Procore Technologies Q2 2025 Earnings Report

Procore Technologies EPS Results

• Actual EPS: $0.35
• Consensus EPS: $0.24
• Beat/Miss: Beat by +$0.11
• One Year Ago EPS: $0.39

Procore Technologies Revenue Results

• Actual Revenue: $323.92 million
• Expected Revenue: $311.91 million
• Beat/Miss: Beat by +$12.01 million
• YoY Revenue Growth: +13.90%

Procore Technologies Announcement Details

• Quarter: Q2 2025
• Date: 7/31/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 5:00PM ET

Procore Technologies (NYSE:PCOR) engages in the provision of a cloud-based construction management platform and related software products in the United States and internationally. The company's platform enables owners, general and specialty contractors, architects, and engineers to collaborate on construction projects. It offers Preconstruction that facilitates collaboration between internal and external stakeholders during the planning, budgeting, estimating, bidding, and partner selection phase of a construction project; and Project Execution, which enables real-time collaboration, information storage, design, BIM model clash detection, and regulation compliance for teams on the jobsite and in the back office. The company also provides Workforce Management, that helps contractors to schedule, track, and forecast labor productivity, enhance time management, communication with workforces, and manage profitability on construction projects; Financial Management, which provides customers with visibility into the financial health of their individual construction projects and portfolios, as well as facilitates untethered access to financial data, linking the field, and the office in real-time; and Construction Intelligence, that allows customers to capture, manage, and learn from data for project and portfolio reporting, analytics, and artificial intelligence-guided workflows, as well as to monitor projects and drive informed decision-making for business needs. It serves owners, general contractors, and specialty contractors operating in the commercial, residential, industrial, and infrastructure segments of the construction industry. The company allow users to access its products on computers, smartphones, and tablets through any web browser or from its mobile application available for iOS and Android platforms through its direct sales team. Procore Technologies, Inc. was incorporated in 2002 and is headquartered in Carpinteria, California.

Procore Technologies Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Revenue grew 14% year-over-year to $324 million in Q2, with non-GAAP operating margin expanding 300 bps to 13% and current RPO up 21% YoY.
• Positive Sentiment: Unveiled Procore Helix AI layer—featuring Assist, agent builder, and developer studio—alongside BIM streaming enhancements via the Novarendr and Flypaper acquisitions.
• Positive Sentiment: Go-to-market transition remains on track, driving more efficient growth as cross-sell mix improved to 30% of expansion ARR versus a historic 20%.
• Positive Sentiment: Added major customers and six- and seven-figure deals—including Clayco, a Fortune 150 utility, and leading ENR contractors—expanding across construction, energy, and public sectors.
• Positive Sentiment: Raised full-year FY25 revenue guidance to $1.299 billion–$1.302 billion (13% YoY growth) while maintaining a non-GAAP operating margin outlook of 13%–13.5%.

Presentation

[Operator]

Good afternoon, and thank you for joining today's Prolcore Technologies Inc. FY twenty twenty five Q2 Earnings Call. My name is Regan, 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. I would now like to pass the conference over to our host, Alexandra Head of IR. Please proceed.

[Alexandra Geller, Head of IR at Procore]

Good afternoon, and welcome to Procore's twenty twenty five second quarter earnings call. I'm Alexandra Geller, Head of Investor Relations. With me today are Tuohy Coramanche, Founder, President and CEO and Howard Fu, CFO. Further disclosure of 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.

[Alexandra Geller, Head of IR at Procore]

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. All forward looking statements are subject to risks, uncertainties and assumptions and are based on management's current expectations and views as of today, 07/31/2025. 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.

[Alexandra Geller, Head of IR at Procore]

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 Tilly.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Thanks, Alex, and thank you everyone for joining us today. Let's start with our q two 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 6 and 7 figure deals growing 21 year over year, resulting in more than 2,500 customers contributing greater than a $100,000 in ARR.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

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. So I'd like to share a few of these exciting innovations. Starting with AI intelligence.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

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 the owners plan, build, and operate their global portfolios with robust capabilities tailor made for owners, such as owners portfolio hub, a comprehensive portfolio management solution, and integrated asset management for fixed assets to generate even more value for owners.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

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 three d streaming BIM engines with our acquisitions of Novarendr 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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

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, 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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

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. In q two, 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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Clayco sought to better integrate a highly segmented technology stack to meet the diverse needs of its six business units. In q two, 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. Procre 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. Playco purchased products across our platform to standardize all construction projects on Procore.

[Craig Courtemanche, Founder, Chairman, CEO & President at 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 q two, they selected Procore to standardize operations and enable their aggressive growth targets. 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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

We also had a strong global expansion wins across stakeholders in q two, including one of Japan's largest contractors, a long standing 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 e n r ten, Contracting Incorporated, a Procore customer for over twelve years. In that time, HIT scaled its business from $800,000,000 to more than $8,000,000,000 in revenue, with Procore as a constant in their technology stack supporting their impressive growth. In q two, 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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Another large expansion win in the quarter was with a Fortune one fifty utility holding company. Already a Procore customer in two of their three business units, this q two expansion replaces an outdated homegrown solution in their remaining unit energy generation. 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. As you can see from these customer wins, the Procore platform is applicable across transact a wide range of use cases, spanning data centers, energy, agriculture, and everything in between.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Our q two 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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

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 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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

And with that, I'll turn it over to Howard to walk you through our financial performance.

[Howard Fu, CFO at Procore]

Thanks, Tewy, and thank you to everyone for joining us. The main topics I would like to cover today are our q two financial results, additional color on the quarter, and our outlook. Total revenue in Q2 was $324,000,000 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.

[Howard Fu, CFO at Procore]

Therefore, on a constant currency basis, international revenue grew 16% year over year. Q2 non GAAP operating income was $44,000,000 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. Q2 was a strong quarter for new logo ARR growth with our general contractor, owner and public sector motions showing particular strength.

[Howard Fu, CFO at Procore]

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 eightytwenty 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 seventythirty 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.

[Howard Fu, CFO at Procore]

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. 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.

[Howard Fu, CFO at Procore]

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. Even with that conservatism, we are on track for another year of solid operating margin improvement of three fifty 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. 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.

[Howard Fu, CFO at Procore]

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. 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 GAAP margins while not compromising our growth opportunities.

[Howard Fu, CFO at Procore]

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 twenty six, 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 twenty twenty five, we expect revenue between $326,000,000 and $328,000,000 representing year over year growth of 10% to 11%.

[Howard Fu, CFO at Procore]

Q3 non GAAP operating margin is expected to be between 1313.5%. For the full year fiscal twenty twenty five, we are raising our revenue guide to a range of $1,299,000,000 to $1,302,000,000 representing total year over year growth of 13%. We are maintaining our non GAAP operating margin guidance for the year to be between 1313.5%, which implies year over year margin expansion between three hundred and three fifty 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 and A.

[Operator]

Thank you so much. We will now begin our Q and A session. Our first question comes from Dylan Becker of William Blair. Your line is now open.

[Dylan Becker, Research Analyst - Technology, Media & Communications at William Blair]

Hey, gentlemen. Appreciate the question here, and nice job. Maybe, Tuohy, 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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Yeah, Dylan. Great question. And, yeah, that the the hackathon that we have with our customers was really, really, exciting and eye opening. What we're finding is is that our customers are bringing their unique challenges to build out agents on our platform, things we couldn't even imagine before. And so to kinda to answer your question, what we think is gonna happen is the more that we can demonstrate this value, the more people are gonna adopt, agent builder.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

And the 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 I think the proof's gonna be in the pudding, is it's gonna drive so much value into our customers that the adoption we're hoping is gonna is gonna reflect that. So so far so far so good.

[Howard Fu, CFO at Procore]

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, we 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 gonna move forward in terms of that adoption curve and work.

[Howard Fu, CFO at Procore]

We can facilitate that. And so, really right now in the early stages, it's about getting this in the hands of our customers.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

And by way, did you ask 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.

[Dylan Becker, Research Analyst - Technology, Media & Communications at William Blair]

Perfect. That's that's very helpful.

[Dylan Becker, Research Analyst - Technology, Media & Communications at William Blair]

Thank you both. Maybe, Howard, on kind of the go to market changes, it sounds like that continues to track. Maybe and 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 are aligned. Excuse me.

[Dylan Becker, Research Analyst - Technology, Media & Communications at William Blair]

It sounds like the cross sale motion's really kinda starting to resonate, but kinda any any incremental metrics, on on traction with the go to market front? Thank you.

[Howard Fu, CFO at Procore]

Dylan, you broke up just a little bit there, but I'm gonna I'm gonna anticipate what you're asking. Overall, the go to market transition is is going about as planned. You know, we had a strong q one. We had a a solid q one and q two. The transition is going about exactly what we expected it to be.

[Howard Fu, CFO at Procore]

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, 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 with where we're at.

[Dylan Becker, Research Analyst - Technology, Media & Communications at William Blair]

Fantastic. Thank you, both. Appreciate it.

[Howard Fu, CFO at Procore]

Thanks, Dylan.

[Operator]

Thank you. Our next question comes from Saket Kalia of Barclays. Your line is now open.

[Saket Kalia, Managing Director at Barclays Capital]

Great. Hey guys, thanks for taking my questions here and a nice quarter.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Thanks, Saket.

[Howard Fu, CFO at Procore]

Thanks, Saket.

[Saket Kalia, Managing Director at Barclays Capital]

Howard, maybe just to yeah, absolutely. Howard, maybe just to start with you. 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.

[Saket Kalia, Managing Director at Barclays Capital]

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 for next year? Understanding you're not guiding, but just what you wanted us to take away from that?

[Howard Fu, CFO at Procore]

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 twenty six.

[Howard Fu, CFO at Procore]

And 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 '1. And had we not done that, we would have expanded margins even more in the first part of this year. And so we kinda got a nice setup going into the next fiscal year as well in fiscal twenty six. So that's the first thing.

[Howard Fu, CFO at Procore]

The second thing, frankly, second, we wanted to make sure is folks didn't get ahead of us on revenue for fiscal twenty six. It's a little bit early to talk about revenue for fiscal twenty six, and we still just we 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, Zach, 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. First part is durable growth through retention, through expansion, cross sell, which we're already starting to see some benefits from.

[Howard Fu, CFO at Procore]

But the other piece is equally important around the leverage and the efficiency that we're gonna get from go to market and a e productivity. And that's gonna 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 2540% free cash flow margins.

[Saket Kalia, Managing Director at Barclays Capital]

Got it. Got it. That's super clear. Thanks. Thanks for thanks for that added context.

[Saket Kalia, Managing Director at Barclays Capital]

Touy, maybe for you for for my follow-up question. It's it's a bit of a longer term question. But, you know, one of the 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?

[Saket Kalia, Managing Director at Barclays Capital]

And how realistic of a scenario is that as you think one, two, three years out?

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

By the way, Saket, one thing that people don't realize is that we've actually had some flexibility in our pricing models and model in the past. With our self perform 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 where they are. And so so that that isn't that that is one example. The other thing is just in terms of looking forward, yes.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Mostly in the owner segment where we'll hear, just the preference to buy differently. Right? So, you know, looking into per seat, licensing model for models, for instance, for them. Or or, frankly, any way they wanna buy, we wanna make sure that we're there to meet them, where they're where they're most comfortable. So, ACV is not a sacrosanct, 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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

They run their businesses off the amount of construction volume they anticipate in their backlogs. And so it's a really good yardstick that we get to use with our customers to understand how much of Procore they're gonna use.

[Saket Kalia, Managing Director at Barclays Capital]

Super helpful. Thanks, guys.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Thanks, Saket.

[Howard Fu, CFO at Procore]

Thanks, Saket.

[Operator]

Thank you. Our next question comes from Joe Ruiwink of Baird. Your line is now open.

[Joe Vruwink, Senior Research Analyst at Baird]

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 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?

[Joe Vruwink, Senior Research Analyst at Baird]

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?

[Howard Fu, CFO at Procore]

The short answer is yes. Going into next year, the improvement in Referral 40 is going to be driven by profitability. 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 a revenue acceleration standpoint.

[Howard Fu, CFO at Procore]

Right now, it's just too early to talk about fiscal twenty six 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. And so short answer, just to sum up, is yes.

[Howard Fu, CFO at Procore]

You should expect the rule 40 improvement to come from margin improvement.

[Joe Vruwink, Senior Research Analyst at Baird]

Okay. 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 and the conquest when just around how data and unifying data was the imperative there.

[Joe Vruwink, Senior Research Analyst at Baird]

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?

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Yeah. So here's what here's one thing to know about construction, and and this is what all of our customers know and all of our buyers know, is that construction is very, uniform. So the yeah. 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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

So 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 that's that's something that we think about over time, which is as our customers grow, we we wanna grow with them. But but and then in terms of the collaborators, yeah, the collaborators are seeing a tremendous amount of value in the data.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

It's one of the main reasons why a collaborator becomes a total customer is they want to own the data from the projects that they're working on. And that's that's not new based on AI. That's just that is the way it's always worked. So I think AI is a is a, you know, an accelerator in all this, but it's it's it's it really is an exciting time in this industry as we pivot into making agents do the work.

[Joe Vruwink, Senior Research Analyst at Baird]

Great. Thank you.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Thanks, Jim.

[Operator]

Thank you. Our next question comes from DJ Hines of Canaccord. Your line is now open.

[David Hynes, MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Hey, guys. Congrats on the quarter. So 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 this there's less volume to to upsell right now?

[David Hynes, MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

I'm trying to figure out, like, is this a signal that the the the go to market realignment's working, or is it maybe an indictment on the macro? Just help me there.

[Howard Fu, CFO at Procore]

Hey, BJ. This is Howard.

[Howard Fu, CFO at Procore]

Actually, let me let me take that one. 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 two quarters now. So and the expectation is that those technical specialists are going to really increase and and benefit our cross sell.

[Howard Fu, CFO at Procore]

The reality of it is, think, given that we're only about two quarters in, that that benefit that we got on the cross sell came from a broader range of things that we're doing inclusive of the technical specialist, 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 road map and our platform. But those that is absolutely the expectation that we're gonna have. But more broadly, I think it's more than just any one thing. I think it's a reflection of us executing well across a number of dimensions in our business.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Yeah. I wanna add too. I I've had, I think, 16 c level conversations recently. And 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 it's it's 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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

And the you know? So no. You it's hard to argue with your customers.

[David Hynes, MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Yeah. Yeah. No. That those are great data points, I you know, it's like my sense is it's only gonna get better with more time in the market. Howard, for you, I wanna ask a little Can I Please?

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Can I just real quick quickly correct that one thing? Because it sounded to me like you were you were you were kinda making an assumption that our volume was down. This was not a volume was down. This was the, this was the cross sell was up. So I I I I just wanna make sure that that was the, that was Oh, yeah. Corrected.

[David Hynes, MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Yep. That's an important distinction, and, I I think makes perfect sense with the explanation. How can I ask you a little bit on on free cash flow? I mean, it was it came in a little light, I I think, of where we were.

[David Hynes, MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

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 are there any kind of factors we should be thinking about as to what happened in q two?

[Howard Fu, CFO at Procore]

Yeah. There's always gonna be noise quarter on quarter, DJ. I wouldn't put any any weight on the the free cash flow within the specific quarter here. We're on track to where we expect to be for 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.

[Howard Fu, CFO at Procore]

So there's there's nothing to read into the specific free cash flow for the for the quarter.

[David Hynes, MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets]

Perfect. Thank you, guys.

[Howard Fu, CFO at Procore]

Thanks, CJ.

[Operator]

Thank you. Our next question comes from Kash Rangan of Goldman Sachs. Your line is now open.

[Kash Rangan, Managing Director at Goldman Sachs]

Hey, thank you very much, Tewe and team. Tewe, always appreciate your perspective 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 three months ago? Thank you so much.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

And not to say it's a it's a panacea, but but they have ways of dealing with this. So, I'll tell you this. Our customers are very optimistic about the future, and that is, that's kinda true across the board.

[Kash Rangan, Managing Director at Goldman Sachs]

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, etcetera, 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 that the the transformation? Thank you so much. And that's it for me.

[Howard Fu, CFO at Procore]

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 head count is stable. Attrition is really stable. Productivity is going up. The GMs continue to leverage their new found new found capabilities and remit to really tailor things that are specific to their regions. So anyways Yeah.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

And I I'll tell you this. The 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, our the big win that we had this this this quarter. 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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

It's not just a software transaction. It's a true partnership.

[Kash Rangan, Managing Director at Goldman Sachs]

Got it. Thank you so much.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Thanks, Kash.

[Operator]

Thank you. Our next question comes from Daniel Jester of b BMO. Your line is now open.

[Daniel Jester, US Software Equity Research Analyst at BMO Capital Markets]

Great. Thanks for taking my question.

[Daniel Jester, US Software Equity Research Analyst at BMO Capital Markets]

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 dynamic that you've seen this quarter that you'd call out.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

By the way, I'm I'm 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 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.

[Daniel Jester, US Software Equity Research Analyst at BMO Capital Markets]

Oh, nope. Just, obliged to ask. I do wanna 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?

[Daniel Jester, US Software Equity Research Analyst at BMO Capital Markets]

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 accelerate in terms of adoption? Thank you so much.

[Howard Fu, CFO at Procore]

So why don't I start? 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 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 financial, some form of financials. And that was always what we expected to be the most immediate opportunity for us.

[Howard Fu, CFO at Procore]

And we made good progress on that in terms of making progress on cross sells primarily around financials. Know, pay is gonna be a smaller portion of that that goes along with financials. But that was that was a good op outcome for us in terms of what drove that that cross sell for the quarter.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

By the way, one of the problems we're calling out financials because we're proud of that was it's kind of it it kind of drew all the focus to financials. We had we had success across all of product lines, I would say, this quarter. And it's really is a testament to the fact that the platform that we have built is is really paying off by 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 and T organization has done to make it so.

[Daniel Jester, US Software Equity Research Analyst at BMO Capital Markets]

Great. Thank you so much.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Thank you.

[Operator]

Thank you. Our next question comes from Taylor McGinnis of UBS. Your line is now open.

[Taylor McGinnis, Equity Research Analyst at UBS Group]

Yes. Hey, thanks so much, Tom, 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?

[Taylor McGinnis, Equity Research Analyst at UBS Group]

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 multiyear contracts such that, you know, should we see, I guess, a bigger convergence as we get into one q? Thank you.

[Howard Fu, CFO at Procore]

So the the first thing is, yes, we are still seeing the the impact from the longer contract durations that largely came from q four going into q one. That's why we said we could expect to see that start to normalize and going into q two because we're gonna anniversary when that shift happened. And then just in terms of a little bit more color on the CRPO growth, we had a solid q one and q two and that contributed to 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 back part of the year.

[Taylor McGinnis, Equity Research Analyst at UBS Group]

Perfect. And then 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 in growth in 4q? Thank you.

[Howard Fu, CFO at Procore]

That actually has more to do with the compares more than anything. And so, there's nothing from a from a business change standpoint going into the back half of the year that would impact that.

[Taylor McGinnis, Equity Research Analyst at UBS Group]

Awesome. Thanks so much for taking my questions.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Yeah. Thank you.

[Operator]

Thank you. Our next question comes from Jason Celina of KeyBanc Capital Markets. Your line is now open.

[Jason Celino, MD & Equity Research Analyst at KeyBanc Capital Markets]

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 $6.07 figure deal quarter?

[Jason Celino, MD & Equity Research Analyst at KeyBanc Capital Markets]

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 deals because of duration. My sense is no, but just wanted to clarify.

[Howard Fu, CFO at Procore]

Typically, the larger deals are gonna come to actually towards the end of the year. And so q two is not typically a large deal, large deal quarter. And these are gonna be, the annual annual contract value that we're referring to.

[Jason Celino, MD & Equity Research Analyst at KeyBanc Capital Markets]

Okay. 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?

[Howard Fu, CFO at Procore]

I 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. So I think this is a progression against that. And so don't I don't think it's anything that's a that's a significant shift.

[Howard Fu, CFO at Procore]

It's a progression of what we've been doing for some time in terms of going after the larger customers.

[Jason Celino, MD & Equity Research Analyst at KeyBanc Capital Markets]

Okay. Thank you.

[Kash Rangan, Managing Director at Goldman Sachs]

Yep. Thanks, Jason.

[Operator]

Thank you. We have time for one more question. Question. Our last question for today's call is from Ken Wong of Oppenheimer.

[Ken Wong, MD & Senior Analyst at Oppenheimer & Co. Inc.]

Line Thank now you guys for squeezing me in. Tilly, 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 what are you hearing in terms of how how this could benefit the the end market?

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

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 or, you know, anything that that you all are reading about in the newspaper. They're talking about how they're gonna optimize their business, how they're gonna drive productivity in their business. And, frankly, that's why we're having those conversations is that we believe we can help them do do that. So, yeah, it's just remarkably, very little.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Again, because they build all this resilience into their business anyway. And so for them, this is business as usual. You know, I I use the ER 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 it's like walking in us walking into an ER and, and seeing all the chaos. But if you're an ER doctor, that chaos is what what's normal.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

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.

[Howard Fu, CFO at Procore]

Hey, This is Howard. Just you know, look, we we can potentially see some of the the possible tailwinds to the construction industry that could, you know, elicit some more investment. We could also see some 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. Hello? Ken, you there? Yeah. You there was that Ken, are you good? Do you got any other questions?

[Ken Wong, MD & Senior Analyst at Oppenheimer & Co. Inc.]

Yeah. I I lost Howard. I wasn't sure if you guys lost me or I lost you.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Oh, well, I'm not sure about that.

[Ken Wong, MD & Senior Analyst at Oppenheimer & Co. Inc.]

Well, I I think I get the gist of what what what Howard was saying. It's like, potential talent, not baking anything in. And then maybe just, on a follow-up, I know you guys have been, you know, potentially working on some some product packaging bundling. I I guess any any anything in terms of any feedback you're getting on the on the beta test, how we should think about, kind of the the end objective for for for what you guys are trying to achieve here?

[Howard Fu, CFO at Procore]

Ken, this is Howard. Again, like, you know, these are really early early pilots that we're doing, the good, better, best, and determining what to include in in each package. It's so early with a small set of select customers. It didn't have any impact on our performance. And this is.

[Howard Fu, CFO at Procore]

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.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

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.

[Ken Wong, MD & Senior Analyst at Oppenheimer & Co. Inc.]

Perfect. Thanks a lot, guys.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Thanks, Ken.

[Operator]

Thank you. That will conclude the Q and A session. So I'll now pass it back over to management for any closing or further remarks.

[Craig Courtemanche, Founder, Chairman, CEO & President at Procore]

Thanks for joining us today everybody. Talk soon.

[Howard Fu, CFO at Procore]

Thank you.

[Operator]

Thank you. That will conclude today's call. Thank you for your participation. You may now disconnect your line.

Participants

Executives

• Craig Courtemanche, Founder, Chairman, CEO & President
• Howard Fu, CFO

Analysts

• Alexandra Geller, Head of IR at Procore
• Dylan Becker, Research Analyst - Technology, Media & Communications at William Blair
• Saket Kalia, Managing Director at Barclays Capital
• Joe Vruwink, Senior Research Analyst at Baird
• David Hynes, MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets
• Kash Rangan, Managing Director at Goldman Sachs
• Daniel Jester, US Software Equity Research Analyst at BMO Capital Markets
• Taylor McGinnis, Equity Research Analyst at UBS Group
• Jason Celino, MD & Equity Research Analyst at KeyBanc Capital Markets
• Ken Wong, MD & Senior Analyst at Oppenheimer & Co. Inc.