Good afternoon. Thank you for attending today’s Procore Technologies, Inc. FY 2025 Q1 Earnings Call. My name is Tamia, and I’ll be your moderator for today’s call. [Operator Instructions] I would now like to pass the conference over to your host, Alexandra Geller, Head of Investor Relations. You may proceed.

Good afternoon, and welcome to Procore’s 2025 first quarter earnings call. I’m Alexandra Geller, Head of Investor Relations. With me today are Tooey Courtemanche, Founder, President and CEO; and Howard Fu, CFO. Further disclosure of our results can be found in our press release issued today, which is available on the Investor Relations section of our website and our periodic reports filed with the SEC. 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, our stock repurchase program, products, customer demand, operations and macroeconomic and geopolitical conditions. You should not rely on forward-looking statements as predictions of future events. All forward-looking statements are subject to risks, uncertainties and assumptions and are based on management’s current expectations and views as of today, May 1, 2025. 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 in our periodic reports filed with the SEC. With that, let me turn the call over to Tooey.

Thanks, Alex, and thank you, everyone, for joining us today. So I’d like to begin by addressing what’s top of mind for everyone. The uncertainties and potential impacts of the tariff policies. First and foremost, I want you all to know that we have not seen any material change in our customers’ behavior so far. Clearly, we are carefully monitoring this very fluid situation, and we’re staying close with our customers and prospects as it develops. Our customers are working to understand the impacts of these tariffs on their end customers and their supply chains. For example, the typical contractor has a cost structure that’s made up of approximately one half labor and the other half materials. Procurement has always been a balance of obtaining the highest quality materials at the optimal price point within the fastest time frame and the introductions of tariffs do not change that calculus. For project requirements that stipulate by American, tariffs may be less relevant. And where domestic procurement might not even be possible, tariffs could increase the cost of materials and ultimately, the corresponding project costs. Modest cost increases can likely be accommodated by contractors and their owner clients, which could benefit our business model. Some contracts have allowances or escalation clauses designed to protect GCs and subs from unforeseen cost increases and many firms buy materials at the onset of a project to mitigate the risk of future price increases. However, should costs rise to a level where a contractor or owner cannot absorb them, it is possible that projects could get delayed or even canceled. While there’s no way to know for sure, some believe that if tariffs persist long term, they could spark a wave of American reindustrialization. This outcome could drive substantial growth in nonresidential construction, creating a tailwind…

Thanks, Tooey, and thank you to everyone for joining us. The main topics I would like to cover today are our Q1 financial results, additional color on the quarter and our outlook. Total revenue in Q1 was $311 million, up 15% year-over-year. International revenue grew 18% year-over-year. Our Q1 international results were slightly impacted by currency headwinds. On a year-over-year basis, FX contributed approximately two points of headwind to international revenue growth. Therefore, on a constant currency basis, International revenue grew 20% year-over-year. Q1 non-GAAP operating income was $32 million, representing a non-GAAP operating margin of 10%. As for our key backlog metrics, current RPO grew 20% year-over-year and current deferred revenue grew 15% year-over-year. Now, let me share some additional color on the business. In addition to our execution in the quarter, current RPO continues to primarily benefit from a longer contract duration. This is reflected in the notably higher growth rates in our noncurrent RPO and over the last two quarters. Longer contract durations can result in greater stability in current RPO growth for a longer period of time. For example, a customer on a 12-month contract that renewed at the end of Q4 would have approximately nine months of contract value in CRPO when we report Q1. And - but if that same customer renewed for 24 months at the end of Q4, then CRPO would reflect 12 months of contract value when we report Q1. When normalizing CRPO for this dynamic the year-over-year growth continues to be in the mid-teens. We expect this dynamic to continue to benefit CRPO for at least the second quarter of fiscal 2025 and which may result in a continued disparity between CRPO growth and out quarter revenue growth. From a profitability standpoint, we expect to deliver continued margin improvement for…

Thank you. [Operator Instructions] The first comes from Saket Kalia with Barclays. You may proceed.

Okay, great. Hey, Tooey, how Howard thanks for taking my questions here and nice start to the year.

Thank you.

Thanks, Saket.

Hey guys. Howard maybe for you, the CRPO acceleration was great to see and appreciate some of the dynamics that you called out with noncurrent RPO, maybe thinking about the normalized growth that you called out, - can you just talk about some of the drivers there qualitatively in terms of strength of new logos versus maybe net revenue retention from your existing? And when does that benefit from non-current RPO maybe normalize?

Yes, sure. Thanks, Saket. So I think in Q1, we had a strong new logo quarter, and I think that definitely contributed to our performance in Q1. And - some additional color that I’ll talk about is, remember, we’re viewed as partners, strategic partners to our customers. And one of the things that drove the increase in duration is really from the increase in terms of the pooled models that we think customers signed up for in Q3 and Q4. And the reason that’s important is because it really gives our customers some flexibility to consume the volume that they buy from Procore over a longer period of time. So we think that, that’s what drove some of the longer duration. And just to give you a little bit more specifics of duration uptick from historically about 20 months to about 21.5 months and the proportion of our ARR, that is on multiyear deals increase from roughly about 38% of the AR to about 43% of the ARR. Now in terms of when this might normalize, we’re probably looking at the back part of the year, probably in Q4, is when this will normalize. And we just wanted to provide color in the quarter to make sure folks understood that that delta between where cRPO growth and where revenue growth is, is really in the mid-teens in terms of cRPO.

Yes, absolutely. That’s really helpful call out. Tooey maybe for you, I’d love to dig into some of the changes from last year, particularly international. As you brought on more management and at the local level - what are some of the early signs that you’re seeing on things like pipeline or customer conversations? Or any other metrics that you use to gauge success internationally?

Yes, great question, Saket. By the way, this - we’re well into the middle of our transition. So there’s a lot that’s happened since the last time we spoke. But yes, on the international front, - this is really one of the big, big reasons why we made this change moving to the GM model was we really wanted to create more bespoke go-to-market effort in the markets that we are serving. And a one size fits all just wasn’t going to scale. So the thing that I can point to is I talk to customers all the time and I reckon love it. One of the things that I hear often is, hey, these new technical resources that you guys have been contributing to our accounts have actually made our adoption and our engagement go up and they’re grateful for it. And those are resources they didn’t have access to before. And so all of that just leads us to believe that growth will fall in line and things are going to continue to move in a very positive direction. So we are very happy with where we are in the process of making this transition. And - the green shoots are there. One other area to just note is when you look at a project team, an account manager and the customer success engineer and all the folks that are swarming in the count, when those teams are operating as a unit and they’re really fired up and they’re finishing each other sentences, you’ve got the right org design, and I’m seeing that again and again. So very, very positive.

All great to hear. Thanks guys.

Thanks, Saket.

Thanks, Saket.

Thank you. The following comes from Dylan Becker with William Blair. You may proceed.

Hey guys. Nice job here. Maybe Tooey kind of sticking on that on the go-to-market front. The customers obviously are facing a lot of complexity in the current backdrop. But how that emphasis of swarming kind of plays into that long-term strategic partnership positioning, addressing things like rising input costs, labor constraints, things of the like and kind of maybe how that enables you or gives you confidence in your ability to continue cross-selling expanding the volume base and several kind of the core tenets of the growth algorithm that you pointed to?

Yes. So Dylan, the one thing to just point out, which I know you know is what Procore really was built for was to drive efficiency and productivity into our customers’ businesses. And so what we’re seeing is in this time of additional stress and uncertainty and the marketplace, that the customers are actually very grateful that we’re actually providing the services that we do. I was talking to one of our largest customers yesterday, and they were saying that they are grateful that we are a partner and not a vendor in these moments because we do so much more than just provide them with software and then we partner with them on how to work through these big challenges and how to create the transparency on the job site so people can see where the risk lies. So yes, I think this is where Procore shines. And let’s say it’s an honor to be a partner with the industry during these challenging times.

Great. Okay. That’s helpful. And then not going to miss the AI opportunity this time for you, Tooey. But - how do you think about your kind of positioning in light of what you just said as well, too, given where you sit in the construction ecosystem today? And the access to curated data in the workflows to drive level of automation and productivity. I mean how does that give you the perception of the right to win in an increasingly agentic-oriented world? Thank you.

By the way, I love this, Dylan, this is my - this is where I spent a lot of my passion at time. So yes, what we have and we have this unique vantage point, which no one else has, because we were built in the cloud, we only serve construction. We’re a single code base. We have everything, and we have a great partner ecosystem that provides data into the ecosystem. So because we have the corpus of data that we do across so many different project types, across so many different stakeholders and across so many different geos. We have the data to look for pattern recognition to help our customers run better businesses. And that is exactly what agentic work is all about. Let me give you an example. We have an agent that we’re building with some customers right now around daily logs on the job site. And a daily wage on a job site is essentially a very important document that fills out who was on site, what accidents happen, what observations happen, what photos happen, what visitors, what deliveries, all that information has to be gathered on a daily basis. If the project manager doesn’t do it, they incur a lot of risk for their business. So our customers, the executives come to us all the time saying, we need to repay somebody to go look in all those daily reports every day to see who hasn’t filled them out. And now we have agents that are doing that 24/7 with a couple of customers in the pilot, and it’s just game-changing. It’s not - it’s not like super technical, but it’s super valuable, and that’s what we’re focusing on is delivering value and productivity tools to our customers.

Perfect. Thanks, Tooey.

Thank you.

Thank you. The next question comes from Joe Vruwink with Baird. You may proceed.

Great. Thanks for taking my questions. You made the comment in the past that the length of a recession that is as much as the depth of a recession? I know all the tariff - is fairly fresh. But maybe when you audit customer decisions, and I guess this would be more of the annual variety. Does it seem like there’s maybe any bracing for a shorter downturn? And I guess if one takes the view that the downturn is short before the long-term tailwinds Tooey spoke to, I would imagine they’re probably not changing their volume commitment because that impedes them on the other side. Is there maybe that thought process that’s helping kind of preserve the financial performance in the quarter?

Well, Joe, I would look at it a little bit differently, which is our customers, they tend to be - they tend to plan over the long-term more than they react to the short-term. They’re running projects in a lot of cases that are two years long. So that for them, their business is way out over the horizon, and they’re not going to make kind of rash decisions based off of new cycles, but that doesn’t mean that they’re not very aware of what’s going on. And all of the folks I’m talking to are doing all of the prudent things that any other business owner would do, which is running scenario planning, putting in some cases, subcommittees together. They’ll have folks that are focusing on commodities in pricing and pre-purchasing of materials before jobs. And of course, our legal team is trying to get their escalation clauses into every contract that they have in order to be prepared - but the takeaway on this one, Joe, is no one is sounding the alarm. This is just people doing what they do when they’re running a great business. And then when I think about what Procore’s doing, as much as there’s a lot of noise out there and trust me, we do the scenario planning like everyone else. We focus on what’s in our control. And we put all of our energy in the things that we can do to make our customers more productive and make them have better margins. And so to us, that’s where our focus is.

That’s great. And then touching on something you just said, I mean, with tariffs, there’s going to be a lot of legal changes and the contractual arrangement owners and contractors have with one another management of the project itself trend differently. I guess when you think about your financial and resource management solutions - are you seeing a spike in interest there? Can those kind of serve as new conversation starters or lead generation to maybe pitch the broader suite?

I would say we haven’t seen any material change, not to say that our customers and the prospects out there don’t value highly are financial products. They basically are - they’re basically not overreacting. And again, like I said, they’re not making quick decisions. And actually, Joe, this gives me an opportunity. An analogy I’d like to share with folks is - if you and I walked into an emergency room on a Friday night at 10 p.m. as lay people and we looked at what was going on in the chaos, the mayhem, the fear, the gore and everything else. We would have one perspective. But if you turn your perspective briefly to what the ER doctor who’s been working in that same ER room for the last 10 years, their perspective, which is they’re used to dealing with uncertainty. They’re used to dealing with chaos and regulation. And so that’s the way I look at the industry is that these folks deal with us all the time. Look, I’ve been doing this for many years. And since 2002, I’ve seen time and time again, there’s a new issue [indiscernible] that they have to deal with. But what they do is they deal with it. And they deal with it consistently and they deal with it well and the best ones deal with it really well and they come out better than they went into it with.

Thank you.

Sure, Joe.

Thank you. The next question comes from Brent Bracelin with Piper Sandler. You may proceed.

Thank you. Good afternoon. Tooey, I wanted to maybe double-click into kind of customer growth. If we think about the opportunity here, I get that revenue and backlog could be impacted by a slowdown in construction. Good to see it not happening yet. But as you think about what would - how would you measure progress, let’s say, a year from now - you added 200 new customers this quarter. You can’t control the volume they come on, but you can control the number of customers that decide to standardize on Procore. So is that the North Star over the next year, is it all about customer adds? Walk through the metric, if you can’t control revenue, would it be customers and logos that we should really look to see where you’re having the most success? Thanks.

So one thing that I pointed out, Brent, was that we have 2,400 customers that are contributing over $100,000 in ARR. For us, it’s much more about the dollar volume than it is the customer volume because in our world, there’s a lot of SMB folks that do less than $5 million a year. But they’re - it’s not a an area where we spend a lot of our time. And so that’s where we would get the logo count increase that you’re talking about. Now of course, I always want more, and that’s my job, right? So but - and we have been seeing success. The owners business has been showing some success. And so our international business, our cross-sell and our upsell. And then when I zoom way out, and I like Brent, the TAM that we are focusing on is so big, and there’s so much untapped opportunity for us out there. And that we have - like I mentioned in the opening remarks, we have half of our customers’ volume we just got the other half, we would double the size of this great business. There’s just so much ahead of us. And then you got to be thinking about like all the things that we’re doing, I think, doing well like our go-to-market transition, like all of the work that we’re doing with agents and AI, I just - the future is very bright.

Couple of color. And then Howard, you mentioned one thing. I just wanted to double-click on relative to longer duration. I think you talked about mix of ARR 20-plus months. How does that impact rev recognition? If a customer signed larger contracts if they slow consumption of those contracts, maybe in year one? Do you see a little bit of a change in rev rec there or not, that would just only have an impact on cRPO and not revenue. Thanks.

Yes. Hi Brent, it actually doesn’t impact rev rec at all. And you can think about it this way, with the longer durations and the longer proportion of customers with multiyear deals - what it does is actually reload cRPO sooner. So for example, instead of reloading cRPO in Q3 of this year, those longer durations allowed us to reload cRPO in Q1 and Q2. And that’s why we wanted to call that out. And that separation, if you control for that, Brent, our cRPO growth would still be in that mid-teens range.

Helpful. Thank you so much guys.

Thanks, Brent.

Thank you. The next question comes from Kash Rangan with Goldman Sachs. You may proceed.

Hey, thanks for taking my question. This is Matt Martino on for Kash Rangan. Tooey, one for you. I imagine with all the uncertainty out there, Procore’s deflationary value prop to the construction industry. You should really start to resonate with customers. It seems like especially with the recent go-to-market enablement efforts, there could be a greater opportunity to cross-sell some of these newer products where there’s still a lot of white space. I’d love to get your thoughts on any areas or products you believe Procore can lean into to help customers navigate a more dynamic macro. Thanks.

Yes, Matt. So one of the big reasons why we did this transition that we’re going through is we wanted to get closer to the customer. We wanted to drive adoption and engagement, which we believe gives us an opportunity and the right to have a conversation with the customer about these other productivity enhancement tools that we have to offer them. And so that is really the journey that we’re on. And so it really depends on the stakeholders. So owners need different tool sets than the specialty contractors. And GCs need a different set, too. So there’s always an opportunity to increase the number of products that our customers adopt of ours, and I’m glad that we now have the teams in place to have those conversations. Move on.

Thank you. Next question comes from DJ Hynes with Canaccord. You may proceed.

Hey, how are you doing guys. Maybe Tooey sticking with that go-to-market realignment threat, I mean, you alluded to kind of modest disruption in Q1, but you also said there were some learnings that you picked up as part of this process. Maybe you could just double click on what those learnings were and kind of how that informs or changes the strategy, if at all, kind of going into Q2 and Q3?

Yes. Let just share some learnings with you. But I think the big takeaway here, DJ, is that everything is kind of going pretty much to plan, right? And by the way, when you embark on a journey to do a go-to-market transition to the scale and the scope in which we did, you go through scenario planning and not everything ends up in your scenarios where you would hope they would. And I would honestly say that we believe that we’ve ended up in a great place in this transition. And to your point, yes, there have been some learnings along the way. Change management is never easy, right? Communication is key. And if you don’t get some of the communication right, you got to go back and fix it. But in general, I really believe that we’ve done a great job on this and that we’re making great progress.

Hey DJ, this is Howard. I’ll just really quickly add on - the short answer is we’re about exactly where we thought we would be, both in terms of the disruption that we expected as well as some of the green shoots that we expected. And we expect to continue on this journey through Q2 and then we still expect to get some of this benefit going into the back part of this year. And we’re about where we thought we would be, and that’s a sign, and it gives us additional confidence that this is the right model to go towards as we go after this long-term opportunity for Procore.

Yes. I would say definitely not a mission accomplished. I don’t want to send that, DJ, but - and we have work left to be done, but I’m definitely happy with where we’ve ended that.

Good. Yes. That’s great to hear. Howard, maybe the financial follow-up to that would be just looking at like Q1 sales and marketing OpEx. I was a little surprised to see it below Q3 2024 levels, right, especially given kind of the incremental hiring you did in the back half of last year. So are there efficiencies that are being drawn out elsewhere in the model? Like how should we think about kind of that OpEx line specifically as you continue to scale the organ?

Yes. On the back part of fiscal 2024, DJ, there were a lot of onetime things that we actually deployed and invested in we talked about last year. Those are onetime and did not persist into fiscal 2025. However, we still did continue to add resources and a significant amount of resources to support these changes on the go-to-market side in Q4 and to the first part of Q1, which then offset that - which then lost at that a little bit. But it was really about a lot of the onetime pieces from last year. And just to remind everyone, look, what we’re optimizing for is not any particular expense in a quarter or cRPO quarter or anything like that. It’s really about optimizing free cash flow per share and compounding free cash flow per share over time.

Yes. Very clear. Okay. Thank you, guys.

Yes. Thanks DJ.

Thank you. The next question comes from Adam Borg with Stifel. You may proceed.

Awesome. And thanks much for taking the questions. Maybe the first one, Tooey. So to your point, obviously, if there’s a potential downturn here. It’s always a great opportunity to go deeper into the installed base and you talked about having less than half the ACV or volume in the existing customers, and there’s another 50% plus remaining. Any thought or any visibility into of the ACV that you do not have today? What is already in a competitor’s book of business, what’s not available altogether? Just trying to size the size of that opportunity? And then I have a follow-up.

Yes. So by the way, one thing to think about, Adam, is that a lot of the accounts that we’re going into right now, they don’t have an existing system or if they do, they’re using Microsoft Office or some sort of kind of homegrown situation or a bunch of point solutions. And in some cases, some old ERP systems - to do their project management. So it’s not really as uniformly spread as you would - one might think across that. Generally, the only reluctance our customers have to bring on more volume is it’s a matter of change. Like are they - is there a division within their organization. They have to go through a whole bunch of change management in order to go through - is there a division that’s working for a particular sector where they have some specialized software that they might be using. So it’s all of that. But to me, it’s all gettable, - it’s all greenfield and it’s all ours for the taking. We just have to go get it.

No, that’s super clear. And that’s really exciting. Maybe as a follow-up, Howard, just on gross margin, it was a little bit lower this quarter relative to the last number of quarters. Just any color there on how we should think about the revenue. Thanks so much.

There’s really nothing to take from that. The gross margin tick down was really a result of some of the changes we made on the go-to-market side. that shifted some of the expense from sales and marketing to cost of revenue. It’s neutral to free cash flow. It’s neutral to operating margin. It’s really a function of where it sits on the P&L. So there’s nothing really there to look at. Over time, we still expect gross margins to be in the mid-80s, plus or minus one or two points, and that’s the way that you should think about it profile.

Excellent. Thanks again.

Yes. Thanks, Adam.

Thank you. The final question is from Jason Celino with KeyBanc Capital Markets. You may proceed.

Great. Thanks for fitting me in. Maybe just a couple of questions on the duration update. Is this being driven by maybe some of the go-to-market changes? Like are there any incentives that the salespeople are getting to drive some of these pooled deals or are these longer deals? And then maybe why would it normalize in Q4? Is that just a function of lapping?

Yes. So the last part of that question is, yes, it’s just lapping kind of when these changes started to take place in Q3 and Q4, and you could see that in the growth rate of our long-term RPO. I want to be clear. There are no special incentives that we are putting in place for our field to sell longer-term deals. And as I mentioned earlier on the Q&A, we believe it’s because our customers, again, looking at us as a strategic partner really wanting the flexibility to consume the ACV that they buy from Procore and things like multiyear pool models allow them to do that. And we started to see that in Q3 and Q4, and that’s what’s impacting the duration.

Okay. Excellent. And then maybe just one question on guidance philosophy. I think this earnings season has been quite different for many companies and different management teams are taking a different approach. You spoke about it in the prepared remarks a little bit, but can you maybe just speak to how you’re thinking about the revenue guidance and conservatism? Because when I look at the 2Q guidance that decelerates and there’s an implied reacceleration in the back half. Just curious how you’re approaching this. Thanks.

Yes. We’re approaching it very conservatively. The guide has the ability to withstand a significant decline in our demand environment, and we would still be able to hit and beat that guide. Internally, we continue to evaluate a range of scenario outcomes, and we have conviction that the guide is enough to cover a significant down case. We continue to control what we can control, and we continue to optimize for free cash flow per share - and we will continue to manage the business appropriately on what we can control, regardless of what’s going on in the external market. And we think we have room to not just beat the revenue guide, but the opportunity to provide incremental margin improvement should we see the demand headwinds pick up. I want to be clear that we haven’t seen any material changes on that today.

Okay, perfect. Very clear. Thank you, Howard.

Yep.

Thanks, Jason.

Thank you. Thank you for your participation today. This concludes today’s conference call. You may now disconnect your lines.