Procore Technologies Q2 2025 Earnings Call Transcript

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Provided by Quartr
July 31, 2025

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%.
AI Generated. May Contain Errors.
Earnings Conference Call
Procore Technologies Q2 2025
00:00 / 00:00

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Operator

Good afternoon and thank you for joining today's Procore Technologies, Inc FY25 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. 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 Investor Relations. Please proceed.

Alexandra Geller
Alexandra Geller
Head of IR at Procore Technologies Inc

Good afternoon and welcome to Procore's 2025 Second 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 also available on the Investor Relations section of our website and our periodic reports filed with the SEC.

Alexandra Geller
Alexandra Geller
Head of IR at Procore Technologies Inc

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 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, July 31st 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.

Alexandra Geller
Alexandra Geller
Head of IR at Procore Technologies Inc

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 Tooey.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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. 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. I'd like to share a few of these exciting innovations.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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 Novorender 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 U.S. and Europe, and a few things stood out everywhere I went.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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 that 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.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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 Q2, we added new customers across all stakeholders, including Calpine Corporation, a leading U.S. 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 U.S. 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.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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. 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 U.S. general contractors. Another large new logo win in the quarter was a leading U.S. 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.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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 strong global expansion wins across stakeholders in Q2, including one of Japan's largest contractors, a long-standing GC in the UAE, JT Magen, Purdue University, and a top 10 ENR 600 specialty contractor. One of our largest wins in the quarter was an expansion with ENR 10 HITT Contracting Inc., a Procore customer for over 12 years. In that time, HITT 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.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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. 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.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Thanks Tooey 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 3 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.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

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. 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.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

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. 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, we continue to believe we are well-positioned for higher margins in the years to come.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

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 and 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.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

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. 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 2026, 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%.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

For the full year fiscal 2025, 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. 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. With that, let's turn it over to the operator for Q&A.

Operator

Thank you so much. We'll now begin our Q&A session. If you'd like to ask a question, you can do so by pressing star one on your telephone keypad. 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 handset before asking your question. Our first question comes from Dylan Becker of William Blair. Your line is now open.

Dylan Becker
Dylan Becker
Research Analyst at William Blair

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

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Yeah, Dylan, great question. 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.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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 Agent Builder. 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. I think the proof's 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.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

I'll just come on top of.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

If I could.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Dylan, this is Howard. Our focus right now is really to get these things into the hands of our customers. 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. 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. Right now, in the early stages, it's about getting this in the hands of our customers.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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.

Dylan Becker
Dylan Becker
Research Analyst at William Blair

Perfect.

Dylan Becker
Dylan Becker
Research Analyst at William Blair

That's very helpful.

Dylan Becker
Dylan Becker
Research Analyst at William Blair

Thank you both.

Dylan Becker
Dylan Becker
Research Analyst at William Blair

Maybe Howard, on the go-to-market changes, it sounds like that continues to track, maybe an alignment across those teams. Wondering if there's any additional color you can give us as we think about the ramping of productivity now that a lot of those teams are in line or aligned. It sounds like the cross-sell motions really starting to resonate, but any incremental metrics on traction with the go-to-market front.

Dylan Becker
Dylan Becker
Research Analyst at William Blair

Thank you.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Dylan, you broke up just a little bit there, but I'm going to anticipate what you're asking. Overall, the go-to-market transition is going about as planned. We had a strong Q1, we had a solid Q1 and Q2. The transition is going about exactly where 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. I think actually through the first half of the year, we're through the peak, I think, of the disruption that we talked about. We've got a lot of wood to chop in the back half of the year. We're happy with where we're at.

Dylan Becker
Dylan Becker
Research Analyst at William Blair

Fantastic. Thank you both. Appreciate it.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Thanks, Dylan.

Operator

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

Saket Kalia
Saket Kalia
Managing Director at Barclays

Okay, great.

Saket Kalia
Saket Kalia
Managing Director at Barclays

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

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Thanks, Saket.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Thanks. Saket.

Saket Kalia
Saket Kalia
Managing Director at Barclays

Howard, maybe just.

Saket Kalia
Saket Kalia
Managing Director at Barclays

Yeah, absolutely.

Saket Kalia
Saket Kalia
Managing Director at Barclays

Howard, maybe just to start with you, in your prepared remarks, you talked about the path to Rule of 40. We've talked about that since Analyst Day and it's great to see that march forward. 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, just what you wanted us to take away from that.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Yeah, sure. Great question, Saket. 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 2026. 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. We've kind of got a nice setup going into the fiscal year as well in fiscal 2026. That's the first thing. The second thing, frankly, we wanted to make sure is folks didn't get ahead of us on revenue for fiscal 2026.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

It's a little bit early to talk about revenue for fiscal 2026, and we just don't want folks to get ahead of that.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

it creates a much more compelling value proposition.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Together, what it means is that free cash flow or the Rule 40 expansion next year is going to come from profitability. The other thing 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. 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. 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.

Saket Kalia
Saket Kalia
Managing Director at Barclays

Got it. That's super clear. Thanks for that added context. Tooey, maybe for you for my follow-up question. It's a bit of a longer-term question, but 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. I'm just kind of curious how much does that come up in your.

Saket Kalia
Saket Kalia
Managing Director at Barclays

I know you spend a lot of time with customers.

Saket Kalia
Saket Kalia
Managing Director at Barclays

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?

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

By the way, 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. Our philosophy has always been let's try and meet the customers where they are, and 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? Looking into per seat licensing models, for instance, for them, or frankly any way they want to buy.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

We want to make sure that we're there to meet them where they're most comfortable. 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. They run their businesses off the amount of construction volume they anticipate in their backlogs, and it's a really good yardstick that we get to use with our customers to understand how much of Procore.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

They're going to use.

Saket Kalia
Saket Kalia
Managing Director at Barclays

Super helpful.

Saket Kalia
Saket Kalia
Managing Director at Barclays

Thanks guys.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Thanks.

Operator

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

Joe Vruwink
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. 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. Are you just kind of saying for next year you would continue to expect what has been the case? 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
Howard Fu
CFO at Procore Technologies Inc

The short answer is yes. Going into next year, the improvement in Rule of 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. 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 2026 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 frankly we're still in a pretty depressed macroeconomic environment that's been consistent for some time.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

The short answer just to sum up is yes, you should expect the Rule of 40 improvement to come from margin improvement, equity.

Joe Vruwink
Joe Vruwink
Senior Research Analyst at Baird

Okay.

Joe Vruwink
Joe Vruwink
Senior Research Analyst at Baird

I wanted to switch back. Data maturity in 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.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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. Every building has a foundation and every building has an HVAC system in it.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Because of that, when you have all the structured data on your platform, it's just really, really well-positioned to be used to be worked on with agents. When our customers are looking to Procore today, they're seeing all this additional value that comes out of Procore. Will we capture more of our customers' volume? Perhaps. I think that's something that we think about over time, which is as our customers grow, we want to grow with. In terms of the collaborators, the collaborators are seeing a tremendous amount of value in the data. It's one of the main reasons why a collaborator becomes a total customer. They want to own the data from the project that they're working on. That's not new based on AI. That is the way it's always worked.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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.

Joe Vruwink
Joe Vruwink
Senior Research Analyst at Baird

Great, thank you.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Thanks, Joe.

Operator

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

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

Hey guys, congrats on the quarter. I want to ask you a couple questions on the expansion dynamics and what you're seeing there. 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?

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

There's less volume to upsell?

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

Right now I'm trying to figure out, is this a signal that the go-to-market realignment's working or is it maybe an indictment on the macro?

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

Just help me there.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Hey, this is Howard. Actually, let me take that one. Look, 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 two quarters now. 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. That is absolutely the expectation that we're going to have. More broadly, I think it's more than just any one thing.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

I think it's a reflection of us executing well across a number of dimensions in our business.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

I want to add too, I think I've had 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. This is really driving a lot of goodwill with our customers. 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. You know, it's hard to argue with your customers.

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

Yeah, yeah.

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

No, those are great data points and I, you know, my sense is it's only going to get better with more time in the market. Howard, for you, I want to ask a little,

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

can I just quickly correct 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. The cross-sell was up. I just want to make sure that was corrected.

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

Yeah.

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

That's an important distinction, and I think makes perfect sense with the explanation.

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

How.

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

Can I ask you a little bit on free cash flow? I mean, it came in.

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

A little light, I think, of where we were.

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

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

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

Factors we should be thinking about.

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

What happened in Q2?

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Yeah, there's always going to be noise quarter-on-quarter. 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. 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. There's nothing to read into the specific free cash flow for the quarter.

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

Perfect.

DJ Hynes
DJ Hynes
Senior Analyst at Canaccord

Thank you, guys.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Thanks, DJ.

Operator

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

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

Thank you very much.

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

Tooey and team, Tooey, always appreciate your.

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

Perspective when you talk to your customers.

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

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?

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

How ready are they to take?

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

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.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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. Though there's a lot of noise now around tariffs and other things, there's always noise about something in our industry. 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. Not to say it's a panacea, but they have ways of dealing with this. I'll tell you this, our customers are very optimistic about the future. That is kind of true across the board.

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

Got it. Thank you so much.

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

I know this is a.

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

Topic that has come up quite a bit.

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

Any leading indicators on the.

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

Go-to-market side as to why this approach is going to work. Can you talk about the breadth of.

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

The pipeline, the upsell rate or the retention, et cetera, or maybe even the—

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

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. That's it for me.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

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.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Yeah, I'll tell you.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

The proof's in the pudding, which is our sellers and our customers and our partners are all saying this is working. Across the board they can't all be wrong. Look at Clayco, the big win that we had this quarter. 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.

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

Got it. Thank you so much.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Thanks Kash.

Operator

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

Daniel Jester
Daniel Jester
Equity Research Analyst at BMO

Great. Thanks for taking my question. I feel obliged to throw it out there, but Tooey, maybe just comment on the macro environment and any change in the dynamic that you've seen.

Daniel Jester
Daniel Jester
Equity Research Analyst at BMO

This quarter that you'd call out.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

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.

Daniel Jester
Daniel Jester
Equity Research Analyst at BMO

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. Maybe is there something specific that has improved the momentum of this? 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.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

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. 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. That was always what we expected to be the most immediate opportunity for us. We made good progress on that in terms of making progress on cross-sells primarily around financials. You know, pay is going to be a smaller portion of that that goes along with financials. That was a good outcome for us in terms of what drove that cross-sell for the quarter.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

One of the problems with calling out financials, because we're proud of that, is it kind of drew all the focus to financials we had. We had success across all of our product lines, I would say this quarter. 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. I'm really proud of all the work that our P&T organization has done to make it so.

Daniel Jester
Daniel Jester
Equity Research Analyst at BMO

Great.

Daniel Jester
Daniel Jester
Equity Research Analyst at BMO

Thank you so much.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Thank you.

Operator

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

Taylor McGinnis
Taylor McGinnis
Equity Research Analyst at UBS

Yeah. Hey, thanks so much for taking my questions. Howard, maybe just on the CRPO trajectory. On a normalized basis you've mentioned mid-teens growth the past couple quarters, which has been solid, but can you just maybe provide a little bit more color on what the trend line has been there? Has it been more stable in the mid-teens or any moderation or improvement to flag? 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?

Taylor McGinnis
Taylor McGinnis
Equity Research Analyst at UBS

Thank you.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

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. In terms of a little bit more color on the CRPO growth, we had a solid Q1 and Q2 and that contributed to CRPO. When you normalize for 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.

Taylor McGinnis
Taylor McGinnis
Equity Research Analyst at UBS

Perfect. The 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. 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 to comment on like the implied acceleration in growth in 4Q. Thank you.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

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

Taylor McGinnis
Taylor McGinnis
Equity Research Analyst at UBS

Awesome.

Taylor McGinnis
Taylor McGinnis
Equity Research Analyst at UBS

Thanks so much for taking my questions.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Yeah, thank you.

Operator

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

Jason Celino
Jason Celino
Managing Director at KeyBanc Capital Markets

Yep.

Jason Celino
Jason Celino
Managing Director at KeyBanc Capital Markets

Hey, great. Thanks for taking my questions. It sounds like the large deal activity.

Jason Celino
Jason Celino
Managing Director at KeyBanc Capital Markets

Was pretty strong in the quarter.

Jason Celino
Jason Celino
Managing Director at KeyBanc Capital Markets

Is 2Q normally a heavy $67 million deal quarter? Howard, are these annual contract?

Jason Celino
Jason Celino
Managing Director at KeyBanc Capital Markets

Values or total contract values, really the root of this second part of my question, is the larger deals because of duration? My sense is no.

Jason Celino
Jason Celino
Managing Director at KeyBanc Capital Markets

I just wanted to clarify,

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

typically the.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Larger deals are going to come actually towards the end of the year. Q2 is not typically a large deal, large deal quarter, and these are going to be the annual contract values that we're referring to.

Jason Celino
Jason Celino
Managing Director at KeyBanc Capital Markets

Okay, great. You know, spinning a question that DJ asked earlier, if you're seeing this larger deal activity earlier in the year than you'd expect, is this because of some of.

Jason Celino
Jason Celino
Managing Director at KeyBanc Capital Markets

Those go-to-market changes that you.

Jason Celino
Jason Celino
Managing Director at KeyBanc Capital Markets

Made at the very beginning, or is this kind of.

Jason Celino
Jason Celino
Managing Director at KeyBanc Capital Markets

To that better overall execution that you alluded to earlier?

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

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. 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. I think this is a progression against that. 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 large customers.

Jason Celino
Jason Celino
Managing Director at KeyBanc Capital Markets

Okay, thank you.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Yep,

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

thanks, Jason.

Operator

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

Ken Wong
Ken Wong
Managing Director at Oppenheimer

Thank you guys for squeezing me in. Tooey, 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 AIRA to regulatory stuff. What are you hearing in terms of how this could benefit the end market?

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

You know, it's interesting, it comes up almost never because, by the way, our customer conversations these days, they don't talk about tariffs or 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. Frankly, that's why we're having those conversations, is that we believe we can help them do that. Yeah, it's just remarkably very little.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Again, because they build all this resilience into their business anyway, for them, this is business as usual. I used 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 walking in, us walking into an ER and seeing all the chaos. If you're an ER doctor, that chaos is what's normal. For our customers, the chaos of all of this noise is what's normal. It's just our perspective, it looks a lot scarier than it is. They're like, we've got this.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Hey, Ken, this is Howard. We can potentially see some of the possible tailwinds to the construction industry that could 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.

Ken Wong
Ken Wong
Managing Director at Oppenheimer

Hello,

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Ken, you there?

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Yeah. Ken, you good? Do you got any other questions?

Ken Wong
Ken Wong
Managing Director at Oppenheimer

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

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

I'm not sure about that.

Ken Wong
Ken Wong
Managing Director at Oppenheimer

I think I get the gist of what Howard was saying. It's like potential talents not baking anything in. Maybe just on a follow up, I know you guys have been 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 the end objective for what you guys are trying to achieve here.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Ken, this is Howard. These are really 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. 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. It's really early right now with a select few customers.

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

It's a great example of what Saket was asking, which is Procore is constantly trying to meet our customers where they need us to be. This is just one more example.

Ken Wong
Ken Wong
Managing Director at Oppenheimer

Perfect. Thanks a lot, guys.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Thanks, Ken.

Operator

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

Tooey Courtemanche
Tooey Courtemanche
CEO at Procore Technologies Inc

Thanks for joining us today, everybody. Talk soon.

Howard Fu
Howard Fu
CFO at Procore Technologies Inc

Thank you.

Operator

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

Executives
    • Tooey Courtemanche
      Tooey Courtemanche
      CEO
    • Alexandra Geller
      Alexandra Geller
      Head of IR
    • Howard Fu
      Howard Fu
      CFO
Analysts
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