Procore Technologies, Inc. (PCOR) Q4 2022 Earnings Call Transcript

Procore Technologies, Inc. (NYSE:PCOR) Q4 2022 Earnings Conference Call February 16, 2023 5:00 PM ET

Company Participants

Matthew Puljiz - Investor Relations

Tooey Courtemanche - Founder, President and Chief Executive Officer

Paul Lyandres - Chief Financial Officer

Howard Fu - Senior Vice President, Finance

Conference Call Participants

Luv Sodha - Jefferies

Saket Kalia - Barclays

Sterling Auty - SVB

DJ Hynes - Canaccord

Brent Bracelin - Piper Sandler

Adam Borg - Stifel

Dylan Becker - William Blair

Ken Wong - Oppenheimer

Nick Altmann - Scotiabank

Operator

Good afternoon. Thank you for attending Procore’s Fourth Quarter 2022 Earnings Call. My sanction is Matt and I will beryllium your usability for today’s call. [Operator Instructions] I would now for illustration to walk nan convention complete to our host, Matthew Puljiz. Matthew, please spell ahead.

Matthew Puljiz

Thanks. Good day and invited to Procore’s 2022 4th fourth net call. I americium Matthew Puljiz, VP of FP&A and Investor Relations. With maine coming are Tooey Courtemanche, Founder, President and CEO; Paul Lyandres, CFO; and Howard Fu, SVP of Finance.

Further disclosure of our results tin beryllium recovered successful our property merchandise issued today, which is disposable connected nan Investor Relations conception of our website and our periodic reports revenge pinch nan SEC. Today’s telephone is being recorded and a replay will beryllium disposable pursuing nan conclusion of nan call.

Comments made connected this telephone whitethorn see forward-looking statements regarding our financial results, products, customer demand, operations, macroeconomic and geopolitical conditions, including nan effect of COVID-19 connected our business and different matters. You should not trust connected forward-looking statements arsenic a prediction of early events. All forward-looking statements are taxable to risks, uncertainties and assumptions and are based connected management’s existent expectations and views arsenic of today, February 16, 2023. Procore undertakes nary responsibility to update immoderate forward-looking statements to bespeak caller accusation aliases unanticipated events, isolated from as required by law. If this telephone is replayed reviewed aft today, nan accusation presented during nan telephone whitethorn not incorporate existent aliases meticulous information. Therefore, these statements should not beryllium relied upon arsenic representing our views arsenic of immoderate consequent date.

We will besides mention to definite non-GAAP financial measures to supply further accusation to investors. A reconciliation of non-GAAP to GAAP measures is provided successful our property release. Additionally, we whitethorn mention to definite results arsenic organic, which we mostly specify arsenic business capacity aliases results that exclude nan acquisition of Levelset. However, pinch respect to our customer count metrics, we specify integrated to mean customers nether Procore contracts.

With that, fto maine move nan telephone to Tooey.

Tooey Courtemanche

Thanks, Matt and convey you everyone for joining america today. I americium pleased to stock that Q4 was different bully quarter, closing retired a twelvemonth of accordant maturation for Procore. I americium incredibly proud of what nan squad has accomplished this past twelvemonth and I look guardant to carrying this momentum into 2023. Today, I americium going to stock immoderate cardinal highlights from 2022 and nan 4th fourth and reappraisal my cardinal priorities for 2023 and beyond.

Alright. So let’s dive in. Two things jumped retired of maine arsenic I reviewed nan results. One, we saw spot crossed aggregate dimensions of nan business; and two, our ample woody momentum continued successful Q4. On this note, I americium happy to stock that nan number of 6-figure transactions booked successful Q4 grew 27% year-over-year and nan number of 7-figure transactions booked grew 100% year-over-year.

Our beardown capacity was underpinned by nan strengthening of our activity position wrong construction. For example, successful 2022, we saw 1 of our largest competitors little often than we did successful 2021, yet we won much ARR against them. We judge this is simply a testament to our important worth proposition and nan widening of our competitory moat arsenic good arsenic cementing Procore arsenic a clear leader successful nan industry.

Our marketplace positioning, exertion and business pinch nan manufacture continues to beryllium recognized externally. This quarter, Procore was named 1 of nan 2022 Top Construction exertion firms by Construction Executive and awarded nan 2022 Tech Cares grant by TrustRadius. Our achievements would not beryllium imaginable without our employees, which is why I americium peculiarly honored to stock that Procore was again recognized arsenic 1 of Glassdoor’s Best Places to Work.

I want you to cognize that arsenic I bespeak backmost successful 2022, it’s clear to maine that Procore’s momentum is only getting stronger. Overall, I americium very encouraged by our capacity contempt nan backdrop of outer uncertainty. So speaking of which, I cognize nan broader request situation remains apical of mind. Like galore of you, we are alert of nan mixed signals successful nan news and immoderate economical reports. As we shared before, I proceed to enactment adjacent to our customers connected this. And overall, customer sentiment remains positive.

For this quarter, I want to item immoderate of nan much nonsubjective information points we are seeing that lead america to consciousness optimistic astir nan business. Every quarter, we show a fistful of outer building indices. While we don’t over-index connected immoderate 1 of them, successful nan aggregate, they tin service arsenic a adjuvant information point. This quarter, nan AIA’s Architecture Billings Index knowledgeable a decline, indicating softening business conditions for architecture firms, yet we saw galore different building indicators inclination positively.

Dodge starts jumped successful December. And crossed each of 2022, full building starts were 15% higher than they were successful 2021. Both nan ABC backlog parameter and nan Dodge Momentum Index reached 3-year highs. And nan ABC Confidence Index increased, suggesting task backlogs stay robust and customers expect maturation complete nan adjacent respective months. In fact, nan ABC’s Chief Economist precocious said this, “Contractors entered nan caller twelvemonth pinch plentifulness of optimism. Backlogs remained elevated. And alternatively than fixate connected nan possibilities of a recession, galore contractors stay focused connected growth.” As we person discussed successful nan past, building is not a monolith. When request successful 1 assemblage wanes, oftentimes request successful different sectors grow.

Dodge Data and Analytics precocious released their 2023 building outlook report. And while single-family residential, an area that Procore has constricted vulnerability to, is expected to decline, Dodge predicts that sectors for illustration multifamily, information centers, healthcare, acquisition and infrastructure, each of which Procore has a beardown beingness in, will beryllium areas of spot wrong building successful 2023. We person moreover started to spot signs of authorities government providing a tailwind to nationalist assemblage construction. In nan AGC’s 2023 Construction Outlook National Survey, 16% of respondents noted that they person either bid connected projects, been awarded bids aliases person worked connected caller projects funded by nan Infrastructure Bill. What’s more, according to nan latest civilian quarterly study from Dodge, nan mostly of civilian contractors expect their gross to summation successful nan adjacent 12 months, successful portion driven by higher measurement of activity and accrued nationalist backing for infrastructure.

Let maine punctual you that nan standard of nan Infrastructure Bill is unprecedented. And this is conscionable 1 of respective pieces of authorities astir nan world that our customers tin use from, on pinch nan Inflation Reduction Act and nan CHIPS Act. So though nan afloat effect of these bills whitethorn return years to materialize, I americium very encouraged to spot these affirmative indications of nationalist assemblage request picking up. As patient arsenic request and building continues to be, nan industry’s productivity has really declined. According to a caller article successful The New York Times, nan U.S. building assemblage has go little productive complete nan past respective decades successful opposition to nan wide economy, wherever labour productivity has risen almost threefold since 1950. In fact, immoderate investigation has recovered that nan worth added per building worker successful 2020 was astir 40% little than it was successful 1970. We judge nan productivity spread successful building makes it abundantly clear conscionable really monolithic nan opportunity is up of america and really important exertion will beryllium successful closing this gap.

Procore is proudly enabling nan manufacture to beryllium much productive and efficient. In fact, successful our 2022 ROI report, our customers reported being capable to negociate almost 50% much building measurement per personification erstwhile utilizing Procore. We person ever been committed to helping nan manufacture thrust efficiencies successful bid to meet demand. One illustration of this is Gallup McKinley County School District, who became a caller customer this quarter. Gallup McKinley is simply a schoolhouse territory successful New Mexico that covers almost 5,000 quadrate miles. Decades of deficiency of backing person created a immense backlog of awesome renovations and astir 10 caller schools that request to beryllium built. And they were precocious awarded important costs from nan authorities to thief build these projects. They person antecedently relied connected manual processes pinch nary task guidance strategy successful place, but nan deficiency of devices and processes person go challenging. They selected Procore to tackle their monolithic measurement of activity because of our mobile accessibility, our centralized information retention and our drafting functionality.

We proceed to adhd specialty contractors to nan level arsenic well. Steelfab is 1 of nan largest alloy fabricators successful nan U.S., ranking number 1 connected ENR’s apical specialty contractors successful nan southeast. They person been progressive successful notable projects for illustration nan Cleveland Clinic Utility Plant, Daytona International Speedway Renovation and Princeton University’s Chemistry Building. Steelfab has been a long-time customer of a competitory solution and they were dissatisfied pinch nan deficiency of characteristic functionality and customer support. I americium pleased to stock that this 4th they became a Procore customer, based connected our expertise to link nan section to nan agency arsenic good arsenic our aggregate accounting integrations, enabling meticulous financial search and reporting.

Not only are we continuing to adhd caller customers, but we are besides expanding pinch them. ENGIE is simply a French multinational power solutions institution and their North American section has been utilizing Procore for nan past respective years. This quarter, their renewables world business unit, which operates successful France and is focused connected star fields and upwind farms astir nan world, launched a world RFP. Thanks to our proven usage lawsuit successful nan U.S., they chose to grow pinch Procore. Procore is helping them thrust ratio gains, amended connection crossed their teams and yet activity towards nan extremity of scaling to 80 gigawatts of installed renewable capacity by 2030.

Now I want to stock what’s apical of mind for maine arsenic I look into 2023 and beyond. Last quarter, I talked astir businesslike growth, a conception that we person been focused connected internally. To me, this intends continuing to thrust durable maturation connected nan apical statement while showing improvements to our profitability profile. Historically, we person typically delivered 1 aliases nan different from important separator description successful 2020 during COVID, to investing complete nan past 2 years to reaccelerate growth. We judge nan business has reached a level of standard wherever we tin execute both, delivering maturation while showing efficiency.

I want shareholders to cognize that businesslike maturation is simply a mantra we are instilling successful nan DNA of Procore. We talk it astatine each chance we get astatine nan activity squad level and wrong worker each manus meetings, because each squad personnel has a domiciled to play successful ensuring we run much efficiently without sacrificing our maturation objectives. Ultimately, I expect our committedness to businesslike maturation to construe to continued betterment successful free rate travel and per stock metrics.

International capacity continues to beryllium 1 of my cardinal priorities successful 2023. As we mentioned successful nan past mates of quarters, our world business has knowledgeable lower-than-expected productivity, which we proceed to judge is driven by soul operational factors alternatively than outer economical factors. We’ve done a batch of activity to measure our world operations and we person identified a number of impactful changes that we’ve already begun to execute on.

Among nan first of these changes is streamlining reporting structures to thrust execution. Restoring productivity successful this portion of nan business is going to return immoderate time, but we expect seeing improvements towards nan extremity of 2023 and we will proceed to stock much arsenic we progress. And finally, nary of this will beryllium imaginable without nan correct leaders astatine nan helm, which is why different attraction of excavation successful 2023 is to proceed processing and enhancing our activity squad to guarantee we are good positioned for our adjacent shape of growth.

On that note, I’d for illustration to stock a fewer breathtaking activity updates pinch you. First, I americium thrilled to denote that later this month, Sarah Hodges will beryllium joining arsenic Procore’s first ever Chief Marketing Officer. Sarah brings heavy domain expertise successful trading for nan building manufacture and a beardown inheritance successful merchandise management. Her acquisition wrong go-to-market, improving business capacity arsenic good arsenic her thought activity wrong nan building manufacture will beryllium invaluable to Procore.

Second, I want to widen my congratulations to Paul. As you person apt seen, we person conscionable announced that Paul will beryllium assuming a caller domiciled astatine Procore arsenic President of Fintech, effective successful early May. This determination is nan culmination of years of chat betwixt Paul and myself and nan Board astir uncovering nan correct leader to return our fintech initiatives from motorboat to maturation mode. This is an area of nan business that Paul is incredibly passionate astir and is uniquely suited to lead. Paul is 1 of our strongest operators and he has nan perfect blend of manufacture knowledge and Procore expertise. In Paul’s 9 years here, he has been instrumental successful scaling our business from conscionable a fewer cardinal dollars successful gross to complete $700 cardinal today. I besides want to telephone retired that Paul besides led Procore done our successful IPO. Personally, I americium thrilled for Paul to prosecute this adjacent section of starring a captious maturation opportunity for Procore and I americium really excited astir our continued business successful solving construction’s biggest challenges.

And connected that note, I’d besides for illustration to congratulate Howard Fu, our existent SVP of Finance, who will beryllium promoted to CFO successful May successful conjunction pinch Paul’s transition. Many of you person already met Howard and nary uncertainty admit why we consciousness we are successful awesome hands pinch Howard astatine nan helm. Howard is simply a existent exertion finance leader and SaaS manufacture veteran. And he has been operating arsenic Paul’s earthy successor since he joined Procore 2 years ago. In that time, he has developed heavy moving relationships pinch our executive squad and our Board and has garnered tremendous respect crossed our organization. I look guardant to moving intimately pinch Howard arsenic we proceed to scale.

As we grow, our expertise to align our champion group to nan astir captious aspects of nan business intends that we are doing correct by our employees, customers and shareholders. These changes reenforce nan unthinkable caliber of activity we person and cements my individual assurance successful Procore’s semipermanent success.

Now I’d for illustration to manus it complete to Howard to opportunity a fewer words.

Howard Fu

Thank you for nan benignant introduction, Tooey, and convey you Paul for your activity and effect you’ve had connected Procore complete nan years. I person seen firsthand really you’ve built specified an unthinkable team, beardown operations and a institution that will last. It’s because of nan adjacent mentorship and guidance you person fixed maine complete nan past 2 years that I’m good prepared to return nan baton and build upon nan instauration you’ve group for Procore’s future.

To our shareholders, I’ve gotten to cognize galore of you complete nan past mates of years and look guardant to moving intimately together successful this caller capacity. I americium excited and energized by nan chance to proceed helping Procore reaching caller levels of success. The size of our opportunity, nan worth Procore brings to customers, and our people-first culture, are undeniable differentiators. As CFO, I will proceed to activity intimately pinch Tooey, Paul and nan remainder of nan activity squad to beforehand our imagination to amended nan lives of everyone successful building and to support our adjacent shape of businesslike growth.

With that, fto maine move nan telephone complete to Paul to talk our financial results.

Paul Lyandres

Thanks, Howard and convey you Tooey for nan benignant words. I americium incredibly excited to beryllium taking connected this caller domiciled arsenic President of Fintech successful early May. Over my 9 years astatine ProCore, I person ever felt that my domiciled was to find nan spot wherever I could thrust nan astir worth to Procore and our semipermanent vision. Since my early years astatine Procore, it has been clear that our information is simply a unsocial plus that would play a large domiciled successful our semipermanent strategy.

Just arsenic we discussed astatine our Investor Day, pinch our description to a world level institution pinch aggregate products serving aggregate stakeholders, Procore was fresh to commencement making early investments successful its early opportunities astir fintech. Fintech is an area I’ve ever been passionate astir and judge my acquisition astatine Procore put maine successful a unsocial business to thief build.

With this successful mind, I started readying my succession a fewer years agone to guarantee we had a beardown chair of candidates internally. This made Procore’s hunt for our SVP of Finance critical. When Howard joined Procore 2 years ago, he brought pinch him much than 20 years of acquisition holding finance activity positions astatine companies for illustration Visa, Salesforce, LinkedIn and astir recently, DocuSign. Having worked intimately pinch him complete nan past 2 years, I cognize he will proceed his fantabulous business pinch Tooey, nan executive squad and our Board. I person afloat condemnation that Howard is nan correct personification for this role. And arsenic Tooey described, we judge these changes align our champion leaders to nan correct opportunities, which each employees, customers and shareholders will use from.

Now connected to our results. We delivered different beardown quarter, which is simply a continuation of nan accordant capacity we’ve demonstrated since precocious 2021. Today, I’ll recap our Q4 and afloat twelvemonth results, supply immoderate colour connected our capacity and reason pinch our outlook. Revenue successful Q4 was $202 million, up 38% year-over-year. For nan afloat year, gross was $720 million, up 40% year-over-year. This includes a $9 cardinal publication successful Q4 and a $32 cardinal publication successful 2022 from Levelset. Excluding Levelset’s contribution, our afloat twelvemonth gross grew organically by 35%. Please statement that Q4 represents Levelset’s 5th 4th arsenic a portion of Procore. Therefore, Q4 is nan first 4th we nary longer use from their publication wrong our apical statement maturation rates. Also note, that gross publication from our worldly financing programme remains immaterial. Therefore, this programme has not been a maturation driver to nan business successful 2022. Rather, it’s a semipermanent opportunity we are excited astir that is still successful nan early stages.

Moving connected to expenses. Non-GAAP operating separator successful Q4 was antagonistic 8%. For nan afloat year, non-GAAP operating separator was antagonistic 10%. Total RPO was $798 million, pinch short-term RPO representing astir 70% of that and increasing 34% year-over-year. Overall, I’m very pleased pinch our Q4 results.

You whitethorn callback from our remarks past 4th that Q3 benefited from ample deals, representing respective cardinal successful caller bookings that closed successful Q3 that were primitively anticipated to adjacent successful Q4. Given this, our beardown capacity successful Q4 is peculiarly notable successful nan discourse of Q3 being a challenging sequential comparison period. Throughout 2022, which was a volatile clip for truthful galore others, Procore delivered short-term RPO maturation successful nan debased to mid-30s organically and consistently. This is simply a testament to our expertise to execute and reaffirms nan affinity I’ve referenced successful nan past that our business is akin to an lipid tanker, durable and dependable for nan agelong haul.

I’d for illustration to return a measurement backmost and stock immoderate colour connected our performance. First, this quarter, we saw momentum crossed aggregate facets of nan business. Specifically, we saw peculiar spot successful wide contractors and larger enterprises and exceeded our pipeline targets this quarter. This is different affirmative denotation that moreover successful nan midst of outer uncertainty, we proceed to spot patient request crossed respective areas of nan business.

Second, naturally, trends are influenced by their respective comparison period. While this Q4 was our largest and champion caller bookings 4th ever, 2022 was much linear versus 2021. Specifically, Q4 of 2021 had a larger proportionality of caller bookings successful that twelvemonth owed to nan effect of COVID successful nan first half of 2021. Ultimately, we proceed to urge that shareholders measure our capacity based connected short-term RPO growth, which has proven to beryllium nan champion parameter for early gross for our business. At our caller Investor Day, we demonstrated conscionable really intimately correlated short-term RPO maturation is to gross growth. In fact, successful 2022, we grew full bookings somewhat faster than short-term RPO, which demonstrates nan accuracy and reliability of short-term RPO growth.

Third, while our customer count maturation of 19% was accordant pinch anterior periods, we saw a sequential driblet successful nett caller customer adds from Q3. This was successful portion owed to nan 189 customers we integrated from anterior M&A successful Q3 arsenic good arsenic higher churn wrong our smallest paying customers. That said, dollar churn performed arsenic expected, and description activity exceeded our expectations. The operation of these factors is evident successful our gross retention complaint holding astatine 95% and nett retention complaint improving sequentially.

And finally, akin to past quarter, our Q4 world results were impacted by rate headwinds. On a year-over-year basis, FX contributed astir 8 points of headwind to world gross maturation successful Q4. Therefore, connected a changeless rate basis, world gross grew 37% year-over-year. Additionally, arsenic Tooey mentioned, we person begun to execute connected our scheme to reaccelerate world growth. I want to reiterate that resolving these soul dynamics will return time. But ultimately, we expect to spot this inclination reverse by nan extremity of nan year.

Before I move to outlook, I’d for illustration to return a infinitesimal to elaborate further connected what businesslike maturation intends to Procore. As you heard from Tooey, this mindset is thing we’re instilling crossed nan activity and worker base. As we discussed astatine our Investor Day, we judge Procore should beryllium capable to proceed increasing while improving our separator floor plan incrementally each year. As we besides shared astatine our Investor Day, nan activity we’ve done and investments we’ve made complete nan past 5 aliases truthful years were captious successful enabling america to guidelines up caller stakeholder markets, motorboat caller products, grow globally and multiply our TAM. With $1 cardinal of gross successful our statement of sight, we judge we person reached a grade of meaningful standard and person built nan instauration to prolong maturation while expanding operating margins, free rate travel and yet improving per stock metrics going forward. We are measuring and intend to amended everything from gross per worker to free rate travel per share. We would for illustration our chap shareholders to cognize that this is simply a privilege for us, and we look guardant to delivering upon this successful nan coming quarters and years, which brings america to our outlook.

In position of our guidance philosophy, we group our gross guidance astatine a level that we person a very precocious condemnation we tin present connected successful almost immoderate environment, though we do not optimize for a accordant magnitude of upside to that guidance. We are taking a prudent attack and person factored successful continued outer uncertainty and imaginable for weakness successful nan economy. To beryllium clear, we person knowledgeable minimal outer effect connected our financial results today. So present is our guidance for Q1 and afloat twelvemonth 2023.

For nan first 4th of 2023, we expect gross betwixt $202 cardinal and $204 million, representing year-over-year maturation betwixt 27% and 28%. Q1 non-GAAP operating separator is expected to beryllium betwixt antagonistic 8.5% and antagonistic 9.5%. For nan afloat twelvemonth 2023, we expect gross betwixt $895 cardinal and $900 million, representing year-over-year maturation betwixt 24% and 25%. Non-GAAP operating separator for nan twelvemonth is expected to beryllium betwixt antagonistic 6.5% and antagonistic 7.5%. This represents 350 ground points of betterment from our non-GAAP operating separator successful 2022, which is accordant pinch nan inclination statement of betterment we described astatine our caller Investor Day and reflective of our committedness to delivering greater separator ratio astatine scale.

With that, I’d for illustration to adjacent retired by again thanking our customers, nan building industry, our partners, employees, shareholders arsenic good arsenic nan communities we service for giving america this opportunity. Now let’s move it complete to nan usability to statesman nan Q&A.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] The first mobility is from nan statement of Brent Thill pinch Jefferies. Your statement is now open.

Luv Sodha

Hi, this is Luv Sodha connected for Brent Thill. Thank you for taking my questions. First, congrats to Paul and Howard for your promotions, possibly first, conscionable to footwear off. Tooey, I conscionable wanted to get your consciousness successful position of caller versus publication from existing customers? I cognize astatine Investor Day, you guys showcased this descent wherever you tin get 50% much ARR maturation from existing customers. So going forward, really should we deliberation of publication from caller versus existing customers?

Tooey Courtemanche

Yes. So I deliberation we mentioned this, but very happy – by nan way, Luv, awesome to perceive your words. The – we’re very happy pinch nan results successful Q4, particularly connected our expertise to grow pinch our customers. And I’ll show you that, that is conscionable a existent testament to not only our expertise to seizure much building measurement but supply much products to them that adhd each nan worth that they need. And truthful I’m incredibly proud, proud, and location is simply a batch much activity to do here, but it’s an area of strength. And Paul, you want to...

Paul Lyandres

Yes. As we shared astatine Investor Day, 1 of nan things that we really emotion astir this business is that erstwhile you look astatine nan contributions that travel from caller customers versus description , it was very overmuch adjacent 50-50 clip – it was 50-50. We judge that arsenic we spell forward, we whitethorn spot activity present aliases there. But successful general, that we’ve sewage truthful overmuch room still wrong nan description base, but astatine nan aforesaid time, location is specified a monolithic greenfield of caller logos that we don’t expect that, that publication operation will alteration to meaningfully.

Luv Sodha

Got it. And a speedy follow-up, Paul, for you, I guess, connected nan guide, gross guideline for adjacent year, I conscionable want to make judge what assumptions you’re making successful there. Could you conscionable level group us? Is it – are you assuming macro stays nan aforesaid aliases does it worsen? Just immoderate colour location would beryllium helpful. Thank you.

Paul Lyandres

Yes. So akin to nan prepared remarks, successful general, our guidance accuracy has not changed. Our guidance accuracy for immoderate clip now has been that we are guiding to a number that we judge we will hit, moreover if nan macro situation deteriorates. In this case, we are not seeing that. And truthful we are decidedly being prudent successful that guide. The 1 point to return from nan prepared remarks arsenic good is conscionable that we aren’t optimizing for peculiar upside successful that guide, we are optimizing to guarantee that nan numbers we stock pinch you all, we tin deed successful almost immoderate environment.

Luv Sodha

Got it. Perfect. Thank you.

Operator

Thank you for your question. The adjacent mobility is from nan statement of Saket Kalia pinch Barclays. Your statement is now open.

Saket Kalia

Okay. Great. Hey, bully afternoon, guys. Thanks for taking my questions here.

Tooey Courtemanche

Hey, Saket.

Saket Kalia

Hey, Tooey, possibly we will conscionable commencement pinch you. Listen, really straightforward 4th and guide. I’d emotion to possibly conscionable deed connected 1 taxable from Analyst Day and from nan personification convention astir Procore payments. Obviously, still very early. But possibly a mobility for you, Tooey, is, tin you conscionable talk astir immoderate of nan first customer reception that you’ve gotten from nan beta location pinch that product? And what’s going to beryllium nan floor plan of immoderate of nan early adopters there?

Tooey Courtemanche

Yes. Well – and by nan way, Saket, this gives maine a bully benignant of excuse to explicate to everyone really we built package astatine Procore. We person been moving very intimately pinch a definite group of folks that are our biggest customers to effort to travel up pinch a solution that’s correct for nan industry. And this has been a agelong clip coming. And truthful we are good connected our way. And past those – nan folks that we’re chiefly focused connected successful nan opening are wide contractors successful nan endeavor down to nan mid-market, each of which person nan request to person a payments platform. And I will show you that nan customers I cognize that person been progressive successful nan helping america get there, they are very excited astir wherever we’re going pinch this, and they can’t hold for it to beryllium launched astatine nan extremity of this year.

Saket Kalia

Got it. Got it. That’s really helpful. Paul, possibly a fewer – first off, congrats to you and Howard connected your respective transitions. Glad we’re keeping a family business, let’s say. Maybe nan mobility for you, Paul, is really do we deliberation astir nan finance successful world arsenic portion of nan separator description this year, right? I mean, I deliberation astatine Analyst Day, location was a really absorbing descent that showed that outsized finance successful world versus a gross publication that is still scaling, really do you deliberation astir that narration changing present successful fiscal ‘23, if astatine all?

Paul Lyandres

Yes. I mean, here’s what’s really breathtaking for us. When we deliberation astir our existent guideline wherever we’re showing 350 ground points of betterment year-over-year, that is mostly not a consequence of international, right? That is conscionable continued efficiencies crossed nan business. Now I will show you, world is not a monolith, arsenic Tooey likes to say, either. And truthful you should deliberation astir different countries being different. The much mature markets are showing much ratio gains. But successful general, it’s still very early stages there. And truthful we do judge we’re going to proceed to request to put there, but that we will proceed to show much and much progression arsenic clip goes connected and we get much mature successful those markets.

Saket Kalia

Makes sense. Thanks, guys.

Tooey Courtemanche

Thanks, Saket.

Operator

Thank you for your question. The adjacent mobility is from nan statement of Sterling Auty pinch SVB. Your statement is now open.

Sterling Auty

Hi, thanks. Hi, guys. Paul, congratulations. Howard, congratulations. Tooey, possibly to dive in, you’ve been proactive pinch immoderate of nan guidance changes, particularly complete nan past 2 years. Can you springiness america an update, particularly successful nan effect of immoderate of nan income leadership, guidance changes that you’ve made? And possibly conscionable nan productivity that you’re seeing, is it search successful a guidance that you want astatine this point?

Tooey Courtemanche

Yes. Thanks, Sterling. By nan way, apparently, you’ve changed your past name. So yes, truthful here’s thing I americium incredibly proud of. And I want to benignant of zoom backmost out. I’ve ever benignant of been very happy pinch nan truth that we’ve been capable to put nan correct leaders successful nan correct position astatine nan correct clip to get america to nan adjacent level of growth. And that’s – that includes nan folks who sewage america to wherever we are today. But arsenic I person been building nan activity squad for this adjacent shape of growth, wherever I deliberation astir it from, we person statement of show to $1 cardinal of gross to $5 billion. I’ve been very intentional, I think, arsenic you know, arsenic to really do we get nan correct players successful spot to get america there. I’ll show you that nan – complete nan past 4th aliases so, seeing that squad successful wide gel has been highly rewarding for me. There is simply a batch of shape recognition. There is simply a batch of erstwhile acquisition that’s being brought that’s really helping america a batch actually. And connected nan income side, we person been very focused connected making judge that we person nan correct group successful place. And truthful far, I’ll show you that nan squad has been very performing, and location is really thing to study there.

Sterling Auty

No, that’s awesome to hear. And past 1 follow-up question. As you look astatine ‘23, tin you springiness america a consciousness of what your intentions are astir managing headcount and headcount maturation arsenic we’ve seen truthful galore companies laying disconnected that possibly not from a position of strength, what’s your intention?

Tooey Courtemanche

Yes. So we are being very intentional and trying to beryllium very thoughtful arsenic to our hiring strategy. The header is that we are going to proceed to prosecute done nan extremity of nan year. We are going to beryllium very focused to make judge that we person nan quota carriers online successful bid to make our numbers. But ultimately, what I want to benignant of authorities to everybody is that we’re being very intentional present because of that – nan conception of businesslike growth. And truthful we’re making judge that each caput that we adhd is perfectly basal successful bid for america to meet our objectives.

Sterling Auty

Makes sense. Thank you.

Tooey Courtemanche

Thank you. Next question.

Operator

Next mobility is from nan statement of DJ Hynes pinch Canaccord. Your statement is now open.

DJ Hynes

Hey, really are you doing, guys? I’ll echo nan congrats that everyone other has shared. Paul, possibly conscionable fixed benignant of your forthcoming modulation to nan fintech broadside of nan business, possibly I tin conscionable inquire you for illustration a wildly open-ended question, for illustration what excites you nan astir about nan opportunity connected that broadside of nan house?

Paul Lyandres

Yes. No, I admit nan question. So for illustration arsenic I shared successful nan prepared remarks, 1 of nan things that has conscionable been truthful awesome astir my travel astatine Procore, I’ve now gone done respective transitions is that I’ve ever recovered my domiciled to beryllium wherever tin I thrust nan astir value. And nan truth is, arsenic we look astatine nan finance operations, we’ve sewage conscionable specified an astonishing leader successful Howard, it’s specified a beardown chair there. And arsenic we look forward, we talked astir this astatine nan Investor Day, we spot specified a large opportunity, whether you look astatine nan TAM, nan marketplace opportunity, nan symptom that our customers feel, nan request that is retired there, aliases conscionable nan unsocial position we are successful pinch our monolithic go-to-market and our phenomenal information group that I conscionable can’t hold to spell backmost to being capable to really deliberation astir building that strategy, helping to standard thing and uncovering caller and innovative ways to lick problems. And frankly, I’m conscionable humbled and grateful for nan opportunity.

DJ Hynes

Yes, yes. Well, you’re a cleanable fresh for it. So large things to come. And past look, we conscionable lapped Levelset, right, which was nan large – past large benignant of inorganic wound that you guys took. How are you reasoning astir M&A benignant of rounding retired nan strategy successful ‘23? What are you seeing retired location successful position of opportunities, valuation expectations? Any precocious level commentary would beryllium interesting.

Tooey Courtemanche

Yes. Look, I deliberation correct now, we consciousness really bully astir nan extent of our merchandise portfolio. We consciousness for illustration we still person much activity up successful position of conscionable nan areas we want to thrust our ain business value, that we are surely ever staying adjacent to our partners, nan use of our app ecosystem and what we person built successful position of our organization intends that we person incredibly beardown relationships pinch these folks, proceed to thrust much and much partnerships. But you shouldn’t look to america for doing immoderate meaningful acquisition anytime soon.

DJ Hynes

Prefect. Okay, great. Thanks guys. Congrats connected nan results.

Matthew Puljiz

Thank you, DJ.

Operator

Thank you for your question. The adjacent mobility is from nan statement of Brent Bracelin pinch Piper Sandler. Your statement is now open.

Brent Bracelin

Thank you. Good afternoon. Paul, congrats. Rarely, person we seen folks spell from extracurricular investors to CorpDev to CFO to now President of Fintech complete a 9-year period. Look guardant to seeing what other you tin benignant of bring going guardant arsenic now President there. Howard, look guardant to moving pinch you. Tooey, wanted to commencement possibly pinch you, conscionable arsenic we deliberation astir nan creation of nan building business, nan durability of nan business, I deliberation investors person been a small much tense going into this twelvemonth astir possibly a slowdown successful residential, slowdown successful commercialized buildings. But if you look astatine nan Dodge Construction Index forecast, we are seeing large shifts successful highways and bridges, hospitals, schools. Are you seeing that operation displacement successful your ain business for illustration successful Q4, aliases is that still yet to travel comparative to nan pipeline and RFP activity you are seeing truthful acold successful benignant of nan first half of nan year? Thanks.

Tooey Courtemanche

Yes, absolutely, Brent. So, I will show you this from nan position of our customers, who I talk to, who are really nan ones that are managing nan operation of their portfolio of work. They are ever looking astatine nan existent environment, trying to fig retired wherever nan puck is going to spell and make judge that they person sewage nan correct group successful spot and nan occupation group up for that. I conjecture possibly 1 measurement I would look astatine it is simply a batch of nan folks I americium talking to are mounting up for illustration replacement power divisions aliases immoderate to specialize successful those projects that are going to travel online successful nan anticipation that those dollars are coming. So, location is simply a small spot of that. But our customers are ever managing their operation of portfolio. It has thing to do pinch nan macro today. That’s conscionable really they look astatine their business. And truthful it’s not different for them to beryllium looking astatine areas of maturation and besides benignant of beryllium investing successful areas that are softened and weakened.

Paul Lyandres

Yes. Maybe nan only point I would adhd is that you person heard america talk a batch astir this complete nan years that nan manufacture is not a monolith that it’s each astir looking astatine nan wide maturation and knowing that location will ever beryllium a displacement there. And if anything, I deliberation what you are seeing correct now, Brent, is that playing retired successful existent time, wherever you are seeing different pockets of nan manufacture spot immoderate weakness, while different pockets excel and really grow. And that is what’s truthful awesome astir our business and our manufacture is it’s very diverse, and it gives america that elasticity successful different types.

Brent Bracelin

Great. And past conscionable 1 past speedy follow-up present for possibly Paul aliases Howard connected free rate flow. If I look back, this is simply a business exemplary that’s generated affirmative free rate travel 2 years retired of nan past 3 years. Obviously, you made immoderate investments present world past year. But arsenic you deliberation astir it connected a go-forward basis, really should we deliberation astir nan free rate travel generation, evidently you gave america nan op margin?

Paul Lyandres

Yes. So, for illustration we person talked astir before, nan free rate travel separator betterment should beryllium a small spot up of what we spot successful position of our operating separator improvements trajectory of 350 ground points connected mean per year. Of course, free rate travel is not thing that we officially guide, but we do negociate to wide free rate travel connected an yearly ground internally. And it’s a very focused metric that we have, some successful position of magnitude arsenic good arsenic connected a per stock basis. So, it’s thing that we are perfectly focused connected continuing to improve.

Brent Bracelin

Helpful color. Thank you.

Matthew Puljiz

Thanks Brent.

Operator

Thank you for your question. The adjacent mobility is from nan statement of Adam Borg pinch Stifel. Your statement is now open.

Adam Borg

Awesome. Thanks for taking nan questions and I will echo congrats to some Paul and to Howard. Maybe conscionable connected Levelset, it’s been a small spot complete a twelvemonth since that acquisition closed, and I conjecture I conscionable will person a broader update connected really that’s performing comparative to expectations and past benignant of nan up-sell, cross-sell opportunities that you are seeing? And past I person a follow-up.

Howard Fu

Yes. Happy to touch connected that one. In general, we proceed to spot nan advancement location chugging on well. As we person talked astir successful nan past erstwhile we did nan acquisition, it’s important to retrieve location were a number of different facets that really drove that. The biggest ones being astir our opportunity to really spell retired location and accelerate our way to payments, bringing successful nan compliance workflow into that solution that we had already built astir invoicing. And you person seen that proceed to progress. We consciousness really good. We person shared, what we shared Groundbreak. As Tooey had shared, it’s gotten a batch of affirmative feedback from our customers. The different areas astir information worldly financing, fintech, those were areas that were really breathtaking for us. We proceed to put successful those areas. Though very early, we do proceed to judge location is immense opportunities there. And truthful overall, we consciousness that nan integration has gone according to scheme and that location is much to travel arsenic we decorativeness retired nan payments.

Tooey Courtemanche

Adam, besides it dovetails very nicely pinch nan truth that we now person integrated a batch of this already into Procore. And truthful now it’s clip for a leader to travel successful and build connected that instauration and motorboat america into maturation mode. And that’s 1 of nan reasons why now it’s nan clip for Paul to return connected this role. And also, I do want to constituent retired that I wouldn’t beryllium this assured successful this move if I didn’t person a awesome narration pinch Howard. He some is simply a awesome partner, but besides challenges maine connected wherever I request to beryllium challenged, which is what you want successful your move betwixt your CEO and your CFO, right, Howard? So, anyhow, yes, I deliberation this is simply a testament for why it’s clip for Paul to return nan helm.

Adam Borg

That’s awesome. And possibly conscionable arsenic a speedy follow-up. Just connected nan request situation for nan first six weeks of 2023, immoderate changes that you are seeing present comparative to nan trends we conscionable talked astir successful nan December quarter? Thanks again.

Tooey Courtemanche

Yes. No, thing important to report, thing that has really been changing. I will opportunity that nan sentiment of nan customers I talk to remains very affirmative and optimistic going forward, and backlogs do stay strong. So, we are emotion beautiful good.

Adam Borg

Great. Thanks again.

Matthew Puljiz

Yes. Thanks Adam.

Operator

Thank you for your question. The adjacent mobility is from nan statement of Dylan Becker pinch William Blair. Your statement is now open.

Dylan Becker

Hey gentlemen. Thanks for taking nan mobility and I will echo nan congrats for Paul and Howard. Maybe Tooey, conscionable digging connected nan backlog commentary you person called retired successful nan broader macro landscape, knowing really that provides visibility for nan adjacent respective quarters. But are you seeing immoderate dynamics from nan preconstruction side, obviously, you are looking to thrust ratio to alteration these contractors to activity done those backlogs quicker. But astatine nan aforesaid time, really they are reasoning astir positioning for this adjacent limb of maturation and replenishing that activity arsenic they spot fit? Have you seen immoderate – aliases elaborate connected immoderate of nan puts and takes from nan backlog broadside that you guys are seeing.

Tooey Courtemanche

Nothing to report, but I will show you though, nan analog that I deliberation we should each deliberation astir is that each of our customers that I talk to, they person each of this work, which evidently is portion of their backlog. And truthful so – and they only person a definite number of folks that they tin deploy to do these projects. And truthful location is simply a changeless politician connected nan magnitude of activity that they tin travel done their business. And truthful location is not a batch that they tin do successful bid to summation that flow. But to your point, location has been a realization, not conscionable because of nan macro, but this has been complete nan past 3 years aliases 4 years, that preconstruction is wherever each your money is won and mislaid connected nan project. And truthful a batch of effort is being put connected that. And nan cool point is, because you can’t – they can’t put much group to work, Procore provides them nan expertise to do much pinch little people, right. The quota that we had successful nan earlier stat was that Procore enables our customers to tally astir 50% much building measurement per person, which gives them a unit multiplier to beryllium capable to create much throughput and revenue.

Dylan Becker

Got it. That makes full sense. I wonderment arsenic good to – and possibly this is, Tooey aliases Paul, but to nan grade and nan uptake of integer twins, tin lick arsenic an take driver and possibly a imaginable description opportunity area for you guys arsenic you deliberation astir that information connectivity to nan proprietor sub-segment, right? As they deliberation astir moving from conscionable that first build phase, each nan measurement done to nan operational shape of those assets. I conjecture really do you deliberation astir that? Is that serving arsenic a tailwind to adoption, aliases possibly is that an incremental monetization opportunity down nan roadworthy arsenic well? Thanks.

Tooey Courtemanche

In general, I deliberation erstwhile we deliberation astir nan integer copy world, for illustration it’s early days still. It’s thing that we judge tin beryllium really excited complete nan longer play of time. But it is an area for america coming that we really look to partner pinch different players retired there. We person a number of really awesome partners successful our ecosystem that attraction connected this. And this, for us, goes backmost to knowing wherever we really want to put our main attraction connected energy, and ensuring that sloppy of if we present that solution that we are tightly integrated to lick these problems for nan customers, astatine slightest pinch respect to integer twin, that’s wherever our attraction is now.

Paul Lyandres

And you whitethorn cognize this, but conscionable truthful everyone other knows this. The integer copy can’t – won’t for illustration beryllium generated without each nan accusation that Procore aliases systems for illustration Procore generates. So, we are a immense input to immoderate integer copy strategy. So complete time, you tin ideate that, that mightiness beryllium an area of liking for us, but that’s complete nan horizon.

Dylan Becker

Thanks guys.

Matthew Puljiz

Thank you.

Operator

Thank you for your question. The adjacent mobility is from nan statement of Ken Wong pinch Oppenheimer. Your statement is now open.

Ken Wong

That’s great. Fantastic. Thanks for taking my question. One for you, Paul, and past I will follow-up pinch Tooey. You guys consistently pointed retired cRPO arsenic nan champion measurement for apical statement and different beardown showing astatine 34%. Can you conscionable punctual america benignant of what are immoderate of nan considerations that support your gross maturation from lining up person to a cRPO arsenic you guide? Is it conscionable astir conservatism, aliases benignant of what other could beryllium successful information that keeps you cautious?

Paul Lyandres

Yes. Look, I would reiterate what you had said. cRPO remains nan champion metric to track. We had a descent astatine nan Investor Day that [Technical Difficulty] home. As always, location is simply a number of puts and takes that spell into it. But successful general, I would show you, nan measurement to deliberation astir it is that, spell backmost to nan commentary made astir nan guideline accuracy and knowing that today, what we are very mindful of erstwhile we deliberation astir our guideline accuracy is that sloppy of almost immoderate situation we are in, that we tin present connected that, and that is nan measurement we deliberation astir nan favoritism is.

Ken Wong

Got it. Okay. Perfect. And past Tooey, connected nan world side, I conscionable wanted to benignant of make judge that I understood. As acold arsenic products and arsenic acold arsenic group and leadership, do you consciousness that is each squared distant from a – arsenic acold arsenic being capable to get to marketplace connected nan world side, and it’s conscionable a matter of execution and seeing request travel in, aliases are location still pieces that you still request to put successful spot to benignant of get nan complaint started?

Tooey Courtemanche

Well, nan fundamentals are that we are – we person done an org creation change, which is really going to thrust much productivity, we believe. And ultimately, location are different things that we are readying connected doing. But we are emotion very optimistic astir what’s going connected successful nan world markets. And I conscionable person to reiterate this because I get this mobility each nan time. It is strictly, successful our opinion, an soul operating challenge, not an outer macroeconomic challenge. And actually, you whitethorn inquire nan mobility like, really do we cognize that, well, we really look astatine each nan territories successful which we are selling. And we tin spot that successful each 1 of nan territories, we person highly productive and successful income reps, but we besides person newer reps that person not ramped yet that are having a small spot much of a challenge. So, we judge that getting our reps much ramped much quickly is 1 of nan keys to america driving success.

Ken Wong

Got it. Okay. Prefect. Thanks a batch guys. Great job.

Tooey Courtemanche

Thank you.

Operator

Thank you for your question. The adjacent mobility is from nan statement of Nick Altmann pinch Scotiabank. Your statement is now open.

Nick Altmann

Awesome. Great. Thanks guys. I wanted to talk astir nan seven-figure woody count was up 100% year-over-year, which is very impressive. Can you possibly conscionable talk astir what’s driving those ample deals? Is it you are landing astatine a higher ACV pinch customers upfront? Is it much multiproduct adoption? Is it a circumstantial geo? Just immoderate incremental colour connected what’s driving immoderate of those ample seven-figure deals, I deliberation would beryllium really interesting.

Tooey Courtemanche

Yes. I deliberation what we are seeing is this is conscionable nan improvement of our brand, right. Instead of customers starting pinch a mini magnitude of building measurement connected 1 product, because of nan heft of our brand, we are capable to onshore accounts astatine a overmuch larger benignant of magnitude upfront, which I deliberation is starring a batch to it. But also, we are really resonating pinch nan endeavor customers because of our level strategy and each of nan information that we have. So, I judge that location are multi-factors here.

Nick Altmann

Awesome. And past conscionable different one, Paul, congratulations connected nan caller role, and I’d emotion to talk astir it, and you guys benignant of already addressed this earlier. But successful your prepared remarks, Tooey noted earlier that this is nan move you guys person been contemplating for years, and it’s thing that you person been passionate astir for a while. You guys person talked astir really you are perpetually talking pinch customers astir merchandise roadworthy mapping pinch immoderate of these fintech initiatives. So, is nan determination to go nan President of fintech now, is that much related to what you are proceeding from customers seeing immoderate of those industry-specific symptom points really get worse aliases you are conscionable seeing benignant of heightened request for immoderate of these fintech initiatives? Just immoderate incremental colour you tin springiness connected why now, I deliberation would beryllium really helpful. Thanks.

Paul Lyandres

Yes. I would really show you that it has much to do pinch nan improvement of Procore arsenic a business. This really goes backmost to that commentary we made astatine our Investor Day talking astir nan chapters of nan travel that Procore has really been through, nan investments into description s of caller markets, caller stakeholders, caller products and nan monolithic group of information that we person built complete that play of time, putting america successful a position wherever we are fresh to really spell tackle this problem. I would not show you that consequence successful moving superior is simply a caller problem for this industry. It has been astir for arsenic agelong arsenic we tin deliberation of, and therefore, this is simply a symptom that customers person ever had. This is much astir being successful a position to really yet spell aft and reside that pain.

Tooey Courtemanche

And because of our information strategy and nan level that we have, we are now uniquely suited to lick these problems. And anterior to this, I don’t deliberation these problems could person been solved successful a measurement that it was meaningful. So, nan timing was perfect.

Nick Altmann

Awesome. Thanks guys.

Tooey Courtemanche

Yes. Thank you.

Operator

Thank you for your question. We person nary further questions waiting astatine this time. So, I will walk nan convention backmost to nan guidance squad for immoderate closing remarks.

Matthew Puljiz

Thank you everybody. Talk soon.

Operator

That concludes nan convention call. Thank you for your participation. You whitethorn now disconnect your lines.