all for joining. I can confirm that that concludes today's question and answer session.

Speaker Change: Thank you.