Q2 2025 Procore Technologies Inc Earnings Call
Reagan: Good afternoon, and thank you for joining today's PROCORE TECHNOLOGIES, INC. FY 25 Q2 earnings call. My name is Reagan, and I'll be your moderator today. All lines will be muted during the presentation portion of today's call, with an opportunity for questions and answers at the end. And if you'd like to ask a question, please do so by pressing star one. I would now like to pass the conference over to our host, Alexandra Geller, Head of IR. Please proceed.
Good afternoon and thank you for joining today's procore Technologies Inc. Fy22 earnings call, my name is Reagan and I'll be your moderator today. All lines will be muted during the presentation portion of today's call with an opportunity for questions and answers at the end. And if you like to ask a question, please do so by pressing star 1.
I would now like to pass the conference over to our host. Alexander Geller of head of ir, please proceed.
Alexandra Geller: Good afternoon, and welcome to PROCORE's 2025 second quarter earnings call. I'm Alexandra Geller, Head of Investor Relations. With me today are Tui Koremontch, founder, president, and CEO, and Howard Fu, CFO. Further disclosure about our results can be found in our press release issued today, which is also available on the Investor Relations section of our website and our periodic reports filed with the SEC. Today's call is being recorded, and a replay will be available following the conclusion of the call. Comments made on this call include forward-looking statements regarding, among other things, our financial outlook, go-to-market transition, platform and product, customer demand, operations, and macroeconomic and geopolitical conditions. You should not rely on forward-looking statements as predictions of future events. All forward-looking statements are subject to risks, uncertainties, and assumptions and are based on management's current expectations and views as of today, July 31, 2025.
Good afternoon and welcome to procore 2025 second quarter earnings call. I'm Alexander Geller head of investor relations with me today are 2 weeks founder, president, and CEO, and Howard Fu CFO further disclosure about our results can be found in our press release issued today, which is also available on the investor relations section of our website and our periodic reports filed with the FCC.
Call.
Comments made on this, call include forward-looking statements regarding among other things. Our financial Outlook go to market transition, platform, and products, customer demand operations, and macroeconomic and geopolitical conditions.
You should not rely on forward-looking statements as predictions of future events.
Alexandra Geller: PROCORE 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 date. We'll also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of non-GAAP to GAAP measures is provided in our press release and our periodic reports filed with the SEC. With that, let me turn the call over to Tui.
All forward-looking statements are subject to risks, uncertainties and assumptions, and are based on Management's. Current expectations, and Views as of today. July 31st 2025.
Pro for 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 date. We'll also refer to certain non-gaap Financial measures to provide additional information to investors.
A Reconciliation of non-gaap to gaap measures is provided in our press release and our periodic reports filed with the SEC.
Tooey Courtemanche: Thanks, Alex, and thank you, everyone, for joining us today. Let's start with our Q2 performance, which represented another solid quarter for the year. Some highlights include revenue grew 14% year over year. Non-GAAP operating margins increased quarter over quarter to 13%. We had a strong quarter for large deals, with a number of six and seven-figure deals growing 21% year over year, resulting in more than 2,500 customers contributing greater than $100,000 in ARR. And we saw continued progress with our go-to-market transition, positioning PROCORE for efficient growth as we build deeper and lasting partnerships with our customers. In June, we held our annual innovation summit, exploring how AI-connected workflows and smart data are transforming the construction industry. Our latest innovations put PROCORE at the forefront of this transformation as we help to define the next era of construction.
With that, let me turn the call over to 2 Leeds.
Thanks, Alex. And thank you everyone for joining us today.
Let's start with our Q2 performance which represented another solid quarter for the year. Some highlights include Revenue grew 14% year-over-year
And margins increased quarter over quarter to 13%.
We had a strong quarter for large deals with a number of 6 and 7, figure deals growing, 21% year-over-year resulting in more than 2500 customers contributing greater than dollars in the ARR. And we started continued progress with our go to market transition.
Positioning procore for efficient growth, as we build deeper and Lasting Partnerships with our customers.
Tooey Courtemanche: So I'd like to share a few of these exciting innovations. Starting with AI intelligence, we introduced PROCORE Helix, our intelligence layer with powerful capabilities, including Assist, formerly known as Copilot, our improved conversational intelligence experience. Second, Agent Builder, which allows customers to build custom agents tailored to their unique workflows directly in PROCORE. And third, Developer Studio, which will allow agents to work across apps or platforms by leveraging MCPs, third-party integrations, and APIs. We also have out-of-the-box agents in limited release today for our largest customers, including daily log accountability agents and RFI agents, with many more in development. We are reimagining the way that owners plan, build, and operate their global portfolios with robust capabilities tailor-made for owners, such as Owner's Portfolio Hub, a comprehensive portfolio management solution, and integrated asset management for fixed assets to generate even more value for owners.
In June, we held our annual Innovation Summit exploring how AI connected workflows and smart data are transforming the construction industry. Our latest Innovations put procore at the Forefront of this transformation as we help to define the next era of construction.
So, I'd like to share a few of these exciting Innovations.
Starting with AI intelligence. We introduced procore Helix our intelligence layer with powerful capabilities, including a cyst formerly known. As co-pilot. Our improved conversational intelligence experience,
Second agent Builder, which allows customers to build custom agents tailored to their unique workflows directly in procore and third developer Studio which will allow agents to work across apps or platforms by leveraging. Mcps third-party Integrations and apis.
We also have out-of-the-box agents in limited release today for our largest customers, including daily log accountability, agents, and RFI agents with many more in development.
We are reimagining the way owners plan, build, and operate their global portfolios with robust capabilities tailored for owners, such as Owners Portfolio Hubs.
Tooey Courtemanche: And we continue to innovate our existing products with planned enhancements to improve safety on the job site, simplify scheduling changes to keep projects on track, and create one of the industry's most comprehensive project financials offerings. We're also unlocking one of the world's most powerful 3D streaming BIM engines with our acquisitions of NovaRender and Flypaper. The announcements that we shared at the innovation summit are just the beginning of what's to come when you combine human expertise with intelligent technology. We're not just changing workflows. We're changing how the industry thinks about what's possible. You know, I spent a lot of time on the road this past quarter visiting employees and customers across the US and Europe. And a few things stood out everywhere I went. Our customers are incredibly optimistic about the rapid pace of technological change and the potential to transform the construction industry.
A comprehensive portfolio management solution and integrated asset management for fixed assets to generate even more value for owners.
And we continue to innovate our existing products with planned enhancements to improve safety on the job site. Simplify scheduling changes to keep projects on track and create 1 of the industry's most comprehensive project financials offerings.
We're also unlocking one of the world's most powerful 3D streaming BIM engines with our acquisitions of Nov Render and Fly Paper.
The announcements that we shared at the Innovation Summit are just the beginning of what's to come when you combine human expertise with intelligent technology.
We're not just changing workflows. We're changing how the industry thinks about what's possible.
You know, I spent a lot of time on the road this past quarter visiting employees and customers across the US and Europe.
Tooey Courtemanche: And our employees are equally energized, including our global sellers. I'm continually impressed by the talent density that we built and the level of product and engineering innovation happening across the company. It's clear the work that we're doing is meaningful and pushing the industry forward. This optimism about the future of construction became clear in a recent conversation I had with John Fish, CEO of Suffolk, widely recognized as one of the most innovative leaders in our space. We discussed how AI, by automating some of the most laborious tasks, empowers construction professionals to step into more impactful, fulfilling roles as knowledge workers. This shift is not only changing how we build, but also who chooses to build, attracting a new generation of talent to an industry that's becoming more dynamic, innovative, and rewarding. By consistently innovating for our customers, we're securing customer wins.
And a few things, stood out everywhere. I went our customers are incredibly optimistic about the rapid pace of technological change, and the potential to transform the construction industry. And our employees are equally energized, including our Global sellers.
I'm continually impressed by the talent density that we built and the level of product and engineering and Innovation happening across the company.
It's clear the work that we're doing is Meaningful and pushing the industry forward.
We discussed how AI by automating some of the most laborious tasks, empowers construction professionals to step into more impactful fulfilling roles as knowledge workers.
This shift is not only changing how we build but also who chooses to build attracting a new generation of talent to an industry? That's becoming more Dynamic Innovative and rewarding.
Tooey Courtemanche: In Q2, we added new customers across all stakeholders, including Calpine Corporation, a leading US renewables energy company, a top 10 ENR 400 general contractor, the Department of Transportation for a large Southeastern state, and a major consumer electronics retailer. Another new customer in the quarter was top design-build contractor, Clayco, one of the largest construction firms in the US. Clayco sought to better integrate a highly segmented technology stack to meet the diverse needs of its six business units. In Q2, they chose PROCORE to replace an incumbent vendor and help consolidate across a host of solutions. A crucial factor in their decision was finding a partner capable of unifying their construction data with their data architecture vision across multiple enterprise applications.
By consistently innovating for our customers. We're securing customer wins in Q2 we add a new customer's across all stakeholders including Calpine Corporation.
A leading us Renewables Energy company, a top 10, enr 400, general contractor.
The Department of Transportation for a large southeastern state, and a major consumer electronics, retailer.
Another new customer is a quarter was top design, build contractor clayco 1 of the largest construction firms in the US.
Plecos sought to better integrate a highly segmented. Technology stack to meet the diverse needs of its 6 business units.
In Q2, they chose procore to replace an incumbent vendor and help consolidate across a host of solutions.
Tooey Courtemanche: PROCORE won the deal by demonstrating our ability to streamline their financial processes, enhance budget management, and deliver a fully integrated solution that could support the unique needs for all business units. Clayco purchased products across our platform to standardize all construction projects on PROCORE. This win underscores the significant market opportunity that remains within US general contractors. Another large new logo win in the quarter was a leading US egg producer and one of the nation's largest barn builders experiencing significant CapEx growth. With a lean team and highly manual processes, they frequently faced costly project delays and spent significant time and money traveling for individual site inspections and management. In Q2, they selected PROCORE to standardize operations and enable their aggressive growth targets.
A crucial factor in their decision was finding a partner capable of unifying their construction data with their data architecture vision across multiple enterprise applications.
Broker won the deal by demonstrating our ability to streamline their financial processes. Enhance budget management and deliver a fully integrated solution that could support the unique needs for all business units.
Play code, purchase products. Our platform to standardize all construction projects on procore.
This win, underscores the significant Market opportunity that remains within us, general contractors.
another large new logo win in the quarter was a leading us egg producer and 1 of the nation's largest Barn builders experiencing significant capex growth
with a lean team and highly manual processes. They frequently faced costly project delays and spent significant time and money, traveling for individual site, inspections and management.
Tooey Courtemanche: With PROCORE's crucial field-to-office connection, they can now operate with greater efficiency from the office, streamlining communication, task management, and accountability to complete their builds on time and on budget. We also had a strong global expansion win across stakeholders in Q2, including one of Japan's largest contractors, a longstanding GC in the UAE, JT Megan, Purdue University, and a top 10 ENR 600 specialty contractor. One of our largest wins in the quarter was an expansion with ENR10, HIT Contracting Incorporated, a PROCORE customer for over 12 years. In that time, HIT scaled its business from $800 million to more than $8 billion in revenue, with PROCORE as a constant in their technology stack, supporting their impressive growth. In Q2, they expanded their PROCORE footprint with additional ACV, driven by a growing backlog, primarily due to their leadership position building data centers across the country.
In Q2, they selected procore to standardize operations and enable their aggressive growth targets.
With Procore, crucial fields to Office Connection can now operate with greater efficiency from the office. Streamlining communication, task management, and accountability allows them to complete their builds on time and on budget.
We also had a strong Global expansion wins across stakeholders in Q2 including 1 of Japan's largest contractors a long-standing GC in the UAE.
JT Megan, Purdue University and a top 10 enr 600 specialty contractor.
1 of our largest wins in the quarter was an expansion with enr 10, Hitt, Contracting Incorporated, a procore customer for over 12 years in that time, hit scale this business from 800 million to more than 8 billion dollars in Revenue with procore is a constant in their technology stack supporting their impressive growth.
Tooey Courtemanche: With many of their customers also using PROCORE, they see a tremendous opportunity to leverage AI and to gain further efficiencies as we continue to build out our connected platform. Another large expansion win in the quarter was with a Fortune 150 utility holding company. Already a PROCORE customer in two of their three business units, this Q2 expansion replaces an outdated homegrown solution in their remaining unit, Energy Generation. PROCORE will help them build a wide range of clean energy projects, including large-scale solar farms, natural gas plants, and upgrades to major transmission corridors and substations across the Southeast. PROCORE won the deal due to our proven success within their existing business units, our robust platform, and our ability to transact efficiently.
In Q2, they expanded their procore footprint with additional ACV driven by a growing backlog primarily due to their leadership position. Building data centers across the country,
With many of their customers also using procore. They see a tremendous opportunity to leverage Ai and to gain further efficiencies as we continue to build out our connected platform.
Another large expansion win in the quarter was with a fortune. 150 utility holding company.
Already a procore customer and 2 of their 3 business units. This Q2 expansion, replaces, an outdated homegrown solution in their remaining unit, energy generation.
Poker will help them. Build a wide range of clean energy projects including large-scale, solar Farms, natural, gas plants and upgrades to Major transmission. Corridors and substations across the southeast.
Procore won the deal due to our proven success within their existing business units. Our robust platform, and our ability to transact efficiently.
Tooey Courtemanche: As you can see from these customer wins, the PROCORE platform is applicable across a wide range of use cases, spanning data centers, energy, agriculture, and everything in between. Our Q2 wins demonstrate our success in attracting new logos, driving increased market share with our existing customers via volume expansion and product cross-sell, as well as strength abroad. We take great pride in our ability to drive efficiency, transparency, and communication across all phases of construction to help our customers build better. As we look ahead, it is clear PROCORE is just getting started. We are the category leader in one of the world's largest and most under-digitized industries. And with the best platform in the market and a singular focus on construction, we believe there's a significant opportunity for continued market share gains.
as you can see, from these customer wins, the procore platform is applicable, across a wide range of use cases, spanning data centers and energy Agriculture and everything in between
Our Q2 wins demonstrate our success and attracting new logos driving increased market. Share with our existing customers via volume expansion and product cross sell as well as strength abroad.
We take great pride in our ability to drive efficiency, transparency and communication across all phases of construction to help our customers build better.
Category leader, in 1 of the world's largest and most under digitized Industries.
Tooey Courtemanche: You know, a great example of this is our recent FedRAMP in-process designation, with PROCORE now listed on the FedRAMP marketplace. FedRAMP applies to certain federal agencies and contractors, and this designation is an important milestone towards enhancing our ability to serve this segment of the federal market. More broadly, it's a meaningful tailwind within the larger public sector opportunity, where we're already seeing momentum across local municipalities, state agencies, and federal projects that do not require FedRAMP. And our platform is only getting better from here. With the rapid advancements that we're driving in areas like AI, we're helping customers make faster, smarter decisions with less risk, all on a unified platform built for the complexities of construction. We're also operating with greater rigor and focus.
And with the best platform in the market and a singular focus on construction, we believe there's a significant opportunity for continued market, share gains.
You know, a great example of this is our recent FedRAMP in-process designation, with Procore now listed on the FedRAMP Marketplace.
Fed ramp applies, to certain federal agencies and contractors. And this designation is an important Milestone, towards enhancing our ability to serve this segment of the federal Market
More broadly, it’s a meaningful tailwind within the larger public sector opportunity, where we’re already seeing momentum across local municipalities, state agencies, and federal projects that do not require FedRAMP.
Our platform is only getting better from here with the rapid advancements that we're driving in areas like AI. We're helping customers make faster, smarter decisions with less risk, all on a unified platform built for the complexities of construction.
Tooey Courtemanche: Our go-to-market transition is on track, and we're executing in a way that positions us for sustained, efficient growth, which will allow us to continue improving our margins, free cash flow, and per-share metrics. Look, we are proud of the progress to date, but what excites me most is the innovation ahead. We'll showcase many of these innovations at Groundbreak in October, and I believe the next chapter of PROCORE's growth will be our most transformative yet for our customers, for the industry, and for our shareholders. And with that, I'll turn it over to Howard to walk you through our financial performance.
We're also operating with greater rigor and focus.
Our go to market transition is on track and we're executing in a way that positions us for sustained efficient growth which will allow us to continue. Improving our margins free, cash flow and per share metrics.
Look, we are proud of the progress today but what excites me most is the Innovation ahead.
We'll showcase many of these Innovations at groundbreaking October and I believe, the next chapter procourse growth will be our most transformative yet.
For our customers for the industry. And for our shareholders and with that, I'll turn it over to Howard to walk you through our financial performance.
Howard Fu: Thanks, Tui, and thank you to everyone for joining us. The main topics I would like to cover today are our Q2 financial results, additional color on the quarter, and our outlook. Total revenue in Q2 was $324 million, up 14% year over year. Our Q2 international revenue grew 13% year over year and was impacted by currency headwinds. On a year-over-year basis, FX contributed approximately three points of headwind to international revenue growth. Therefore, on a constant currency basis, international revenue grew 16% year over year. Q2 non-GAAP operating income was $44 million, representing a non-GAAP operating margin of 13%. As for our key backlog metrics, current RPO grew 21% year over year, and current deferred revenue grew 13% year over year. Now let me share some additional color on the business.
Thanks tuy and thank you to everyone for joining us. The main topics I would like to cover today, are our Q2 Financial results additional color on the quarter and our Outlook.
Total revenue in Q2 was $324 million, up 14% year-over-year.
To International Revenue through 13% year-over-year and was impacted by currency headwinds.
On a year-over-year basis. FX contributed, approximately 3 points of headwind to International Revenue growth,
therefore, on a constant currency basis, International Revenue groups, 16% year-over-year,
To non-gaap operating income was 44. Million representing a non-gaap operating margin of 13%.
As for our key backlog metrics current RPO grew 21% year-over-year and current deferred revenue, grew 13% year-over-year.
Howard Fu: Q2 was a strong quarter for new logo ARR growth, with our general contractor, owner, and public sector motions showing particular strength. And within expansion, we also saw an improvement in the mix between volume expansion and product cross-sell. As we have previously stated, this mix has historically been roughly 80/20, respectively. With the addition of our new technical specialists, our expectation is for cross-sell to become a larger contributor to our expansion mix. In Q2, that mix shifted to 70/30, with the cross-sell portion increasing primarily from the higher attach of our financials suite. And similar to last quarter, current RPO continues to benefit primarily from longer average contract duration. This is reflected in the notably higher non-current RPO growth rate for the quarter. And when normalizing current RPO for this dynamic, the year-over-year growth continues to be in the mid-teens.
Now, let me share some additional color on the business.
Q2 was a strong quarter for new logo, ARR growth with our general contractor owner and public sector motions showing particular strength.
and within expansion, we also saw an improvement in the mix between volume expansion and
product cross sell.
As we have previously stated, this mix has historically been roughly 80/20 respectively.
With the addition of our new technical Specialists, our expectation is for Kraus cell to become a larger contributor to our expansion. Mix
In Q2 that mix shifted to 7030 with the crossover portion increasing primarily from the higher attach of our financials Suite.
and similar to last quarter, current RPO continues to benefit primarily from longer average contract duration,
this is reflected in the notably higher non-current RPO growth rate for the quarter.
Howard Fu: We expect this dynamic may continue benefiting CRPO in Q3, resulting in a continued disparity between CRPO growth and out-quarter revenue growth. We expect this disparity to shrink as early as Q4 as we begin to anniversary the longer contract duration impact. We're pleased with our non-GAAP operating margin improvement in Q2, which increased 300 basis points quarter on quarter. The entire management team remains aligned and committed to continuing to improve our profitability. In the spirit of conservatism, we are maintaining our operating margin guide for the year as we monitor certain items, such as FX, that are not structural to the business. And even with that conservatism, we are on track for another year of solid operating margin improvement of 350 basis points at the high end of our guide, and we continue to believe we are well-positioned for higher margins in the years to come.
And when normalizing current RPO for this Dynamic, the year-over-year growth continues to be in the mid teens.
We expect this Dynamic. May continue benefiting crpo and Q3 resulting in a continued disparity between crpo growth and outcore revenue growth.
We expect this disparity to shrink as early as Q4 as we begin to anniversary the longer contract. Duration impact.
We're pleased with our non-gaap. Operating margin Improvement in Q2, which increased 300 basis points, quarter on quarter.
The entire management team will remains aligned and committed to continuing to improve our profitability in the spirit of conservatism. We are maintaining our operating margin guide for the year, as we monitor certain items such as FX but are not structural to the business.
Even with that conservatism, we are on track for another year of solid operating margin Improvement of 350 basis points at the high end of our guide and we continue to believe, we are well positioned for higher margins in the years to come.
Howard Fu: Let's shift gears now to how we're thinking about our medium and long-term milestones. When we first announced our go-to-market transition a year ago, we shared that we expected this operating model to yield numerous long-term benefits that would ultimately be reflected in our financial performance. We highlighted more durable long-term growth, which should help our retention and expansion metrics, as well as improvements in sales efficiency, which should help drive best-in-class terminal margins. We're a couple of quarters into the new operating model, and we continue to be optimistic about this change. The early evidence has increased our confidence in achieving the milestones of 25% free cash flow margins in the medium term and 40% free cash flow margins in the long term that we shared at our investor day.
A year ago, we shared that we expected this operating model to yield. Numerous long-term benefits that would ultimately be reflected in our financial performance.
We highlighted more durable long-term growth, which should help our retention and expansion metrics as well as improvements in sales efficiency which should help Drive best-in-class, terminal margins.
For a couple of quarters into the new operating model and we continue to be optimistic about this change. The early evidence has increased our confidence in achieving the Milestones of 25% free cash flow margins in the medium-term and 40% free. Cash flow margins in the long term that we shared at our investor day.
Howard Fu: Specifically, this go-to-market model should provide leverage as we scale our top line and ensure we see opportunities to continue improving profitability, including GAAP margins, while not compromising our growth opportunities. So we feel good about the progress we have made in go-to-market. While spend discipline and operating leverage are in our control, there are always external factors that are not. Therefore, while we do intend to improve our Rule of 40 profile in fiscal '26, we anticipate that improvement will be driven by higher profitability, and this will also naturally benefit our North Star metric of free cash flow per share. With that, let's move on to our outlook. For the third quarter of 2025, we expect revenue between $326 million and $328 million, representing year-over-year growth of 10% to 11%. Q3 non-GAAP operating margin is expected to be between 13% and 13.5%.
Specifically, this go to market model, should provide leverage as we scale our Top Line. And in short, we see opportunities to continue improving profitability, including Gap margins, while not compromising our growth opportunities.
So, we feel good about the progress we've made going to market, while spend discipline and operating leverage are in our control. There are always external factors that are not.
Therefore while we do intend to improve our rule of 40 profile and fiscal, 26, we anticipate that Improvement will be driven by higher profitability. And this will also naturally benefit our Northstar metric of free cash flow per share.
With that, let's move on to our Outlook.
For the third quarter of 2025, we expect revenue between 326 million and 328 million representing year-over-year growth of 10 to 11%.
Q3 non-gaap operating margin is expected to be between 13 and 13.5%.
Howard Fu: For the full year of fiscal '25, we are raising our revenue guide to a range of $1.299 billion to $1.302 billion, representing total year-over-year growth of 13%. We are maintaining our non-GAAP operating margin guidance for the year to be between 13% and 13.5%, which implies year-over-year margin expansion between 300 and 350 basis points. And to wrap up, we're pleased with our performance in the quarter and remain confident in our ability to capture the opportunity ahead of us while we prioritize efficient growth and strong per-share improvements. And with that, let's turn it over to the operator for Q&A.
For the full fiscal year 2025, we are raising our revenue guidance to a range of $1.299 billion to $1.32 billion, representing total year-over-year growth of 13%.
And we are maintaining our non-gaap operating margin guidance. For the year to be between 13% and 13.5%, which implies year-over-year margin expansion between 300 and 350 basis points.
And to wrap up we're pleased with our performance in the quarter and remain confident in our ability to capture the opportunity ahead of us. While we prioritize efficient growth and strong per share improvements. And with that, let's turn our over to the operator for Q&A.
Jenna: Thank you so much. We'll now begin our Q&A session. So if you would like to ask a question, you can do so by pressing star one on your telephone keypad. And to remove your question for any reason, you can do so by pressing star two. Once again, to ask a question, please press star one. As a reminder, if you are using a speakerphone, please remember to pick up your headset before asking your question. Our first question comes from Dylan Becker of William Blair. Your line is now open.
Thank you so much.
Or now begin our Q&A session. So if you would like to ask a question, you can do. So by pressing star 1 on your telephone keypad and to remove your question for any reason you can do so by pressing star 2
once again to ask a question, please press star 1
As a reminder, if you are using a speaker-phone, please remember to pick up your handset before asking your question.
Our first question comes from Dillon Becker of William Blair.
Your line is now open.
Various Analysts: Hey, Jenna. I appreciate the question, Erin, and nice job. Maybe, Tui, starting with you, you called out a lot of the exciting kind of momentum coming out of the innovation summit with Helix and a handful of other solutions. I'm wondering, to what extent are you seeing kind of customer conversations maybe thinking through that initial adoption curve to lean into AI? And you called out maybe unification across the platform as well, kind of how that thesis around standardization across a multitude of kind of different workflows really kind of brings in the value proposition of PROCORE as that core system of record.
Hey gentlemen, appreciate the question here and nice job maybe 2 weeks. Uh, starting with you. You called out a lot of the exciting kind of moments and coming out of the Innovation Summit with Helix in a handful of other Solutions. I'm wondering to what extent are you seeing kind of customer conversations, maybe thinking through that initial adoption curve to lean into Ai? And you called out maybe unification across the platform as well. Can I have that thesis around standardization across? Uh, a multitude of kind of different workflows really kind of brings in the value? Proposition of proc course, that core system of record.
Tooey Courtemanche: Yeah, Dylan, great question. And yeah, the hackathon that we had with our customers was really, really exciting and eye-opening. What we're finding is that our customers are bringing their unique challenges to build out agents on our platform, things that we couldn't even imagine before. And so to kind of answer your question, what we think is going to happen is the more that we can demonstrate this value, the more people are going to adopt Agent Builder. And the good news is there is a lot of demand from our customers to automate these processes that today can take hours to get done. So I think the proof is going to be in the pudding, which is it's going to drive so much value into our customers that the adoption we're hoping is going to reflect that. So far, so far, so good.
Yeah, Dylan. Great question. And yeah, that the the hackathon that we had with our customers was really, really, um, exciting and eye-opening. Um, what we're finding is, is that our customers are bringing their unique challenges, to build out agents on our platform things, that we couldn't even imagine before. And so it's kind of to answer your question. What we think is going to happen, is the more that we can demonstrate this value, the more people are going to adopt, uh, uh, agent Builder and the
Howard Fu: And I'll just come on top of that if I could, Dylan. This is Howard. You know, our focus right now is really to get these things into the hands of our customers. And when we do that, I think we will make a lot of discoveries about the way that this can continue to add value to our customers. And from there, it'll give us a better perspective on how we're going to move forward in terms of that adoption curve and where we can facilitate that. And so really, right now in the early stages, it's about getting this in the hands of our customers.
Tooey Courtemanche: And by the way, you asked about what customers are saying. Customers are saying that more than ever, PROCORE is the system of record because they need the data to get the jobs done.
Right now in the early stages, it's about getting this in the hands of our customers. And by the way you asked about what customers are saying, customers are saying that more than ever procore is the system of record because they need the data to get the jobs done.
Various Analysts: Perfect. That's very helpful. Thank you both. Maybe, Howard, on kind of the go-to-market changes, it sounds like that continues to track maybe an alignment across those teams. Wondering if there's any kind of additional color you can give us as we kind of think about kind of the ramping of productivity now that a lot of those teams are in line or aligned, excuse me. It sounds like the cross-sell motion is really kind of starting to resonate, but kind of any incremental metrics on traction with the go-to-market front. Thank you.
Perfect. That's very helpful. Thank you. Both um, maybe Howard, uh I'll kind of go to market changes. It sounds like that continues to track, um, maybe
An alignment across those teams wondering. If there's any kind of additional color you can give us as we kind of think about kind of the ramping of productivity now that a lot of those teams are in line or aligned. Excuse me, it sounds like the cross sale motions really kind of starting to resonate but kind of any any incremental metrics uh on on traction with the go to market front. Thank you.
Howard Fu: Dylan, you broke up just a little bit there, but I'm going to anticipate what you were asking. Overall, the go-to-market transition is going about as planned. You know, we had a strong Q1. We had a solid Q1 and Q2. The transition is going about exactly what we expected it to be. We are starting to see some internal improvements around things like conversion, pipeline, deal cycle. Attrition is low. And we're about where we need to be. And I think actually through the first half of the year, I think we're through the peak, I think, of the disruption that we talked about. But we've got a lot of wood to chop in the back half of the year. But we're happy with where we're at.
Dylan, you broke up just a little bit there, but I'm going to, I'm going to anticipate what you are asking. Overall, the go to market transition is is going about as planned. You know, we had a strong q1, we had a, a solid q1 and Q2, um, the transition is going about exactly what we expected it to be. We are starting to see some uh, internal improvements around things like conversion pipeline deal cycle, attrition is low. Um, and we're about where we need to be. And uh, and I think actually, through the first half of the year, I think we're we're through the peak. I think of the disruption that we talked about, but we've got a lot of wood to chop in the back half of the year, but we're happy.
Happy with where we're at.
Various Analysts: Fantastic. Thank you both. Appreciate it.
Fantastic. Thank you. Both appreciate it.
Tooey Courtemanche: Thanks, Dylan.
How you doing?
Jenna: Thank you. Our next question comes from Saket Akalia of Barclays. Your line is now open.
Thank you.
Our next question comes from Sackett, Kia of barklay.
Your line is now open.
Various Analysts: OK, great. Hey, guys, thanks for taking my questions here and a nice quarter.
Okay, great. Hey guys, thanks for taking my questions here and uh, a nice Porter.
Tooey Courtemanche: Thanks, Saket.
Howard Fu: Thanks, Saket.
Tooey Courtemanche: Howard, maybe just a--yeah, absolutely. Howard, maybe just to start with you. You know, in your prepared remarks, you talked about the path to Rule of 40. I mean, we've talked about that since Analyst Day. And it's great to see that march forward. But I'm curious, you mentioned in your prepared remarks that maybe some more of that would come from margin expansion as you look out to next year. Just to get everybody on the same page, could you just go one level deeper into that as we sort of think about some of the puts and takes for next year, understanding you're not guiding, but just what you wanted us to take away from that?
Um, thanks, Saget. Thanks, Saget Howard. Maybe just, yeah, absolutely.
Howard, maybe just to start with you. You know, in your preparatory remarks, you talked about the path to the Rule of 40. I mean, we've talked about that since Analyst Day, and it's great to see that march forward.
But I'm curious you mentioned in your prepared remarks. That maybe some more of that would come from margin expansion as as you look as you look up to next year just to just to get everybody on the same page. Could you just go 1 level deeper into that? Um, as we sort of think about some of the puts and takes for for next year understanding. You're not guiding, but just what you wanted us to take away from that.
Howard Fu: Yeah, sure. Great question, Saket. So let me just step back a little bit and provide context. The first thing we really wanted to communicate was to reiterate our commitment to margin expansion, both for this year and for fiscal '26. And if you really think about it, we've got a pretty good setup from this year going into next year. Remember, for the go-to-market transition, we pulled forward a lot of those investments into the first part of Q1. And had we not done that, we would have expanded margins even more in the first part of this year. And so we've kind of got a nice setup going into the next fiscal year as well, fiscal '26. So that's the first thing. The second thing, frankly, Saket, we wanted to make sure is folks didn't get ahead of us on revenue for fiscal '26.
Yeah sure, great question second. So let me just step back a little bit and provide context. The first thing we really wanted to communicate was to reiterate our commitment to margin expansion, both for this year and for fiscal 26. And if you really think about it, we've got a a pretty good setup from this year going into next year. Remember for the go to market transition. We pulled forward a lot of those investments into the first part of q1,
Howard Fu: It's a little bit early to talk about revenue for fiscal '26. And so we just we don't want folks to get ahead of that. And when you put those two pieces together, what it means is that free cash flow or the Rule of 40 expansion next year is going to come from profitability. The other thing, Saket, that I'll add on top of that is when we talked about the go-to-market transition, we talked about the benefits in two main parts. The first part is durable growth through retention, through expansion, cross-sell, which we're already starting to see some benefits from. But the other piece is equally important around the leverage and the efficiency that we're going to get from go-to-market and AE productivity.
And how do we not done that? We would have expanded margins even more in the first part of this year. And so we've kind of got a nice setup going into the next fiscal year as well, and fiscal 26. So that's the first thing, the second thing, frankly, second we wanted to make sure is folks didn't get ahead of us on revenue, for fiscal 26. It's a little bit early to talk about revenue for fiscal 26. And we still just we, we don't want folks to get ahead of that. And when you put those 2 pieces together, what it means is that free cash flow or the rule of 40 expansion, next year is going to become from profitability. The other thing that I'll add on top of that is when we talked about the go to market transition, uh, we talked about the benefits in 2 main parts.
Howard Fu: And that's going to be a pretty significant contributor as we think about our trajectory and in terms of our profitability going into next year and on the path to our mid and long-term goals of 25% and 40% free cash flow margins.
First part is durable growth through retention through expansion crosselle which we're already starting to see some benefits from, but the other piece is equally important around the leverage and the efficiency that we're going to get from go to market and AE productivity. And that's going to be a pretty significant contributor. As we think about our trajectory in terms of our profitability going into next year and on the path to our mid and long-term goals of 25 and 40% free cash flow margins.
Tooey Courtemanche: Got it. Got it. That's super clear. Thanks for that added context. Tui, maybe for you, for my follow-up question, it's a bit of a longer-term question. But you know, one of the questions I get from investors is whether long-term PROCORE, whether PROCORE maybe needs to consider multiple pricing models beyond pricing just based on construction volume, which has been a very successful model so far. But I'm just kind of curious, how much does that come up in your--and I know you spend a lot of time with customers--how much does that come up in your customer conversations? And how realistic of a scenario is that as you think one, two, three years out? So by the way, Saket, one thing that people don't realize is that we've actually had some flexibility in our pricing model in the past.
Got it, got it. That's super clear. Thanks, thanks for. Thanks for that added context to it. Maybe for you from from my follow-up question. It's, it's a bit of a longer term question, but, you know, 1 of the 1 of the questions I get from investors, is whether long term procore, whether procore maybe needs to consider multiple pricing models, Beyond pricing, just based on construction volume, which has been
You know, a very successful model so far but I'm just kind of curious.
How much does that come up in your and I know you spent a lot of time with customers. How much does that come up in your customer conversations and how realistic of a scenario is that as you think, 1 2 3 years out,
Tooey Courtemanche: With our self-performed products, we will sell a group of seats of licenses. And that was the way that the subcontractors wanted to buy the software. So our philosophy has always been, let's try and meet the customers where they are. And so that is one example. The other thing is just in terms of looking forward, yes, mostly in the owner segment where we'll hear just the preference to buy differently, right? So looking into per-seat licensing models, for instance, for them, or frankly, any way they want to buy, we want to make sure that we're there to meet them where they're most comfortable. So ACV is not a sacrosanct item at PROCORE, but it does work really, really well for the rank-and-file customers of PROCORE because that's how they run their businesses. They run their businesses off the amount of construction volume they anticipate in their backlogs.
Tooey Courtemanche: And so it's a really good yardstick that we get to use with our customers to understand how much of PROCORE they're going to use. Super helpful. Thanks, guys. Thanks, Saket.
Perform products. We will sell a group of seeds of licenses, um, and that was the way that the subcontractors wanted to buy the software. So our philosophy has always been, let's try and meet the customers where, where they are and so, so that, that isn't that, that is 1 example. The other thing is just in terms of looking forward. Yes. Uh, mostly in the owner segment, where we'll hear, um, uh, just the preference to buy differently, right? So um, you know, looking into proceed, uh, licensing model for models, for instance, uh, for them or or frankly any way they want to buy. We want to make sure that we're there to meet them uh where they're where they're most comfortable. So, uh, ACV is not a Sac um uh you know item at procore but it does work really really well for the rank and file customers of procore because that's how they run their businesses. They run their businesses off the amount of construction volume, they anticipate in their backlogs. Uh and so it's a really good yard stick that we get to use with our customers to understand how much appropriate.
Program, they're going to use.
Super helpful. Thanks guys.
Howard Fu: Thanks, Saket.
Thanks Jack.
Jenna: Thank you. Our next question comes from Joe Rulink of Baird. Your line is now open.
Thank you.
Our next question comes from Joe rule of Baird.
Your line is not open.
Various Analysts: Great. Thanks for taking my question. I just wanted to go back to this Rule of 40 expectation for next year. You know, I think about the last two years and how you've guided this year. It's really three years in a row where margin improvement is more responsible for contributing to Rule of 40. So are you just kind of saying for next year you would continue to expect what has been the case? Because I suppose the question related to this is, with that revenue growth rate, does it add anything at all? Would you say it's more flat in growth relative to this year or some level of improvement?
Uh, great thanks for taking my questions. I just wanted to go back to this rule of 40 expectation for next year. You know, I think about the last 2 years and how you've guided this year.
It's really three years in a row where margin improvement is more responsible for contributing to the Rule of 40. So, are you just kind of saying for next year you would continue to expect what has been the case? Uh, because I suppose the question is related to, this is with that revenue growth rate, does it add anything at all? Would you say it's more flat-stained growth relative to this year or some level of improvement?
Howard Fu: The short answer is yes. Going into next year, the improvement in Rule of 40 is going to be driven by profitability. And I already talked about in my response to Saket's question why that's the case. In terms of revenue, and I talked about not wanting folks to get ahead of us. More specifically, I think you hit on it as we don't want folks to get ahead of us from a revenue acceleration standpoint. Right now, it's just too early to talk about fiscal '26 revenue. We understand the benefits that we're trying to get in terms of our transition on the go-to-market side. We have a lot to get through in the back half of the year. And you know, frankly, we're still in a pretty depressed macroeconomic environment that's been consistent for some time.
The short answer is yes. Uh, going into next year the Improvement in improval 40 is going to be driven by profitability. And I already talked about in my response to the second question. Why that's the case in terms of Revenue and I talked about not wanting folks to get ahead of us more specifically, I think you hit on it as we don't want folks to get ahead of us from of Revenue acceleration standpoint right now is just too early to talk about. Fiscal, 26 Revenue, we understand the benefits that we're trying to get in terms of our transition on the go to market side, we have a lot to get through in the back half of the year. Uh and you know, frankly we're still in a pretty depressed macroeconomic environment that's been consistent for some
Howard Fu: And so the short answer, just to sum up, is yes, we should expect the Rule of 40 improvement to come from margin improvement.
Um, and so short answer just to sum up is yes, you should expect the rule, 40 improvements.
Various Analysts: OK. And then I wanted to switch back. Yeah, data maturity and construction is always a point of discussion. I was interested by the rationale you cited in the conquest when just around how data and unifying data was the imperative there. I guess as you think about AI and now needing this data for the benefit of future automation, are you getting the sense that existing customers might look to run more of their volume through your platform or even, you know, outside the subscribers, the collaborators now understand they need to be on the platform to get the maximum benefit?
Okay.
And then I wanted to switch back. Yeah, data maturity and construction is always a point of discussion. So, I was interested by the rationale you cited in the conquest when just around how data and unifying data was the imperative there. I guess as you think about AI and now needing this data for the benefit of future automation, are you getting the sense that existing customers might look to run more of their volume through your platform? Or even, you know, outside the subscribers, the collaborators now understand they need to be on the platform to get the maximum benefit.
Tooey Courtemanche: Yeah, so here's one thing to know about construction. And this is what all of our customers know and all of our buyers know, is that construction is very uniform. So every building has a foundation and every building has an HVAC system in it. And because of that, when you have all the structured data on your platform, it's just really, really well-positioned to be worked on with agents. So when our customers are looking to PROCORE today, they're seeing all this additional value that comes out of PROCORE. So will we capture more of our customers' volume? Perhaps. I think, you know, that's something that we think about over time, which is as our customers grow, we want to grow with them. And then in terms of the collaborators, yeah, the collaborators are seeing a tremendous amount of value in the data.
Yeah, so um here's what here's 1 thing to know about construction is and this is what all of our customers know. And all of our buyers know is that construction is very, um, uniform. So the every building has a foundation and every building has an HVAC system in it and because of that, when you have all the structured data on your platform, it's just really, really well positioned to be you to be worked on with agents. So, uh, so when our customers are looking to procourt today, they're seeing all this additional value, uh, that comes out of pro for. Um, so will we capture more of our customers volume? Perhaps, I think, you know that's that's
Tooey Courtemanche: It's one of the main reasons why a collaborator becomes a PROCORE customer. They want to own the data from the projects that they're working on. And that's not new based on AI. That's just, that is the way it's always worked. So I think AI is an accelerator in all this, but it really is an exciting time in this industry as we pivot into making agents do the work.
Something that we think about, over time, which is, as our customers grow, we, we want to grow with them. Um, but but, uh, and then in terms of the collaborators, yeah. The collaborators are seeing a tremendous amount of value in the data. It's 1 of the main reasons why a collaborator becomes a Social customer, is they want to own the data from the projects that they're working on. Uh, and that's that's not new based on AI. That's just, that is, uh, the way it's always worked. So I think AI is a, uh, is a, uh, you know, an accelerator and all this, but it's, um, it's, uh, it's it's really is an exciting time in this industry, as we pivot into making agents, do the work.
Various Analysts: Great. Thank you.
Great. Thank you.
Howard Fu: Thanks, Jenna.
Thanks Jeff.
Jenna: Thank you. Our next question comes from DJ Hines of Canaccord. Your line is now open.
Thank you.
Our next question comes from DJ Hinds of can oford.
Your line is now open.
Various Analysts: Hey, guys. Congrats on the quarter. Tui, I want to ask you a couple of questions on the expansion dynamics and what you're seeing there. I mean, obviously, it's great to see cross-sell making up a larger share there. What gives you confidence that that's the new go-to-market model working versus just there's less volume to upsell right now? I'm trying to figure out, like, is this a signal that the go-to-market realignment is working, or is it maybe an indictment on the macro? Just help me there.
Hey guys uh congrats on the quarter. So I want to ask you a couple questions on the expansion Dynamics and what you're seeing there. I mean obviously it's great to see uh, cross sell making up a larger share their
What gives you confidence that that's the new go to market model working versus just there's less volume to to upsell right now. I'm trying to figure out like is this a signal that the the the go to market realignment is working, or is it maybe an indictment on the macro just help me there?
Howard Fu: Hey, DJ. This is Howard. Actually, let me take that one. So look, you know, we're a couple of quarters into this go-to-market transition. And I think undoubtedly, there's some contribution from the technical specialists that have been online for just over two quarters now. And the expectation is that those technical specialists are going to really increase and benefit our cross-sell. The reality of it is, I think, given that we're only about two quarters in, that benefit that we got on the cross-sell came from a broad range of things that we're doing, inclusive of the technical specialists, inclusive of the broader go-to-market changes that we're making, inclusive of the progress that we're making in terms of our product roadmap and our platform. But that is absolutely the expectation that we're going to have. But more broadly, I think it's more than just any one thing.
Howard Fu: I think it's a reflection of us executing well across a number of dimensions in our business.
Hey DJ. This is how actually let me let me take that 1. So look, you know, we're a couple quarters into this, go to market transition and I think undoubtedly there's some contribution from the technical Specialists that have been online for just over, just just over 2 quarters now. So, and the expectation is that those technical Specialists are going to really increase and, and benefit our cross sell, the reality of it is, I think given that we're only about 2 quarters in that, that benefit that we got on the cross. Sell it came from a broad range of things that we're doing inclusive of the technical Specialists, inclusive of the broader. Go to market change changes that we're making inclusive of the progress that we're making in terms of our product roadmap and our platform. Um, but those that is absolutely the expectation that we're going to have. But more broadly, I think it's more than just any 1 thing. I think it's a reflection of
Tooey Courtemanche: Yeah, I want to add, too, I've had, I think, 16 C-level conversations recently. And those conversations have all been around PROCORE's new model, where they're getting additional technical resources, and there's more people involved in their accounts trying to help them be more successful, is really driving a lot of goodwill with our customers. And it's been something that we are, you know, the customers are very vocal about, which is, you know, what you all are doing now is absolutely the right thing for us. And you know, so it's hard to argue with your customers.
Howard Fu: Yeah, yeah. No, those are great data points. And you know, my sense is it's only going to get better with more time in the market.
Us executing well, across a number of dimensions in our business. Yeah, I want to add too. I I've had, I think 16 sea level conversations recently and um, and those conversations have all been around process, new model where they're getting additional Technical Resources and there's more people involved in their accounts, trying to help them be more successful uh is really driving a lot of Goodwill with our customers. Um, and it's, it's it's, it's been something that we are, you know, the customers are very vocal about which is, you know, the what you all are doing now is absolutely the right thing for us and you know so no you it's hard to argue with your customers.
Tooey Courtemanche: Howard, can I just quickly say something, too?
Howard Fu: Please.
Tooey Courtemanche: Can I just real quickly correct that one thing? Because it sounded to me like you were kind of making the assumption that our volume was down. This was not a volume was down. This was the cross-sell was up. So I just want to make sure that that was corrected.
Howard Fu: Yeah, that's an important distinction. And I think it makes perfect sense with the explanation. Howard, can I ask you a little bit on free cash flow? I mean, it came in a little light, I think, of where we were. I know it's a seasonally softer quarter historically. But just how are you thinking about free cash flow generation for the year? And are there any kind of factors we should be thinking about as to what happened in Q2? Yeah, there's always going to be noise quarter on quarter, DJ. I wouldn't put any weight on the free cash flow quarter within the specific quarter here. We're on track to where we expect to be for free cash flow margins for the full year.
Yeah, yeah. No, that those are great data points and I, you know, it's like my sense is it's only going to get better with more time in the market. Um, how are you? I want to ask you can, I can I just real quick quickly, correct that 1 thing, because it sounded to me like, you were, you were, you were kind of making the assumption that our volume was down. Uh, this was not a volume was down. This was the, uh, this was the cross sell was up. So I, I, I, I just want to make sure that that was the, uh, that was corrected. Yeah.
Yeah, that's an important distinction, and I think it makes perfect sense with the explanation.
Um, how can I ask you a little bit about free cash flow? I mean, it came in a little light. I think of where we were; I know it's a seasonally software quarter historically. But just how are you thinking about free cash flow generation for the year, and are there any kind of factors we should be thinking about with respect to what happened in Q2?
Howard Fu: You can still expect free cash flow margins to be roughly in line with where our operating margin is going to be for the full year. So there's nothing to read into the specific free cash flow for the quarter.
Tooey Courtemanche: Perfect. Thank you, guys.
Yeah, there's always going to be noise quarter on quarter. Uh, DJ, I wouldn't put any, any weight on the, the free cash flow quarter within the specific uh quarter here. We're on track to where we expect to be for a free cash flow margins. For the full year you can still expect free cash flow margins to be roughly in line with where our operating margin is going to be for the full year. So uh, there's there's nothing to read into the specific. Free cash flow for the, for the quarter. Perfect, perfect. Thank you, guys.
Howard Fu: Thanks, DJ.
Thanks CJ.
Jenna: Thank you. Our next question comes from Kash Rangan of Goldman Sachs. Your line is now open.
Thank you.
Our next question comes from Kash rangan of Goldman Sachs, your line is now open.
Various Analysts: Hey, yeah, thank you very much, Tui and team. Tui, I always appreciate your perspective when you talk to your customers on how they're thinking about at this time, the tariff impact is probably well understood by your customers. Where are we in their assessment of what it does for the cost structure and how ready are they to take on projects with PROCORE, fully understanding what is it that they do know versus what they did not know three months ago? Thank you so much.
Hey, yeah. Thank you very much. Uh, to in team, uh, to always appreciate your prospective when you talk to your customers on, what they, how are they thinking about? At this time, the Tariff impact is probably well understood by your customers. Where are we in their assessment of what it does for the cost structure? And how ready are they to take on projects with procore fully understanding? What is it? That they do know versus what they did not know, 3 months ago. Thank you so much.
Tooey Courtemanche: Yeah, Kash, one thing that we talk about a lot here is that our customers are extremely resilient, and they build into their business models a ton of resilience. So though there's a lot of noise now around tariffs and other things, there's always noise about something in our industry. And so this is just kind of the issue du jour right now. Our customers have built in a lot of flexibility into the way that they actually contract to help them around tariffs. And not to say it's a panacea, but they have ways of dealing with this. So I'll tell you this, our customers are very optimistic about the future. And that's kind of true across the board.
Yeah, Cash 1 thing that we talked about a lot here is that our customers are um extremely resilient and they build into their business models, a ton of um of resilience. So um though there's a lot of noise now around tariffs and other things, there's always noise about something in our industry. Uh, and so this is just kind of the issue dour right now. Um, our customers have built in a lot of, uh, flexibility into the way that they actually contract to help them around tariffs. Um, and not to say it's a, it's a Panacea, but, but they have ways of dealing with this. So, um, I'll tell you this. Our customers are very optimistic about the future, uh, and that is uh, that's kind of a true across the board.
Various Analysts: Got it. Thank you so much. And also, I know this is a topic that has come up quite a bit, but any leading indicators on the go-to-market side as to why this approach is going to work? Can you talk about the breadth of the pipeline, the upsell rate, or the retention, et cetera, or maybe even the depth of the pipeline, the kind of customers that you are able to, or prospects that you were able to bring on board that you could not before the transformation? Thank you so much. And that's it for me.
Got it. Thank you so much and also I know this is a topic that has come up quite a bit, but uh, any uh, leading indicators on the go to market side. As to why this, uh, approach is going to work, can you talk about the breadth of the pipeline, the upsell rate or the retention?
Etc or maybe even the depth of the 5 from the kind of customers that you are able to or prospects that you were able to bring on board that you could not before that. The the transformation. Thank you so much in that sense for me.
Howard Fu: I mean, it's a lot of things that we've talked about before. In addition to things like conversion, pipeline generation, deal cycles, you know, our headcount is stable. Attrition is really stable. Productivity is going up. The GMs continue to leverage their newfound capabilities and remit to really tailor things that are specific to their regions. So anyways.
Tooey Courtemanche: Yeah, and I'll tell you this, the proof's in the pudding, which is our sellers and our customers and our partners are all saying this is working. And so, you know, across the board, they can't all be wrong. And you know, look at Clayco, the big win that we had this quarter. It was, you know, they were talking to me earlier this week about how much they appreciate the fact that we partner with them in order to make them successful. It's not just a software transaction. It's a true partnership.
Um, I mean it's a it's a lot of things that we've talked about before in addition to things like conversion pipeline generation deal Cycles. You know, our our our headcount is stable attrition is really stable productivity is going up. Uh, the GMS continue to leverage their Newfound, uh, uh, Newfound the capabilities and, uh, remit to really tailor things that are specific to their regions. So anyways. Yeah. And I, I'll tell you this, um, the, the proofs in the pudding, which is our Sellers, and our customers, and our partners Are all, uh, saying this is working. And so, uh, you know, across the board, they can't all be wrong. And, you know, look at clayco, our, the big win that we had this this, this quarter. Um, it was a, you know, they they were talking to me earlier this week about how much they appreciate the fact that we partner with them in order to make them successful. It's not just a software transaction, it's a true partnership.
Various Analysts: Got it. Thank you so much.
Got it. Thank you so much.
Tooey Courtemanche: Thanks, Kash.
Thanks Cash.
Jenna: Thank you. Our next question comes from Daniel Jester of BMO. Your line is now open.
Thank you.
Our next question comes from Daniel, gesture of BMO.
Is that open?
Various Analysts: Great. Thanks for taking my question. I mean, I feel obliged to throw it out there, but Tui, maybe just a comment on the macro environment and any change in the dynamic that you've seen this quarter that you'd call out.
Uh, great. Uh
Question. Um,
I mean, I feel obliged to throw it out there, but Chewy, maybe just a comment on the macro environment and any change in the dynamics that you've seen this quarter that you'd call out.
Tooey Courtemanche: By the way, I'm surprised this wasn't asked earlier because this is normally one of the first questions. It's surprisingly the same as last quarter. So there's very little to report other than the fact that it's pretty much the same as last quarter. Sorry, I don't have more for you on that.
By the way, I'm surprised this wasn't asked earlier because this is normally one of the first questions. Um, it's surprisingly the same as last quarter.
So there there's very little to report uh other than the fact that uh it's pretty much the same as last quarter. Sorry, I don't have more for you on that.
Various Analysts: Nope. Just obliged to ask. I do want to dig in on the comment about the cross-sell and the financial suite specific call out. If I recall correctly, this was already a product that had a pretty good attach rate. And so maybe is there something specific that has improved the momentum of this? Or maybe another question to ask is, what is it going to take from your perspective to broaden now and have the attach rate for the broader suite accelerate in terms of adoption? Thank you so much.
Nope. Uh, just obliged to ask. Um, I do want to dig in on the, the comment about the the cross sell and the the financial Suite specific call out. If I recall correctly. This was already a product that had a pretty good attach rate and so maybe is there something specific that has improved the momentum of this? Or maybe another question to ask is, what is it going to take from your perspective to broaden out and have the attach rate for the broader Suite? Except
Accelerate in terms of adoption. Thank you so much.
Howard Fu: So why don't I start? The first thing is we've always talked about what's kind of the next attach or the next thing that we could most immediate opportunity in terms of cross-sell. And we've always talked about that financial still has a lot of room. When you look at where our customers typically start, most of our customers have project management, but roughly half have financials, some form of financials. And that was always what we expected to be the most immediate opportunity for us. And we made good progress on that in terms of making progress on cross-sell primarily around financials. You know, pay is going to be a smaller portion of that that goes along with financials. But that was a good outcome for us in terms of what drove that cross-sell for the quarter.
Tooey Courtemanche: And by the way, one of the problems with calling out financials, because we're proud of that, though it kind of drew all the focus to financials, we had success across all of our product lines this quarter. And it really is a testament to the fact that the platform that we have built is really paying off by being able to be extensible and meet our customers where they need us. And I'm really proud of all the work that our P&T organization has done to make it so.
So why don't I start? Uh, the, the first thing is we've always talked about what's kind of the next attach or the next thing that we could most immediate opportunity in terms of cross sale and we've always talked about that Financial still has a lot of room when you look at where our customers typically start, most of our customers have project management, but roughly half have a financial, some form of financials and that was always what we expected to be the most immediate opportunity for us. And we made good progress on that. In terms of making uh progress on Cross primarily around financials. Um you know, pay is going to be a smaller portion of that that goes along with financials. Um, but that was, that was a good outcome for us in terms of what drove that that cross sell for the quarter. And by the way, 1 of the problems we're calling out financials because we're proud of that, but it's kind
It kind, it kind of uh uh, Drew all the focus to financials. We had we had successes across, uh, all of our product lines. I would say this quarter and it's really is a testament to the fact that the platform that we have built, uh, is is really paying off by by being able to be extensible, uh, and meet our customers where they need us. Uh, and I'm really proud of all the work that our pnt organization has done to make it. So,
Various Analysts: Great. Thank you so much.
Great, thank you so much.
Tooey Courtemanche: Thank you.
Thank you.
Jenna: Thank you. Our next question comes from Taylor McGuinness of UBS. Your line is now open.
Thank you.
Our next question comes from Taylor, McInnis of UBS.
Your land is not open.
Various Analysts: Yeah. Hey, thanks so much, Jenna, for taking my questions. Howard, maybe just on the CRPO trajectory. So on a normalized basis, you've mentioned mid-teens growth the past couple of quarters, which has been solid. But can you just maybe provide a little bit more color on like what the trend line has been there? So has it been more stable in the mid-teens or any moderation or improvement to flag? And then as you talk about this convergence that we should see with revenue growth in 4Q, can you just comment on whether the duration tailwinds are still from these multi-year contracts such that, you know, should we see, I guess, a bigger convergence as we get into 1Q? Thank you.
Or any moderation or improvement to flag. And then, as you talk about this convergence that we should see with revenue growth in Q4, can you just comment on whether the duration tailwinds are still from these multi-year contracts? Such that, you know, should we see, I guess, a bigger convergence as we get into Q1? Thank you.
Howard Fu: So the first thing is, yes, we are still seeing the impact from the longer contract durations that largely came from Q4 going into Q1. That's why we said we could expect to see that start to normalize going into Q2 because we're going to anniversary when that shift happened. And then just in terms of a little bit more color on the CRPO growth, we had a solid Q1 and Q2, and that contributed to CRPO. But when you normalize for that, the impact of the contract durations, we are in that mid-teens range. And when we start to normalize, we would expect that to normalize around there when we get towards the back part of the year.
So the the first thing is, yes, we are still seeing the, the impact from the longer contract durations, that largely came from Q4 going into q1. That's why we said, we could expect to see that start to normalize and going into Q2 because we're going to hand Avery when that shift happened. Um and then just in terms of a little bit more color on the crpo growth, we had a solid q1 and Q2 and that contributed to to crpo. Uh, but when you normalize for that, the impact of the contractor durations, we are in that mid teens range. Um, and when we start to normalize, we would expect that to normalize around there. When we get towards the back part back, part of the year.
Jenna: Perfect. And then a second one for you is when we look at the revenue guide for this year, it looks to imply like an acceleration in revenue growth as we get into 4Q. So can you just comment on, you know, is there any improvements, I guess, that you guys are expecting in the back half, maybe from some of the sales changes, you know, cross-sell materializing, anything, you know, to comment on like the implied acceleration and growth in 4Q? Thank you.
Perfect. And then um uh second 1 for you is when we look at at the revenue guide for this year, it looks to imply like a an acceleration in Revenue growth as we get into 4 q. So can you just comment on, you know, is there any um improvements I guess that you guys are expecting in the back half maybe from some of the sales changes, you know cross sell materializing anything, you know to comment on like the implied acceleration and growth in 4.
Thank you.
Howard Fu: That actually has more to do with the compares, more than anything. And so there's nothing from a business change standpoint going into the back half of the year that would impact that.
That actually has more to do with the Compares more than anything. Um, and so um there's nothing from a from a business change standpoint going into the back half of the year, that would impact that
Jenna: Awesome. Thanks so much for taking my questions.
Awesome. Thanks so much for taking my question.
Various Analysts: Yeah, thank you.
Yeah, thank you.
Jenna: Thank you. Our next question comes from Jason Salina of QBank Capital Markets. Your line is now open.
Thank you.
Our next question comes from Jason Selena of keybanc capital markets.
Your line is now open.
Various Analysts: Yep. Hey, great. Thanks for taking my questions. It sounds like the large deal activity was pretty strong in the quarter. Is 2Q normally a heavy six, seven-figure deal quarter? And then, Howard, are these annual contract values or total contract values? Really, the root of this second part of my question is, is the larger deals because of duration? My sense is no, but just wanted to clarify.
Yep, hey great. Thanks for taking my questions. Um, it sounds like the large deal activity was was pretty strong in the quarter is 2q normally a heavy 67, figure deal quarter. And then Howard are these annual contract values or or total contract values, really the, the root of this. Second part of my question is, is the larger deal is because of duration? My sense is no, but just wanted to clarify
Howard Fu: Typically, the larger deals are going to come actually towards the end of the year. And so Q2 is not typically a large deal quarter. And these are going to be the annual contract values that we're referring to.
Uh typically the larger deals are going to come to actually towards the end of the year. And so Q2 is not typically a large deal, large deal quarter. Um, and these are going to be uh, the annual annual contract values that we're referring to
Various Analysts: OK, great. And then, you know, spinning a question that DJ asked earlier. So if you're seeing this larger deal activity earlier in the year than you'd expect, is this because of some of those go-to-market changes that you made at the very beginning? Or is this kind of to that better overall execution that you alluded to earlier?
Okay, great. And then you know spinning a question that DJ asked earlier. Um so if you're seeing this larger deal activity, earlier in the year, then you'd expect um is this because of some of those go to market changes uh, that you made, you know, at the very beginning um, or is this, you know kind of to that better overall execution that you alluded to earlier
Howard Fu: I think there's probably a little bit of both in there. I think that we are doing well in terms of the transition of the go-to-market. And remember, we've been increasing our focus on the upper end of the market for a few quarters now that we've talked about for some time. And so I think this is a progression against that. And so I don't think it's anything that's a significant shift. It's a progression of what we've been doing for some time in terms of going after the larger customers.
Uh, I I think there's probably a little bit of of both in there. I think that we are doing well in terms of the transition of the go to market. And remember, we've been, uh, increasing our focus on the upper end of the market for a few quarters now that we've talked about for some time and so I think this is a progression against that. Um, and so, um, I don't, I don't think it's anything. That's, uh, that's a significant shift. It's a progression of what we've been doing for some time in terms of going after the larger customers.
Various Analysts: OK. Thank you.
Okay, thank you.
Tooey Courtemanche: Yeah, thanks, Jason.
Yep, thanks Jason.
Jenna: Thank you. We have time for one more question. Our last question for today's call is from Ken Wong of Oppenheimer. Your line is now open.
Thank you.
We have time for one more question. Our last question for today's call is from Ken Wong of Oppenheim.
Various Analysts: Thank you, God, for squeezing me in. Tui, I wanted to ask you about any thoughts or feedback you're getting from customers as far as impact from OBBA. I know the last few years we've had a lot of potential tailwinds from IRA to, you know, regulatory stuff. What are you hearing in terms of how this could benefit the end market?
And thank you, open.
Thank you guys for squeezing me in uh, tuie. I wanted to ask you about
From obba. I know the last few years we've had a lot of potential Tailwind from Ira to, you know, regulatory stuff what?
What are you hearing in terms of how this could benefit the end market?
Tooey Courtemanche: You know, it's interesting. It comes up almost never. And because, by the way, our customer conversations these days, they don't talk about tariffs or, you know, anything that you all are reading about in the newspaper. They're talking about how they're going to optimize their business, how they're going to drive productivity in their business. And frankly, that's why we're having those conversations, is that we believe we can help them do that. So yeah, it's just remarkably very little, again, because they build all this resilience into their business anyway. And so for them, this is business as usual. You know, I used the emergency room doctor, analogy last time. But like from all of us on the outside, you see all this chaos and mayhem. It's like getting into, it's like us walking into an and seeing all the chaos.
Tooey Courtemanche: But if you're an doctor, that chaos is what's normal. And for our customers, the chaos of all of this noise is what's normal. So it's just our perspective, it looks a lot scarier than it is. And they're like, we've got this.
Howard Fu: Hey, Ken, this is Howard. Just, you know, look, we can potentially see some of the possible tailwinds to the construction industry that could, you know, elicit some more investment. We could also see some of the potential benefits on our cash flow, particularly from a tax perspective. We're not working any of those into our projections at this point, let alone anything.
Like from all of us on the outside, you see all this chaos and Mayhem, it's like getting into. It's like, it's like walking in US walking into an, ER, and, uh, and seeing all the chaos. But if you're an, ER, doctor that chaos is what what's normal. And for our customers, the chaos of all of this noise is what's normal. So, it's just our perspective. It looks, it looks a lot scarier than it is. And they're like, we've got this, hey, Ken. This is Howard. Um, just uh, you know, look, we, we can potentially see some of the, the possible Tailwind to the construction industry that could, you know, uh, elicit some more investment. We could also see some, uh, the potential benefits on our cash flow particularly from a tax perspective. We're not working any of those into our projections at this point. Let alone anything.
Various Analysts: Hello?
Hello.
Howard Fu: Ken, you there?
Various Analysts: Yeah, was that Ken, you good? Do you have any other questions?
Howard Fu: Yeah, I lost Howard. I wasn't sure if you guys lost me or I lost you.
Can you there? Yeah. Was that? Can you go do any other questions? Yeah, I I lost Howard. I wasn't sure if you guys lost me or I lost you.
Various Analysts: Oh, well, I'm not sure about that.
Oh, well, I'm not sure about that.
Howard Fu: Well, I think I get the gist of what Howard was saying. It's like potential tailwinds, not baking anything in. And then maybe just on a follow-up, I know you guys have been, you know, potentially working on some product packaging, bundling. I guess anything in terms of any feedback you're getting on the beta test, how we should think about kind of the end objective for what you guys are trying to achieve here? Ken, this is Howard. You know, these are really early, early pilots that we're doing, the good, better, best, and determining what to include in each package. It's so early with a small set of select customers. It didn't have any impact on our performance.
I I think I get the gist of what what?
Um, and then maybe just, uh, on a follow-up. I know you guys have been, you know, potentially working on some, some product, packaging bundling. I guess, any, any anything in terms of any feedback you're getting on the, on the beta test, how we should think about, uh, kind of the the end objective for for for
For what you guys are trying to achieve here.
Howard Fu: And these packages are much more about streamlining the sales process, making sure that, again, we meet the customers where they are in terms of their journey of getting value out of the PROCORE platform more so than anything else. But it's really early right now with a select few customers.
Tooey Courtemanche: It's a great example, though, of what Saket was asking, which is PROCORE is constantly trying to meet our customers where they need us to be. And this is just one more example.
Uh, Ken, this is how to get like, you know, these are really early early Pilots that were doing the good better best and determining what to include and and each package, it's so early with a small set of Select customers. It didn't have any impact on our performance. Um, and this is these packages are much more about streamlining. The sales process. Making sure that, um, again, we meet the customers where they are in terms of their journey of getting value out of the procore platform more so than anything else, but it's really early right now with a select few customers. It's a great example, though. Of what sacket was asking, which is procore, is constantly trying to meet our customers, uh, where they need us to be. And this is just 1, more example.
Howard Fu: Perfect. Thanks a lot, Ken.
Perfect. Thanks a lot guys.
Various Analysts: Thanks, Ken.
Thanks again.
Jenna: Thank you. That will conclude the Q&A session. So I'll now pass it back over to management for any closing or further remarks.
Thank you.
That will conclude the Q&A session, so I'll pass it back over to management for any closing or further remarks.
Howard Fu: Thanks for joining us today, everybody. Talk soon.
Various Analysts: Thank you.
Thanks for joining us today. Everybody, talk to you soon. All right, thank you.
Jenna: Thank you. That will conclude today's call. Thank you for your participation. You may now disconnect your line.
Thank you.
Now, conclude today's call. Thank you for your participation. You may now disconnect your line.