Q4 2024 Procore Technologies Inc Earnings Call
Thank you for your patience and good afternoon. Thank you for attending today's Procore Technologies Inc. FY24 Q4 earnings call.
My name is Regan and I'll be your moderator today.
All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end.
If you'd like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Alexandra, with Procore Technologies. Alexandra, you may now proceed.
Alexandra: Thanks, good afternoon, and welcome to Procore's 2024 4th Quarter Earnings Call. I'm Alexandra Geller, Head of Investor Relations. With me today are Thuy Courtemanche, Founder, President and CEO, and Howard Fu, CFO.
Alexandra: 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.
Alexandra: Today's call is being recorded and a replay will be available following the conclusion of the call.
Alexandra: Comments made on this call include forward-looking statements regarding, among other things,
Alexandra: Our financial outlook, go-to-market transition, products, customer demand, operations, and macroeconomic and geopolitical conditions. You should not rely on forward-looking statements as predictions of future events.
Alexandra: All forward-looking statements are subject to risks, uncertainties, and assumptions, and are based on management's current expectations and views as of today, February 13, 2025.
Alexandra: ProCore undertakes no obligation to update any forward-looking statements to reflect new information or unanticipated events except as required by law.
Alexandra: 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.
Alexandra: will also refer to certain non-GAAP financial measures to provide additional information to investors.
Alexandra: Reconciliation of non-GAAP to GAAP measures is provided in our press release and our periodic report filed with the SEC. With that, let me turn the call over to Thuy.
Thuy Courtemanche: Thanks, Alex. And thank you everyone for joining us today. So I'd like to begin by expressing our heartfelt condolences to all of those affected by the devastating wildfires in Southern California.
Thuy Courtemanche: While Hope Force Headquarters in Carpinteria is safely north of the fires, we were deeply touched by the outpouring of concern that we received from around the world.
Thuy Courtemanche: Our thoughts remain with the residents and communities who have endured these tragic events and we extend our deepest gratitude to the firefighters and the first responders who courageously put themselves on the front lines.
Speaker Change: Okay, now I'd like to shift gears to our performance in the quarter.
Speaker Change: We are very proud of how our team executed, ending the year better than we expected, with several notable bright spots. Some highlights include our strong booking performance in the quarter, which was led by more than 136 6- and 7-figure transactions.
Speaker Change: We grew the number of customers contributing greater than a million dollars in ARR by 39% year over year, with growth from all three stakeholders and outsized growth from owners.
Speaker Change: We exceeded our headcount targets for the quarter and are ahead of schedule for our go-to-market hiring.
Speaker Change: And for efficiency targets for the year, we expanded our non-gap operating margin by 800 basis points.
Speaker Change: We also generated $128 million in free cash flow, resulting in another strong year of cash flow generation, and we believe 2025, we will see a continuation of this trend.
Speaker Change: Our strength in the quarter was also reflected in our high quality customer ads and expansions.
Speaker Change: In Q4, we added new customers across all stakeholders, including one of the world's largest telecommunication companies, the University of San Diego, Prism Electric, Extra Space Storage, and one of Canada's largest general contractors.
Speaker Change: We also have expansion wins with Tudor Perini, Mortenson, the Japanese division of a major hospitality brand, a Fortune 30 oil refiner, as well as a major expansion with an E&R 50 contractor.
Speaker Change: You know, I'm particularly proud of two significant MAG 7 wins from the quarter.
Speaker Change: The first is a new customer which marks not only our largest win of the quarter, but also one of the biggest seven-figure ARR deals in ProCourse history.
Speaker Change: The second MEG 7 win is a substantial six-figure expansion with an existing customer, driven by their ambitious plans to grow their facilities and data centers.
Speaker Change: These wins underscore the immense scale of CapEx amongst owners and reaffirms ProCorp's position as the clear market leader in construction technology.
Speaker Change: You know, when the world's largest companies seek a trusted partner to manage their most complex projects, they choose Procore.
Speaker Change: Another big expansion this quarter was with Aubergeldi, a leading infrastructure contractor in Australia and New Zealand.
In 2023, they piloted a few Procore products.
Speaker Change: They saw the value in Procore's comprehensive project management solution and our ability to seamlessly integrate with their ERP system.
Speaker Change: This expansion will enable their team to more effectively and efficiently manage their projects, harness the power of their data, and improve internal reporting.
Speaker Change: These customer wins reflect all of the growth levers that we referenced at our recent Investor Day, including new logo ads, volume expansion, product cross-sell, and growth outside of the U.S.
Speaker Change: We are proud of our top line performance this quarter and the momentum that we've built as we head into this new year.
Speaker Change: So as I reflect on last year, I'm incredibly proud of how we've delivered on our commitment to focusing on our core.
Speaker Change: This means reinforcing our foundational strengths while making strategic investments in related areas that enhance and expand our core offerings.
Speaker Change: First and foremost, I want to highlight the transformative potential of data and AI in reshaping the construction landscape.
Speaker Change: Thanks to our unique and unmatched construction data set, AI offers us an extraordinary opportunity to create value for our customers by driving greater efficiency, reducing risk, and ultimately transforming how teams collaborate, forecast, and execute projects.
Speaker Change: Last year, we continued to invest in AI-powered innovations like Copilot, Agents, and Agent Studio, and we're working steadily towards a future where Procore AI will power every task and workflow, deliver actionable insight, and replace manual PDS processes with trusted, customizable agents.
Speaker Change: And this data set only becomes more powerful as we continue to add new customers and expand with our existing customers.
Speaker Change: Ultimately, we expect Procore AI will become central to the platform experience.
Speaker Change: Which brings me to another area where we've made great strides, our platform connectivity.
Speaker Change: The construction process is incredibly collaborative and requires seamless coordination across all relevant stakeholders.
Speaker Change: This is why an important part of our connected strategy is to ensure that critical project data is shareable, not just within a customer, but across customers and their associated accounts.
Speaker Change: You can think of these connection points as the nerve fibers that go between our products and accounts.
Speaker Change: This year we released Connected Drawings and we are in the process of connecting RFIs and submittals.
Speaker Change: This is an important part of delivering on our mission to connect everyone in construction on a global platform and represents a very exciting first step in supercharging the connected nature of our solutions.
Speaker Change: Something that we believe will continue to serve as a competitive advantage for ProQuo.
Speaker Change: We made a host of other innovations to better serve the diverse needs of all stakeholders and all types of construction.
So I'd like to share a few of those highlights.
Speaker Change: We launched Resource Management, the first solution that brings together labor, equipment, and materials, helping our stakeholders, including subcontractors, self-performed general contractors, and civil and infrastructure customers manage resources more efficiently with greater precision.
Speaker Change: We are supporting our civil customers with tools like Procore Maps, which provides stakeholders with seamless access to all project data in a map view, accessible anytime, anywhere.
Speaker Change: We enhance the experience for our global customers with Pro4Zone, ensuring greater consistency in application performance and overall user experience.
Speaker Change: This also enables local storage and processing of project data, which can be critical for multinational customers with data localization requirements.
Speaker Change: We also ended the year with more than 250 customers having purchased pay and beginning to reap the benefits of automated invoicing and payments to their subcontractors.
Speaker Change: While we are pleased with this momentum and the opportunity remains incredibly exciting, we do not expect PAYE to be material to revenues in 2025, given its associated implementation and project rollout timelines.
Speaker Change: Over the past year we released countless feature enhancements addressing customer feedback votes. This is a testament to our deep partnership with the construction industry and our commitment to continually improving and involving with their needs.
Speaker Change: Listen, while all of these updates are exciting, the most rewarding part is seeing our innovations impact customers in some of the largest job sites around the world.
Speaker Change: This year I visited many customer job sites, from the International Thermonuclear Experimental Reactor in France, otherwise known as ITER, to the Barangaroo Pier Pavilion in Sydney Harbour, to the Lucas Museum in Los Angeles.
Speaker Change: and was truly humbled by the complexity and sophistication of these projects.
Speaker Change: When I started Procore 23 years ago, I never imagined that our platform would become the foundation for some of the world's most impactful projects.
Speaker Change: Of course, another notable 2024 initiative with our decision to pull forward and accelerate our go-to-market transition.
Speaker Change: We believe that this is going to position us for continued top-line growth while allowing us to build deeper, lasting partnerships with our customers.
Speaker Change: For more details on these changes, I encourage you to review our recent and best-of-date materials on our IR website.
Speaker Change: We're a little over two fiscal quarters into this transition and we're pacing very well. We're ahead of schedule on hiring with most roles expected to be filled by the end of Q1. New POP plans and territories have been distributed and our sellers are coming online, ramping up and building pipelines.
Speaker Change: We anticipate the most disruption in the first half of the year as generalists and technical sellers are building this new muscle of working together.
Speaker Change: With that said, we continue to receive positive feedback from our team, customers, and partners, and I am confident that our new operating model is going to position Procore to seize the enormous opportunity ahead.
Speaker Change: The energy was palpable at our sales kickoff in January as the team is fired up about the new sales model and excited to share our platform vision with our customers.
Speaker Change: There's still work to do, but we remain focused on executing this transition to ensure lasting success.
Speaker Change: Now I'd like to lay the foundation for how we're thinking about 2025.
Speaker Change: As we shared on Investor Day, there's a significant opportunity ahead. In order to capitalize on that opportunity, my focus for the year are going to be first
Speaker Change: To complete our go-to-market evolution, we aim to transition to this new sales model over the first half of the year and to be fully operational by the second half.
Speaker Change: This change is key to improving customer outcomes, strengthening relationships, and driving efficient long-term growth. We believe achieving these milestones are going to position us for strong momentum going into 2026.
Speaker Change: My second priority is driving operational excellence. In the past few years, we've made significant profitability improvements, but there is substantial room for continued margin expansion.
Speaker Change: We have ambitious goals to be a high margin business, and we are committed to making further strides towards that goal in 2025.
Speaker Change: Despite the substantial investments we've made in our go-to-market initiative, we are guiding for continued margin expansion this year, underscoring our ability to balance growth with disciplined execution.
Speaker Change: And last, but certainly not least, is to multiply the value of our platform.
Speaker Change: Procore is the only truly unified construction management platform and we believe this is our greatest differentiator.
Speaker Change: We are proud of what we built and the exciting analysis that we shared at Groundbreak, but there is so much more that we can do here.
Speaker Change: Our roadmap includes powerful products and capabilities that are going to amplify the power of our platform and better connect and serve everyone in construction.
Speaker Change: This is an incredibly exciting chapter in Procore's product journey. Many things that we've been working on for years are coming together to deliver our customers a more connected, intelligent, and powerful platform experience than ever before.
Speaker Change: To wrap up, we are incredibly proud of how we finished 2024. We are deeply grateful to our customers for their continued trust and partnership, our employees for their dedication, and our shareholders who continue to support us.
Speaker Change: Together, we're building and refining our business to be a forever company, one that drives lasting shareholder value while continuing to make a meaningful impact on the construction industry for generations to come.
Speaker Change: And now I'm going to turn it over to Howard to share some more on our business performance.
Thanks, Dewey, and thank you to everyone for joining us.
Howard Fu: The main topics I would like to cover today include our Q4 and full-year financial results, additional color on the business, and our outlook for Fiscal 25.
Howard Fu: Total revenue in Q4 was $302 million, up 16% year-over-year, and international revenue grew 19% year-over-year.
Howard Fu: Q4 non-GAAP operating income was negative $2 million, representing an operating margin of negative 1%.
Howard Fu: As I will discuss momentarily, this is not indicative of the operating margin you should expect for fiscal 25.
Howard Fu: Our key backlog metrics, specifically current RPO and current deferred revenue, grew 19% and 17% year-over-year respectively.
Howard Fu: In Q4, we made strong progress towards the growth levers we described at our recent Investor Day. For the year, we saw continued expansion in margin, cash flow, and per share metrics.
Howard Fu: These improvements are stepping stones towards our long-term goals. And as I look ahead, we have a tremendous runway for sustained and long-term growth just in the markets we operate in today, as well as meaningful profitability milestones in both the near and long-term.
Now let me share some additional color on the business.
Speaker Change: As you heard from Tui, we had a strong quarter and ended fiscal 24 with positive momentum going into fiscal 25. Strength in the quarter came from multiple areas of the business.
Speaker Change: We had strong deal execution, converted more of our pipeline, closed large deals both from new logos and expansions, and generally experienced less disruption than we expected from the go-to-market transition.
Speaker Change: CRPO saw a benefit primarily from early renewals, which grew significantly year-over-year.
Speaker Change: This growth is notable considering we also had significant early renewals in Q4 of Fiscal 23.
Speaker Change: Without this benefit, GRPO growth would have been in the mid-teens.
Speaker Change: We believe that the positive performance in Q4 sets us up well as we go into Fiscal 25.
Speaker Change: From a profitability standpoint, Q4 was expected to be our lowest cash flow and operating margin quarter of Fiscal 24. This is due to the timing of various one-time and seasonal investments in the year. However, our margin performance did come in below our guidance.
Speaker Change: The primary driver is due to deliberate decisions to accelerate initiatives from Fiscal 25 into Fiscal 24.
Speaker Change: This was a unique opportunity to enhance various one-time initiatives that will benefit Fiscal 25 while still driving margin improvement in both years.
Speaker Change: The secondary drivers that impacted our margin performance include various other items related to the strong business performance we saw in Q4, including our bookings performance and the related commissions payouts, as well as higher headcount costs from exceeding our hiring targets, primarily within go-to-market.
Speaker Change: Just to reiterate, this is not indicative of the operating margin you should expect for fiscal 25.
Speaker Change: We will continue to be thoughtful in managing both of these metrics.
Speaker Change: We remain very optimistic and confident that we have multiple paths to improve our financial profile over the long term.
Speaker Change: We are the category leader serving one of the world's largest industries with a focused and aligned leadership team that will prioritize efficient growth and strong per share improvements.
Speaker Change: Before I turn to guidance, I would like to remind you that we continue to be prudent in our expectations as we navigate or go to market transition.
With that, let's move on to our Outlook.
Speaker Change: Q1 non-GAAP operating margin is expected to be between 7 and 8 percent.
Speaker Change: For the full year of Fiscal 25, we are raising our revenue guide to be between $1.285 billion and $1.29 billion, representing total year-over-year growth of 12 percent.
Speaker Change: We are raising our non-GAAP operating margin guidance by 50 basis points for the year to be between 13% and 13.5%.
Speaker Change: which implies year-over-year margin expansion between 300 and 350 basis points.
Speaker Change: And to wrap up, we are pleased with how we ended the year and the momentum we have going into fiscal 25.
Speaker Change: 2025 will be a transition year, and we believe our strategic initiatives for the year will set us up for a stronger P&L in fiscal 26 and beyond. With that, let's turn it over to the operator for Q&A.
Speaker Change: Thank you so much. We'll now be moving to our Q&A session. So if you'd like to ask a question, please press star followed by one on your telephone keypad. To remove your question, press star followed by two. Again, to ask your question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question.
Speaker Change: Our first question comes from Brent Breslin of Piper Sandler, your line is now open.
Thank you. Good afternoon. Great to see the
Brent Breslin: Improvement and Stabilization in NCRPO. Thuy, I wanted to start out with you on owners. It sounded like you had some very large owner wins here in Q4. I think you talked about the owner opportunity yet.
Brent Breslin: as a 25% of the ARR business, but only 2% logo penetration. So how much can you lean into this owner opportunity to maybe
Speaker Change: Offset some of the cyclical cycle down headwinds that you see in the business. It feels like you got some momentum there in Q4, wondering how sustainable it is going into 25 and 26, thanks.
Brent Breslin: Yeah, so Brent, I'm glad you brought this up because, look, the owner's business is a great business and it continues to be. I do want to start off by setting the table though, because it, though we had a lot of strength in the owners, we had strength across the entire spectrum of the stakeholders that we serve, which was.
Speaker Change: Really, really remarkable. I was very proud with how we how we did that both in the US and internationally
Speaker Change: So, but when you when you want to focus on owners.
Speaker Change: Yeah, the opportunity owners segment is huge. And there's a lot more we will do over time. We are leaning into that. That's a that's an area where we have lots of focus.
Speaker Change: and we will continue to lean into it. But yeah, what I think it demonstrates, Brent, more than anything, is just how big the opportunity is ahead of Procore, and the fact that, you know, people really focus on the ENR 400 as our TAM. This is a, we are a global business serving a, you know.
Speaker Change: Any owner that and GC and sub that actually is building something of scale. So it just really does illustrate the opportunity And yeah, I'm excited about all segments. But yes, very special with what we've done with owners
Howard Fu: Clear, it sounds like the strength here is broad-based, not just in one segment. Howard, just a quick follow-up for you.
Speaker Change: You mentioned the tail end to CRPO here from early renewals. What is driving the early renewals? Was there some new products that prompted some early renewal activity? Just help us understand what drove early renewals in the quarter. Thanks.
Howard Fu: You know, I think it's across a number of areas, Brent. I think it's a
Howard Fu: partially a function of how well we executed in the back part of the quarter. I think that had something to do with it. I think it also speaks to what Thuy talked about in terms of us making progress across the tremendous TAM that we have.
Howard Fu: lesser disruption that we saw in some of the transformations that were transitions that we were making in Q4. And I think all of those things put together actually really helped our performance in bookings. We're very happy with the bookings performance in Q4.
but yeah we're very happy with our performance.
Speaker Change: And by the way, Brett, I do want to come in and just say the execution was so strong. It was just something I'm really, really proud of across the board.
Speaker Change: for the quarter so that you know every player on the field contributed and every player on the field did a great job so you know execution
Speaker Change: and that comes through as early renewals, that comes through as 130 plus six and seven figure deals, and that just comes through with creating the momentum that we need to have an amazing year.
Great to hear. Thank you.
Thanks, Brett. Thanks, Brett.
Unknown Speaker 0.0.0
Thank you.
Speaker Change: Our next question comes from Joe Vrewick of Baird. Your line is now open.
Great, thanks for taking my questions.
Speaker Change: You know, of all the construction macro indicators we've tried to interpret, it does seem like those that triangulate around an owner's willingness to move forward on projects.
Speaker Change: not further delay or abandon. Those indicators seem to have improved the most over the second half of the year.
Speaker Change: Do you think that generally lines up with the sentiment you're hearing from the segment correlates to spending you're seeing? And I guess if it does at all, doesn't this mentality from owners generally perceive maybe how GCs think about the upcoming year at some point?
Speaker Change: So Joe, this is Huey. I would say a couple things to think about here. One is that we do not ever focus on one or two of these metrics just because they're
Speaker Change: Unknown Speaker You'll drive yourself nuts trying to make sense out of the 10 to 20 that you may look at. But one thing that you did say, which is absolutely true is that the industry itself is sentiment driven. And so if there's good news, like people are excited about an election, things get better. If there's bad news, things get a little bit worse. But in general, it's sentiment driven. But I will tell you this.
Speaker Change: What needs to get built still gets built, right? So there's always an opportunity for Procore. And again, with an industry that's searching for productivity increases.
Speaker Change: Craig Courtemanche is the ideal solution for them so they can do more with less. So in general, it is very sentiment driven and we remain very excited about the opportunities.
Okay, that's great.
Speaker Change: and then just in terms of the booking strength here in Fort Hue.
Speaker Change: Does that in any way deplete the available pipeline, maybe alter the exit momentum you would have expected just under the new sales model later in the year? I guess the question is, did you make it harder on yourself by how strong the fourth quarter ended finishing?
Howard Fu: You know, I actually, this is Howard here, I actually wouldn't think about it as depleting pipe.
Howard Fu: I actually think about it as we have strong execution coming out of the year and strong momentum going into the year. However, having said that, in Q1 and Q2, this is where the rubber meets the road in terms of the changes that we're making in the go-to-market organization. And that's really what we're focused on. It's not about depleting the pipe at all. It's really about making sure we nail that execution in Q1 and Q2.
Okay, great. Thank you very much.
Thank you, Joe.
Speaker Change: Thank you. Our next question comes from D.J. Hines of Canaccord.
Your line is now open.
Speaker Change: Hey guys, Tui, maybe we could pick up on that thread that Howard just mentioned and talk a little bit about the reception.
Speaker Change: To the new sales coverage plan when it was introduced to the field at SKL, like how much narrower are coverage plans today with the incremental capacity you've added?
Speaker Change: How active has your technical sales layer been with customer engagement? And just like, how are you thinking about that potential for disruption, given it kind of didn't materialize as badly as you thought in Q4?
Speaker Change: Yeah, so let me let me back up a little bit, DJ, and just kind of tell the story again, because, you know, we announced this last year, you know, several quarters ago. But remember, all of 2024 was essentially the planning phase, right? So it was this, it was all very, you know, hypothetical and theoretical, and nothing really had hit the, you know, the ground yet. But when we did sales kickoff this year, which was just several weeks ago, there was extreme excitement and enthusiasm across the sales organization about what we're doing.
Howard Fu: And as a matter of fact, I've talked to lots of customers who are aware of these transitions and are very excited that they're going to get additional resources and they're going to benefit from this as well. So, but to what Howard was saying earlier, we're now in the execution phase, right? And we're only a couple of weeks into it.
Howard Fu: And that's really where the rubber hits the road. And so, you know, we have new teams that are still figuring out how to work together. We have folks that are building pipe and, you know, focusing on their new accounts and getting on airplanes and, you know, shaking hands and buying some steak dinners and all. But they're just getting started. So we are going to carry a
Howard Fu: healthy dose of skepticism over the next couple of quarters, but we really firmly believe that by the second half of the this year all of these all of these changes and investments we're making are going to start paying off and we're excited about it.
Speaker Change: Yeah. Okay. And then Howard, just bridging that commentary into how you think about the shape for 2025.
Howard Fu: Is it right to think that growth probably gets a little bit worse in Q2 and then maybe starts to reaccelerate by Q4, which kind of gets you that full year 2025 growth rate that looks similar to where you're guiding in Q1? Is that the right way to think about the year?
Howard Fu: I think we'll start to see productivity definitely pick up as we head towards the back part of the year. DJ, I'm not going to comment on what that shape looks like, but the intent is that as we start to get through some of this execution in Q1 and Q2, the productivity will pick up, and you will start to see not just the productivity, but the actual bookings also start to pick up in the seasonality towards the back part of the year.
Got it. Okay. Thank you guys.
Thanks, TJ.
Thank you.
Speaker Change: Our next question comes from Brent Dill of Jeffries. Your line is now open.
Brent Dill: Thanks Howard. Good to see the CRPO to 19. I guess guiding to 12
Speaker Change: You know, explain the delta. Is that really just the sales motion trying to get into gear? Is there something else that you're taking into account for that big a de-sell into 25?
Speaker Change: Yeah. Hey, Brian, good question. Thanks for the question. So, first thing is I just want to remind everyone, the reason that the CRPO growth is at 19% had a lot to do with those early renewals. And without that magnitude of their early renewals, our CRPO growth in Q4 would have been in the mid-teens. And typically, revenue growth is plus or minus a couple points around that CRPO growth. Specifically for the guidance that we have for the full year on revenue for fiscal 25 at 12%, it is a raise.
Speaker Change: and it also reflects an additional level of conservatism applied in Fiscal 25 versus what we did in Fiscal 24.
Speaker Change: and that's because a lot of what we've talked about already, which is we are actually going through that transformation or that transition right now on the go-to-market side. And, you know, from where I sit, there's a lot of moving pieces that still need to come together. We are ahead of plan in terms of hiring, and we're doing really well. But when the marver meets the road, you just will put a little bit more of a cautiousness on it in terms of what we're guiding. So we're guiding a little bit more conservative this year than last year.
Great, thanks.
Thank you.
Speaker Change: Our next question comes from Sakalia of Barclays. Your line is now open.
Speaker Change: Okay, great. Hey guys, thanks for taking my questions here. Nice, nice finish to the year.
Speaker Change: Second. Tui, maybe, hey, yeah, absolutely. Tui, maybe for you, just change it up here for a second. It was great to hear just the number of customers on ProCorp Pay continue to grow.
Speaker Change: Maybe the question is, how are you, I mean, since you've got, you've got, you know, a decent sample size now, how are you sort of thinking about that product differentiating versus the incumbents out there? And just any, you know, any, any feedback just on, from some of those early adopters on, on usage and, and, and how it's winning?
Speaker Change: Yeah, well, by the way, second, thank you for teeing me up on this one. This is an area that's near dear, obviously, to my heart. So we were learning a lot with payments. But you know, the primary attractive driver for our customers on this is the fact that
Speaker Change: Because we're a platform, and all of the pieces that go into an invoice long before it gets paid is managed on our platform.
Speaker Change: The customers are just loving the fact that they can now do that last mile of compliance and payments on the Procore platform. So having it all in one place is great. We also are, frankly, the modern technology stack. We're the system that is like a pleasure to use, and I will imply that maybe some other ones are not a pleasure to use.
Speaker Change: and so therefore we're, you know, we're capturing the hearts and minds of the end users who are actually clicking the buttons and making the payments.
Speaker Change: and in general it's we're learning that the you know our commercial customers our enterprise customers our strat customers are all valuing what we have and and it's fun now one of the learnings we have is it takes a little longer to to wind these accounts up because we have to get everybody onboarded and then all the projects haven't started at the same time so we're incredibly patient but we're also incredibly optimistic about where we're going with it.
Yeah, absolutely. That's super, super helpful.
Speaker Change: Howard, maybe for you for my follow-up, appreciate the visibility on just the early renewals in CRPO. I know we're not going to talk about the shape of CRPO in 2025, but
Speaker Change: Maybe the question is, would most of those renewals maybe have happened in Q1 of 25? Or should we think about those renewals kind of coming sort of equally throughout the year, just as we try to estimate the shape of that CRPO growth?
Speaker Change: Yeah, I think it's fair to say that most of those would have come in Q1 and probably the early part of Q1, but there may be some that float throughout the year. But Zach, this is how I would think about it. When we think about CRPO, when we think about the performance in Q4,
What we're really solving for is
Speaker Change: the evolution and the path across multiple years towards our mid and long-term goals. And that's both on the top line and the bottom line. So we're going through this transformation or this transition on the go-to-market. It's gonna benefit both the top and bottom line.
Speaker Change: We're going to continue to grow margins in Fiscal 25 and into Fiscal 26, and we're going to balance that as we continue to optimize free cash flow per share. And remember,
Speaker Change: All the markets that we talked about and all the different markets that are available to us that we talked about investor day, that is also going to contribute in terms of what we invest in, what we solve for, and what we optimize as we think about the trajectory of our revenue growth and our margin profile over the next several years.
Very helpful, guys. Thanks for the time.
Take a second.
Thank you.
Our next question comes from Dylan Becker of William Blair.
Your line is now open. Hey, guys.
Speaker Change: Hey guys, really nice job here. Maybe Howard, sticking with that point that you just touched on, how should we think about the leverage between kind of the emphasis on top line growth and margin? It sounds like
Speaker Change: There's a little bit of doubling down on some of the early opportunity and momentum you're seeing, but if that continues to accelerate and you see the productivity and collect in the back half, kind of the trade offs between accelerating kind of the top line profile versus kind of the margin expansion opportunity. Unknown Speaker
Speaker Change: Yeah, good question. So the first thing is, in no scenario do we not continue to expand margins in 25 and actually into 26. That's the first thing.
Speaker Change: And remember, we are optimizing for free cash flow per share, and so the different paths in terms of the makeup of that, of optimizing free cash flow per share between what the revenue growth and what the margin growth looks like, we're going to need to go through Fiscal 25 to see what that looks like specifically in Fiscal 26.
Speaker Change: and that's really how we're thinking about the balance of this.
Speaker Change: Okay, got it. That's totally fair. And then maybe Tui, switching over to you, you did call out some larger, obviously, enterprise customers, million plus, a handful of the mag seven ones. I'd be remiss if I didn't ask about data centers, just given kind of the headlines on capital deployment there. I know we've talked about diversification across in markets and in customers, but maybe help us think about what the CapEx deployment on the data center piece can mean from aggregate spend and maybe volumes for your business. Thanks.
Speaker Change: So Dylan, we always have a bet as to who's going to ask the data center question. So you won the data center question. I'll take the crown.
Speaker Change: Thank you. I really wish you'd ask me about AI and our agents strategy, but I'm going to go ahead and talk to you about data centers. So yeah, I mean clearly, you know, even if you just look across all the hyperscalers, the amount of investment going into data centers is absolutely off the charts.
Speaker Change: and so that's that's one of the strengths in the area of the of the economy.
Speaker Change: But I will say, for every really strong segment, there's also a counter segment, like commercial.
Speaker Change: and remember, it's only like 2% of the overall construction market. So it's one of those things that's really exciting. And by the way, I'm doing a
Speaker Change: job site tour next week in Arizona for a not not to be named company. But, you know, they're all exciting. But really, it's just a just one piece of an extremely large opportunity for us.
Speaker Change: across all segments of construction. But yeah, I mean, it doesn't hurt right there. You know, I've seen numbers that are eye popping in terms of that the aggregate spend is going to be this year.
Sounds great. Thanks, appreciate it.
Thank you.
Thank you.
Our next question comes from Adam Borg of Stifle.
Line is now open.
Awesome. And thanks, Liz, for taking the questions.
Speaker Change: Maybe as we think about just the spirit of the go-to-market change. Hey guys.
Speaker Change: when we think about the go-to-market changes, I'd love to revisit a question that's come up in the past just on the channel. I'm just curious, kind of what's the latest thinking here in terms of building a channel and even receptivity from larger SIs or VARs to building out that broader ecosystem?
Speaker Change: Yeah, and by the way, it's, it's a privilege when you have a brand as solid as Procore to be able to have these conversations with the largest SIs in the world who are interested around building practices around this. This is definitely a big part of our long term plan and something that we talk about very often. It's not a, it's not an area of significant focus now, but we're building those relationships and we're having those discussions. So they, when they, when it's time, they will bear the fruit that we know they're going to do. And, and look, in some markets,
Speaker Change: That's the way software is purchased, right? So of course, as we enter new markets where that's the norm, we'll be leaning heavily on that as well.
Speaker Change: That's really helpful. And maybe just as a quick follow up to just in terms of new logo growth, obviously, that's been softer, we've talked about that at length. How do we think about kind of, and maybe for Howard, even, so as we think about the guidance for this year, what's the new logo growth that's underpinning that? Is it in line with what we've seen in recent quarters or any color here would be really helpful. Thanks so much.
Howard Fu: Yeah, look, Adam, you know, we've always talked about customer count as one data point that we look at, but it's not something that significantly drives how our business is. And a lot of that, the customer count is actually concentrated down market.
Howard Fu: I'd actually point you back more to the $100,000 and six and seven figure numbers.
Howard Fu: that are much more indicative of where our business is now and where it's going to go.
Howard Fu: and those are more indicative of how that's incorporated into how we're thinking about growth going forward.
Howard Fu: It's not something that we focus on significantly in terms of what drives the business. And the guide implies that the new logo will be lower. But remember, we manage to the dollars, and that's why I point you more towards the larger customers.
Excellent. Thanks so much, guys.
Thanks, Adam.
Thank you.
Speaker Change: Our next question comes from Daniel Jester of BMO. Your line is now open.
Daniel Jester: Great, thanks for taking my question and I'll bite to and ask you about AI. I'd love to sort of get a flavor of the early feedback you're getting from folks around the copilot and the like and maybe help us with some examples about where you think that they're getting the biggest benefit moving the needle using them. Thanks.
Daniel Jester: Yeah, no, thank you very much, by the way, for teaming up. So yeah, no, by the way, not only am I talking to customers that are using it, and I'm also using it myself. So I'll tell you what the number one piece of feedback I hear is that Copilot is the answer machine, right? It's instead of getting a list of links back when you do a search, it's actually giving you the opportunity to ask questions of your project and get back intelligent answers, which is really, really exciting.
Myself. This is Craig Courtemanche signing out.
Daniel Jester: product as well as our agent studio where our customers are going to be able to configure their own agents to do all their own work.
Speaker Change: that is going to be the partner to you on the job. So instead of just being providing answers to you, you're going to have countless numbers of agents on your project that are going to be helping you manage that project. So imagine
Speaker Change: Two things in construction matter, schedule and budget, time and money, right? So imagine you're going to have agents that are going to be 24 hours a day monitoring your schedule, monitoring your budget, and more importantly, monitoring the things inside the platform from not only Procore, but our partners.
Speaker Change: to look for opportunities for margin improvement for our customers and to avoid risk.
Speaker Change: and you're going to have countless eyes working 24-7 on the project that are agents and I think that that is the future and that's, by the way, that's only possible because we have a
Speaker Change: platform that is unified, we have this corpus of data and that we can drive all of that value right into the hands of our customers.
Speaker Change: So thank you. That's great. Thank you. And then maybe just just, oh, you're welcome. I think, Howard, maybe just quickly, FX, any impact did you call out in the quarter? Thanks.
Speaker Change: Nothing, very very minimal, nothing notable to call out on FX at all.
Okay, thank you.
Yeah.
Thank you.
Our next question comes from Jason Salina of KeyBank.
Your line is now open.
Prep.
Speaker Change: Great. Good afternoon. You know, Thuy, I think we all kind of short memories, but with all the news on tariffs and inflation, can you maybe just remind us?
Speaker Change: flows through or impacts the pro core business. I know you do this volume.
Speaker Change: Based Pricing Model, you know, hypothetically captures the upside. But on the other hand, you know, if construction costs inflate, you know, that might affect underlying project activity. So how do you how do you think it flows through or what did you see, you know, in 2021 or prior periods?
Speaker Change: Well, let me just start with what we're seeing now, Jason. So I talk to lots of customers all the time, and of course I ask these kind of questions, right? The consensus now, I think, from at least the conversations I'm having, is everyone's kind of in a wait-and-see because there's nothing that's been super solid that's been delivered. And so people are not really taking definitive action because they don't know if the tariffs are a bluff or if it's real. But ultimately, this industry is super resilient.
Transcripts provided by Transcription Outsourcing, LLC.
Speaker Change: and our, you know, it's funny when I talk to our customers and I mentioned something around what about, what about your wind farm production? They're like, oh, don't worry about it. We've got these other areas of our business where we're doubling down, which are, which are really, you know, exciting for us. So we just can't forget how resilient.
Speaker Change: the industry is and how diverse every aspect of the industry that we serve is.
Is that it, Nathan?
Speaker Change: Hi Jason, we wanted you to know that we're going to be doing a Q&A session on the new week of July. So if you want to check out the Q&A, we'll be doing a Q&A session on that. If you want to go ahead and join in, please do. Thank you. Thank you. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.
Oh yeah, we got you back. Got you now.
Speaker Change: Okay, yeah, so my question for Howard, you know, I don't want to get too ahead of my skis, but
Speaker Change: The performance you saw in Q4, it sounds like the go-to-market changes were still just in planning, you know, all through last year, but did any of the upside come from any early green shoots from some of the swarming, or is that still, you know, yet to come?
Speaker Change: Those are still yet to come. The story in Q4 is really about strong, strong execution. We saw a really good dose of good execution. It speaks volumes to the enablement, the communication. We didn't see anything change in terms of the competitive environment or anything like that. But we're still going to see the benefits of the changes that we're making in the go-to-market, as we approach the back part of this year.
Speaker Change: get through Q1 and Q2. And so it was really about just stronger execution in Q4.
Okay, perfect. Thank you.
Thanks, Jason.
Thank you.
Speaker Change: Our next question comes from Alexei Gogolev of JP Morgan. Your line is now open.
Alexei Gogolev: Hello everyone. Thuy, if I may ask you about market share dynamics, you mentioned continued leadership.
Speaker Change: in the space. I realize that you probably are not planning to update us on a quarterly basis.
Matthew Puljiz: Unknown Speaker 1. Hello, everyone. I'm Matthew Puljiz. I'm going to be talking about what your win rates are and how you're performing against those three top competitors. But directionally, could you maybe give us an update if you feel you've been gaining share in the most recent quarter? Unknown Speaker 1. Sure.
Speaker Change: So just to be clear, we will, we disclose those kind of, you know, that data, you know, on an annual basis. And so that's not going to, we're not going to update you on that. But here's the good news.
Speaker Change: being so strong against kind of all ways to look at the competitive market are holding strong. And they're exactly where they essentially were before. And it's a testament to our ability to deliver the best product in the market with the best people that are selling the value of it.
Speaker Change: Understood. And just to clarify, or maybe get some more details on AI agents.
Do you feel like there's still a significant
educational process that is needed.
among your customers.
Speaker Change: when your sales go out and talk about these products to them.
Speaker Change: Is there still some confusion among your customers on what exactly is the benefit or do they clearly understand how much productivity improvement they could see from?
and those agents.
Speaker Change: Well, so Alexi, I would say, forget about construction, forget about Procore. I think 2025 is the year of agents, right? So I don't think that many businesses out there are 100% certain as to how they're going to be able to leverage the kind of all of this.
Speaker Change: Generative AI, and specifically around how agents are going to help them, but I will tell you this, that when we have a conversation with a customer or a prospect about the possibilities of what you can do with agents,
Speaker Change: Unknown Speaker Their eyes pop out of their head. Because remember, for every agent that you put on into our system, in generally, the only way they could solve that problem was to add a new headcount to their payroll, which just drives their margins down. So like, from their vantage point, they're like, bring it on. But yes, there is a considerable amount of opportunity for us to educate the community. And I, I think we're all in this together, frankly. So yeah, but it's very exciting.
Thank you, too, and congratulations with great results.
Thanks for watching.
Thank you.
Speaker Change: Our next question comes from Taylor McGinnis of UBS. Your line is now open.
Speaker Change: Hi guys, this is Daniela on FlickTailor. Thanks for taking our questions.
Speaker Change: So just on operating income margin, it looks like it came in below the guide in Q4, but you slightly increased the operating margin guide for 2025. And it sounds like there were some one-time expenses. So are we largely through that? Or are there incrementally more investments that you're making potentially in 2025 that could limit the level upside? And how do we think about the trajectory from here and the annual expansion that we could see?
Speaker Change: Yeah, thanks for the question. So first thing is we take our guidance extremely seriously.
Speaker Change: and we also take how we manage the trajectory of our margin profile over time very seriously. And in Q4, these were one-time decisions that we made. The business was executing strong, we saw a tremendous amount of momentum, and they came to us and asked to continue to spend and we said yes.
Speaker Change: and even in doing so, it still allowed us to expand our margins in fiscal 24 by 800 basis points.
Speaker Change: and we expect to continue to expand margins in fiscal 25 and we leave ourselves room to operate and potentially walk that up throughout fiscal 25 as well.
Speaker Change: I would tell you, don't anchor on the Q4 number. When we report Q1 and Q2, you're going to see a very different margin profile. And remember what I said before in my response to another question, we will not only expand margins in Fiscal 25, we will also expand margins in Fiscal 26 as well.
Great, thank you.
For SAFE-NL.
Thank you.
Samir: Hi, this is Samir calling in for Citi. The question I had was, we're talking about AI benefits for customers and agents.
Samir: and co-pilots and whatnot. Just curious about how you are leveraging AI internally in terms of using agents or for software development or for marketing functions. How is that coming along and what kind of
Samir: What kind of leverage or benefits you're seeing in terms of tangible benefits from using AI internally?
Samir: Yeah, so we are incredibly excited as a business to be able to leverage the latest and greatest generative AI technology. So, of course, we're using CoPilot, right, within our development environments.
Samir: and of course, I'm reaping all the benefits. I'm actually writing code these days and I'm using Copilot. So it's, yeah, it's incredibly, I know from a...
Samir: Firsthand experience, how productive it makes you. So that's that's really exciting. We're using it in, you know, our support department. We're using it basically in our marketing department. Everybody is looking at the best ways to leverage the most modern technology in order for us to get the most leverage out of it. And it's, it's an exciting time. And there's really.
Samir: No area of the business that doesn't get touched by this.
So it's, yeah, lots of opportunities.
any tangible.
numbers you can point to in terms of
forward.
We.
We don't have any that we're...
Samir: Maybe it's too early, but it's also we don't have any really that we're going to disclose. But I will tell you this, you look at the pace of innovation that comes out of Procore every single day, and the amazing product that we put in the hands of our customers. To me, there has to be some of that in there, obviously. So anything that we can do,
Samir: to help solve the needs of the industry, is something that I am 100% behind. And so that's why we're investing in on these things internally.
Great, thank you.
Thanks, Judy.
Oh, yes. Thank you.
Thank you.