Procore Technologies, Inc.

Good afternoon, ladies and gentlemen. Thank you for attending today's ProCore Technologies FY22 Key One Earnings Call. My name is Tia, and I will be your moderator for today's call. All lines will be used to question 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 will now ask a question. Matthew Poulges, Vice President of FP&A and Investor Relations with Procore Technologies. You may proceed.

Thanks. Good afternoon and welcome to Procore's 2022 First Quarter Earnings Call. I'm Matthew Poulges, VP of FP&A and Investor Relations. With me today are TUI Court of Launch Founder, President, and CEO, and Paul Leandris, CFO. A complete disclosure of our results can be found in our press release issued today, which is available on the investor relations section of our website. Today's call is being recorded, and a 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, uncertainties, and assumptions and are based on management's current expectations as of today, May 4, 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 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 acquisition of level set. 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.

Thanks, Matt, and thank you, everyone, for joining us today. First and foremost, I want to start by acknowledging the events occurring in Ukraine and throughout the region. Although our business has very limited exposure in the region, this situation is devastating, and our thoughts and support are with the people of Ukraine. Procore is continuing to find ways to assist and be helpful where possible. Now, turning to the business. We had an excellent Q1 as we exceeded our expectations for the quarter. I continue to be so proud of the team, our momentum, and what we've achieved. The strong performance we delivered didn't just come from one place. We saw notable strength across the spectrum of stakeholders, customer size, and geographies, from owners to GCs, from the enterprise to small businesses, and from the U.S. to APAC. Additionally, we had a record quarter for pipeline generation, setting us up for great momentum through the rest of the year. It's important to look at our performance in the context of the broader environment we're operating in, You know, many of the investors we speak with have an initial perception that the macro environment is challenging to our business. But the reality is that despite the challenging environment, construction activity is robust, and customers tell us that they've never seen stronger and healthier project backlogs. That said, the overall environment remains dynamic, and we will continue to inform you of what we see. Our strong performance is demonstrated by our Q1 results and the positive indicators that we're seeing from the industry today lead us to remain highly optimistic and confident that we'll continue to execute against our plan as we support the industry and our customers in meeting their growing project backlogs. One of those positive indicators is how our customer base continues to expand and grow. So I'd like to share some notable customer stories. First, we continue to develop relationships with specialty contractors. REPA and Associates is a civil and utility contractor with almost 1,000 employees. They needed a single, unified platform to drive efficiency and collaboration across their organization. Procore enables REPA to consolidate their software and data sources, replacing and integrating several legacy point solutions. Ultimately, Procore helps them improve internal reporting, leverage data more efficiently, and reduce overhead costs to maximize employee productivity. And this is so important given the persistent labor shortage in the industry. You may all recall that last quarter I described how we viewed the large market opportunity within enterprise GCs in the U.S. And I am happy to share that we obtained a seven-figure expansion win with one of the largest general contractors in the U.S. They decided to standardize on Procore across all of their projects due to a groundswell of support from their field teams after multiple successful pilots. In addition to support from their employees, we were able to demonstrate our superior user experience, our mobile capabilities, and our robust financial suite. This ultimately gave them the conviction that Procore was a substantial improvement from their existing solution. This is yet another great example of the huge growth opportunity we still have in what is considered to be the most digitized part of the market. We also brought on board a number of notable owners, including another seven figure relationship with one of the largest multinational telecom companies on the planet. This customer has been using our platform for the past decade through a third party, but ultimately became a direct Procore customer in order to own and better manage their data in-house. In becoming a customer, they also adopted our financials product in order to integrate it with their financial systems. This will allow them to benefit from streamlined budget processes, centralized reporting, and increased efficiency. In previous quarters, we shared wins with large government agencies. And this quarter, we landed one of the nation's largest state public power organizations, representing our largest public sector deal to date. After being a collaborator on the platform for many significant projects, they decided to become a Procore customer due to our product strength, our ability to integrate with their existing systems, and our singular focus on construction. And finally, we continue to gain traction internationally. Ryman Healthcare is a retirement living and care options provider in New Zealand that's growing rapidly with several sites in their development pipeline. Their priority is to design and build the best retirement villages in Australia and New Zealand on time and within budget. After evaluating competitive and incumbent solutions, they identified Procore as the preferred platform to support their continued growth, and ultimately, they purchased all of our product lines. Procore will enable them to transform how they manage construction projects by providing more accurate forecasting, improved collaborations between job sites and their offices, and a reliable source of truth for project documentation. Our customers are also staying with Procore because of the value we deliver. I am particularly proud of our partnership with Lee Lewis Construction, a large US general contractor with a seven-figure total contract relationship with Procore. After coming under new management and doing a competitive search to explore cheaper alternatives to Procore, Lee Lewis Construction ultimately decided to stay with Procore. You know, they later shared with me, quote, we looked into other options for price, but we stayed with Procore for the value, unquote. We look forward to continuing to serve Lee Lewis and building upon our partnership for many years to come. These customers joining, expanding, and staying with us underscore the value our customers are getting from the Procore platform and the true partnership we provide. The strength of our customer relationships is also illustrated by our recently updated and published 2022 ROI report. We surveyed thousands of customers globally to gain insights into how they leverage Procore to grow their businesses. And I'd like to share a few highlights from the report. First, customers responded that Procore enables their project teams to manage an average of 48% more construction volume per person. The importance of this cannot be understated given the persistent labor shortage the industry is facing. When the industry can't hire more people to get more work done, the only answer is improving efficiencies so each person can accomplish more. Procore is helping making this possible. Second, 75% of customers surveyed agree Procore has helped reduce the amount of rework on their projects. And of those who agree, they report an average reduction in rework of 16%. And so let me remind you, on average, contractors run single-digit gross margin businesses. And our customers have little room for error. And yet, as we've shared before, on average, the industry spends over $500 billion a year on rework. Reducing unnecessary rework by 16% can have a massive impact on these businesses. That reduction will only increase as our customers adopt more products, leverage more integrations, and roll Procore out across all of their projects. The best way we can help them grow their businesses is enabling them to run more efficiently. And finally, 74% of customers surveyed who are using Procore app integrations agree that these integrations have made their businesses more scalable. This is so important for extending the value of the Procore platform so that we can provide our customers with an ecosystem of solutions that's both comprehensive and customizable. I want to say that I am incredibly proud of the positive impact we're having on our customers and the industry. You know, and it's especially rewarding to see how Procore is helping our customers build more scalable and efficient businesses so they can tackle the industry's biggest challenges and focus on what they do best, which is building the world around us. We're able to help our customers tackle these challenges not only through the deep partner integrations we have, but also with the highly strategic acquisitions we've made to build out the platform. One of the biggest challenges the industry faces is managing risk, including financial risk and the ability to get paid on time. And on this front, I'd like to share an update on one of our most recent acquisitions. Last November, we closed Levelset, and the business continues to perform well. As I previously shared, one of the reasons we acquired Levelset is because of their strength in lean management, a critical component of enabling Procore to manage complex compliance workflows. And I am thrilled to share that I was recently able to see an early demo of how the lean waiver experience is being integrated with our invoice management product. It is so exciting to see such progress. I cannot wait to release it into production so our customers can benefit from this integration. This is an important step towards our goal of creating the best invoicing compliance experience for the industry, and it also gets us one step closer to the payments opportunity. I am incredibly excited for what's to come, and I look forward to updating you all as we progress. I also want to emphasize that our broader M&A philosophy remains unchanged. By nature of the broad and evolving industry we serve, we will occasionally make acquisitions to ensure that we have the most comprehensive platform that can solve construction's unique challenges. The majority of the time, these acquisitions will be smaller tuck-ins of companies that we know very well, and in many cases, they integrate with us through our app marketplace. But both the volume and cadence of M&A in 2021 were unique, and folks should not expect that volume or cadence to be the norm. In fact, we are entirely focused on integrating what we acquired last year and ensuring our collective teams and products come together in an elegant solution that advances our mission to connect everyone in construction on a global platform. As CEO, I focus a lot of my energy on finding our next great leaders. As Procore scales, we are continually investing in our people and building out the best leadership team to drive long-term, durable growth. You've also heard me talk about how passionate I am about the impact data will have on the construction industry and my intentions to make Procore a data-first company. So I'd like to share an exciting update on both of these fronts. Just last week, we welcomed Joy Derling as our first-ever Chief Data Officer. She'll be acting in an elevated and expanded CIO role, leading Procore's data strategy as well as our information technology and product and information security functions. Prior to joining us, Joy held various leadership roles at Vivint and Adobe Systems, where she focused on elevating customer and employee experience with data-driven innovation and building out cross-functional businesses. Joy will be a huge asset to the team as we continue our journey towards becoming a data-first company. In summary, I am incredibly proud of the results we achieved this quarter, our strong execution, and our exceptional team we have in place. Looking ahead, Procore is well-positioned to deliver on another year of growth and exciting opportunities. We believe the investments we're making this year will position us to drive durable, long-term growth and enable us to return to steady margin expansion and cash flow in the future. With that, let me turn it over to Paul to walk you through the financial results.