Procore Technologies, Inc.

Good evening. Thank you for attending today's Procore Technologies Inc. FY21 Q4 earnings call. My name is Selena, and I will be your moderator. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Matthew Cleese, with Procore Technologies. Please go ahead.

thanks good afternoon and welcome to procore's 2021 fourth quarter earnings call i'm matthew police vp of investor relations with me today our two week quarter launch founder president and ceo and paulie andres cfo a complete disclosure of our results can be found in our press release issue today which is available on the investor relations section of our website today's call is being recorded and the replay will be available following the conclusion of the call Comments made on this call may include forward-looking statements regarding our financial results, products, customer demand, operations, the impact of COVID-19 on our business, and other matters. These statements are subject to risks and certainties and assumptions and are based on management's current expectations as of today, February 22nd, 2022. Procore undertakes no obligation to update any forward-looking statements to reflect new information or unanticipated events except as required by law. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Therefore, these statements should not be relied upon as representing our views as of any subsequent date. We'll also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of non-GAAP to GAAP measures is provided in our press release. Additionally, we may refer to certain results as organic, which we generally define as business performance or results that exclude the recent acquisition of level sets. However, with respect to our customer account metrics, we define organic to mean customers under Procore contracts. With that, let me turn the call over to Dewey.

Thank you, Matt, and thank you, everyone, for joining us today. In the fourth quarter, we delivered excellent results and continue to make great progress towards our mission of connecting everyone in construction on a global platform. I am very proud of the work our team did by closing out the year strong, continuing to integrate our recent acquisitions, expanding the depth and breadth of our platform, and as always, investing in our people and culture. Today I'll start by providing additional color on our results, and I'll share what I'm looking forward to this year and beyond. So let's dive in. Annual revenue surpassed a half a billion dollars for the first time in our history, and I am very grateful to our customers and employees for getting us to this milestone. Our deep and expanding customer relationships drove this outstanding performance. On an organic basis, we ended 2021 with greater than 12,000 customers. The number of organic customers contributing more than $100,000 in ARR grew by 32% to end the year north of 1,100. We also ended 2021 with a total of 30 organic customers contributing more than $1 million in ARR, an increase of over 50% from the previous year. Most of these customers initially landed with much smaller contract sizes and grew to surpass $1 million in ARR in just a few years. This progression underscores how we are really just beginning to digitize this industry. Our customers are also heavily engaged with our platform. We now have over 2 million active users. These users uploaded 400 million photos, documents, and inspections last year, reflecting continued growth in our platform usage. We expanded the depth and breadth of our platform, adding nearly 100 new partners to our app marketplace in 2021, bringing total integrations to nearly 350 by the end of the year. Today, 91% of our customers use at least one integration, up from approximately 81% a year ago. This is important because higher adoption of marketplace integrations is strongly correlated with logo retention and customer success on the platform. 2021 provided further evidence that once our customers adopt our leading platform solution, they stay with us. Our gross retention rate improved to 95%, reflecting the value our platform brings to the industry. Our customers are not only staying with us, they're expanding. VENK Building Group, a U.S.-based general contractor, expanded and deployed Procore enterprise-wide after initial evaluation. They selected Procore due to our comprehensive and unified platform that allowed them to replace multiple disparate solutions, including competitors. We also added new GCs to the platform. NavVolts construction is growing into new regions in the U.S., where Procore is already heavily used by owners and specialty contractors. After a competitive evaluation, it became clear that Procore was the solution that could grow with them and will enable them to best partner with their new stakeholders. Outside the U.S., we continue to expand internationally. Ferrovial Construction is one of the largest global builders. They operate across several continents with unique requirements and regulations. After evaluating several systems, they chose to partner with Procore, given our flexible yet standardized platform. Procore is gaining significant momentum with owners as well. In Q4, two major multinational pharmaceutical companies became Procore customers. The largest of these two deals relates to the expansion of their facilities to increase capacity for the development of life-saving products. Their leadership identified Procore as the optimal solution to improve efficiencies while managing their increase in construction volume. And finally, Pueblo Mechanical, a US specialty contractor, is pursuing an aggressive growth strategy. In order to scale, they needed to implement standardized processes across all of their subsidiaries. They chose Procore because of our robust platform and the flexibility it provides them to connect to various ERPs across their subsidiaries. You know, I personally enjoyed my time that I was able to spend with the Pueblo team, and I really admire their ambition and focus. I'm not only pleased with the customers that joined us and the financial results that we delivered. I am really most proud of our ability to grow the business while maintaining the culture and partnership that sets Procore apart. and we continue to be recognized for this in november we were named the 2021 philanthropist of the year by the united states minority contractors association more recently we were ranked as the number one construction project management software by the jb knowledge construction technology report for the fifth year in a row and we were just named as one of the best places to work in glass doors employees choice awards I am particularly proud of this recognition by our employees, as it signifies our ability to maintain our unique and values-driven culture even as we rapidly scale. So the results we delivered, the customer relationships we developed, and the recognition we received reflect how well positioned Procore is to lead the construction industry in its digital transformation. Change is constant in construction, and in 2021, we continue to support an industry through a highly dynamic environment. Over the last two years, you've heard us and many others talk about the broader macro environment. I'd like to share our perspective on this topic. We see 2021 as a transition year, from playing defense and navigating unprecedented challenges in 2020 to playing offense and capitalizing on opportunities in 2022. Listen, some very real headwinds continue to impact the construction industry, though we do expect that many of these challenges will resolve themselves over time. With that said, there are some favorable and lasting tailwinds with regard to Procore's business, above and beyond the catalysts we've shared before. First, the hybrid working model made possible by cloud solutions like Procore is likely here to stay for some of the folks who were previously expected to be on the job site every single day. And second, the labor shortage, exacerbated by an uptick in early retirements, has prompted an increased reliance on younger members of the workforce. And this future generation of builders have expectations of using consumer-grade and mobile-centric technology, like Procore, in their work. Ultimately, we believe there's enough tailwinds offsetting the headwinds that we're not anticipating any outsized positive or negative impact on Procore's performance due to external forces. As such, we are more confident than ever that we should be leaning into the opportunity. This past year was an excellent example of that. Now let's get into what we're planning for 2022 and beyond. Look, I've been doing this for 20 years, and I firmly believe that we're entering one of the most exciting and transformative chapters in ProCourse history. We're starting the year confident with an exceptional caliber of talent and a brand and a platform that have never been stronger. So here's what's top of mind for me as I look towards the future. First, the opportunity is massive, and we have multiple avenues for continued growth ahead of us. You know, you've heard me say this many times, that we're operating in a truly massive global market that's significantly underdigitized and underpenetrated. You know, I believe that nothing will illustrate this more clearly than if we zoom in on the U.S. market. Look, in 2021, the U.S. construction industry was approximately $1.5 trillion in annual construction volume. Keep in mind, the majority of the spend flows to all three stakeholders, the owner, the general contractors, and the specialty contractors. That means that we estimate the true opportunity for Procore in the U.S. is approximately $3.5 trillion. So when you drill down on just U.S. general contractors, and then you drill down even further to U.S. enterprise general contractors, there's about 2,500 logos in this cohort alone. These 2,500 logos represent close to $900 billion in annual construction volume, of which we are just under 25% penetrated. This cohort is thought to be the most digitized, and we still have so much more runway. So if you take a step back and look at it, the broader spectrum of customer sizes, all three stakeholders, and geographies beyond the US, it becomes abundantly clear just how large Procore's global opportunity actually is. In fact, we believe that we have single-digit construction volume penetration across just the markets we're in today. It is really amazing when you think about it like that. We also continue to see a lot of growth potential in cross-selling additional products to our existing customers. Our newer products outside of project management, quality, and safety continue to be well-received by our customers. Nothing's more important than managing time and money in construction, and I'm continually hearing that our approach to financial is revolutionizing how construction is done for all stakeholders. Currently, 59% of our customers use financial management, and more than 75% of our 1,100 six-figure customers have adopted at least one product within this category. We expect to see this adoption increase even further, as the impact of shortages and delays will likely lead more customers to prioritize risk mitigation and seek better control over their project financials. Second, the power of our connected platform continues to be one of our differentiators. As founder and CEO, my focus is always first and foremost on our mission to connect everyone in the industry, our customers, stakeholders, and collaborators on a global platform. So I spend a lot of my time with our product team to ensure we're continuing to lay the foundation to truly connect all people, systems, and data in one place. The surface area of all our products is very large, but the real power comes from the interconnectivity of our platforms. This interconnectivity not only helps our customers run better projects and businesses, it enables us to develop new ways to connect and serve the industry. For example, last quarter we announced that we're building the Procore Construction Network. This network will not only give the industry new ways to find more reliable partners, but it will give us the ability to better convert collaborators into customers and expand and accelerate our existing flywheels. Many of the products on our platform are interconnected, allowing our customers to seamlessly move from each phase of the construction process in one place. So typically, by making an enhancement to one product, we, by extension, are enhancing adjacent products. For example, our customers use our bidding product to solicit and award bids during pre-constructions. The accepted bids are automatically converted into contracts within our financial product, which are then subsequently converted into the budget against which actual performance can be compared. The more products a customer uses, the more automation and synergies they benefit from. Third, we are laying the groundwork for longer-term strategic initiatives and beginning to build out our future fintech solutions. A single global cloud-based platform generates a massive amount of data that we can harness to help our customers run better businesses. It's important for investors to remember that many folks involved in construction manage highly complex, high-risk businesses with low margins and challenging cash flow dynamics. That's why Procore is committed to building be-right fintech solutions to help our customers manage risk and accelerate growth and ultimately run better businesses. Back in September, we announced our intent to acquire Levelset and shared the strategic value it would bring to our long-term initiatives. Since closing the acquisition in November, our teams have begun to not only formulate our plans, but also to operate against them. I look forward to updating you later this year on our progress. I do want to stress that this journey is going to take years and will require investment, experimentation, and thoughtful executions. As a major shareholder, I am committed to getting this right and I am confident that this will benefit both the industry and my fellow long-term shareholders. Finally, none of this would be possible without the continual investment in our people and culture. A big focus of mine in 2022 and beyond will be to continue developing world-class leaders, engaging our people, and scaling our organization alongside our business, especially as we continue to grow. Our healthy culture is felt by our customers every single day, and it's one of the reasons why we can provide them with unparalleled partnership and service, because we never stop working to ensure everyone at Procore is aligned with the needs of our customers. So there you have it. I founded Procore 20 years ago to digitally transform the industry that I love. I am so proud of what we have accomplished to date, but we're really just getting started in our journey of building an even broader platform to serve an evolving industry. What really gets me excited is the opportunity to deliver an elegant combination of software and fintech solutions that will ultimately address the industry's biggest priorities of managing risk and accelerating growth. This industry is so special. The people that are quite literally building the world around us deserve a best-in-class solution to perform their life's best work. With that, I'll hand it over to Paul.