Procore Technologies, Inc.

Good afternoon, everyone. I would like to welcome you all to the Procore Technologies Inc. full year 23 Q1 earnings call. My name is Brika and I'll be your event specialist operating today's call. After the speaker's presentation today, we will conduct a question and answer session. To ask a question at this time, please press star then one on your telephone keypad. If you change your mind and would like to withdraw your question, please press star 2. And if you need operator assistance at any point today, it's star 0. Thank you. I would now like to turn the conference over to Matthew Pulleys. So, Matthew, please go ahead when you're ready.

Thanks. Good afternoon, everyone. Welcome to ProCourse 2023 First Quarter Earnings Call. I'm Matthew Pulleys, VP of Finance. With me today are Thuy Quartermansh, founder, president, and CEO, Paul Leandres, CFO, and Howard Fu, SVP of Finance. Further disclosure of our results can be found in our press release issued today, which is available on the investor relations section of our website, and our periodic reports filed with the SEC. Today's call is being recorded, and a replay will be available following the conclusion of the call. Comments made on this call may include forward-looking statements regarding our financial results, 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, May 3rd, 2023. 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. And with that, let me hand it to Dewey.

Hey, thanks, Matt. And welcome, everyone, and thank you for joining us today. I'm going to begin by expressing my sincere gratitude for the team's hard work to deliver our Q1 results. So let me dive straight in and share a few highlights from the quarter. In Q1, we grew revenue 34% year over year, and we added over 600 net new customers, reaching over 15,000 total customers by the end of the quarter. We continue to demonstrate durable growth while improving operating leverage in the business. And for the third year in a row, we were named one of G2's best global software companies, reaching our highest ever ranking of number 14 out of 100. This is a testament to the value that our platform continues to deliver to the construction industry. Over the past 90 days, I have spent a lot of time on the road and had the privilege of meeting with our customers and shareholders all around the globe. Investors often ask me about the broader demand environment. and I continue to stay close to our industry owners. Our customers continue to share that their backlogs remain healthy, and that in many cases, they're busier now than ever, and that the labor shortage is still the biggest challenge in beating demand. Additionally, in aggregate, third-party external indices that we watch have remained stable. However, we did notice a new dynamic surface in Q1. Specifically, we saw some cautiousness on construction volume commitments, for work that hasn't yet been awarded. We saw this within a small portion of our customers that came up for renewal in the quarter. Let me give you a hypothetical example, which I believe will help illustrate this. Imagine that you're a construction company here in the US. You're hearing in the news about a potential recession and difficulty obtaining financing. But you're also reading about new government spending, record employment, and on top of that, you have a fully committed project backlog which means that you have secured work for the future and are not necessarily concerned about the future pipeline of jobs. These mixed signals leave you confused and naturally lead you to be more cautious, just in case your business takes a turn for the worse. This simple scenario illustrates the slight conservatism some of our customers demonstrated in Q1. However, the external uncertainty has not reduced our customers' desire for efficiency or demand for technology. In fact, we've seen demand drive a return in net new customer ads, and the majority of customers are continuing to grow construction volume with Procore. Paul will elaborate further on these points later. They help illustrate why it's important to take each individual data point in context and to look at all of the internal and external indicators in aggregate to gauge the overall health of the industry. Another nuanced topic investors regularly bring up is the commercial real estate crisis and its impact on office construction. Let me be very clear. We do not believe that this is a notable headwind to our business for two reasons. First, office construction has been muted since 2019 and largely did not contribute to our success over the past two years. Second, office construction represents only a small percentage of the overall industry. Historically, we've described the construction industry as commercial, infrastructure, and residential. This has created some confusion because folks often mistakenly equate office buildings with commercial construction. So I think it's important for me to take a moment to clarify how we view the overall industry. Great place to start is with the U.S. Census Bureau's definition for construction spending. The highest level, they break down the construction landscape between residential and non-residential. Within non-residential, there are over 70 subcategories across lodging, commercial, healthcare, education, office buildings, public infrastructure, transportation, and much, much more. To give you some perspective, office buildings comprised less than 5% of the total US construction value put in place in 2022. As I've shared before, when demand in one sector wanes, Oftentimes, demand in other sectors grow. And while some areas within non-residential, like office buildings, have been impacted for a long time, more recently, we have seen healthy growth in other areas, such as manufacturing, education, and data centers. Longer term, we also anticipate seeing further tailwinds from public infrastructure spend. Ultimately, our customers manage diverse portfolios of work, and they will go to where the demand is. This is why when investors ask me about commercial real estate and office construction, my answer is more holistic. It's the aggregate construction volume and overall demand that matters most. While the broader environment continues to evolve in the near term, what is clear is that in times of uncertainty, customers prioritize efficiencies in the construction process, efficiencies that the Procore platform provides. Our focus remains on delivering powerful ROI to our customers with a mission critical platform that helps them build better, faster, safer, and more efficiently. Let me share a few examples, starting with a new specialty contractor customer. Tri-City Electric Company of Iowa is one of the oldest and largest electrical contractors in the US. They work on a diverse portfolio, spanning the industrial, commercial, multifamily, and sports markets. Their legacy solutions lack the functionality that they required, and as a result, their field staff pushed for a change. Upon evaluating Procore, Tri-City Electric estimated that Procore could help them save over 300 hours per week in labor hours through more efficient field-to-office communication, representing a significant value add. Ultimately, they chose Procore to displace their existing systems due to the meaningful ROI we deliver, advanced functionality, and the support from our existing clients. Not only are customers continuing to join Procore, they're expanding with us. WA Richardson is a Las Vegas-based general contractor with a focus on hospitality and entertainment and has built some of the largest projects in the history of Las Vegas. They originally became a Procore customer because of our advanced platform that enabled collaboration and efficiencies across their teams. Over the course of our partnership, they continued to add new product offerings and expand construction volumes, including billions of dollars in construction value for two major hotel casino resorts this quarter they plan to leverage our continued partnership to secure additional large-scale projects throughout las vegas in addition to general contractors we continue to expand with owners you know i mentioned earlier that data centers are an area within non-residential construction experiencing continued growth vantage data centers is a leading provider of hyperscale data center campuses around the world over the past five years they have grown exponentially to become a global operator across North America, EMEA, and Asia Pacific. Having been a Procore customer in each of these regions, this quarter they committed all of their construction volume to us globally to manage the execution and financials of their projects. Previously, they've been using project management, quality and safety, and analytics globally, and testing out our financials and ERP connector products in each region. As part of this expansion, they are now using financials globally and are actively evaluating additional Procore products. These customer relationships underscore the value our customers are getting from the Procore platform and our ability to help the industry solve its most pressing challenges. Speaking of which, over the past several quarters, you've heard us talk about our long-term FinTech opportunities and how they tie back to our overarching goal of helping our customers manage risk and accelerate growth. In March, we announced the launch of Procore Risk Advisors, one of our FinTech initiatives aimed at solving one of the construction industry's biggest challenges and largest upfront costs, insurance. As a reminder, insurance and construction is complicated, cumbersome, and expensive. All stakeholders on a project are contractually obligated to have relevant coverage for each individual project they work on. George Munro, Insurance brokerage processes are still highly manual and time consuming and insurance carriers lack visibility into new sources of risk data to properly select and price risk. George Munro, Which means construction has one of the most expensive insurance costs as a percentage of the industry's revenues typically comprising multiple percentage points of a project's budget across all of these stakeholders. This represents a great opportunity for Procore to help solve one of our customers biggest pain points. Procore Risk Advisors is a modern construction brokerage that offers enhanced insurance and surety solutions. Ultimately, Procore will serve as a broker and in some cases help underwrite a subset of our customers policies by leveraging our unique risk data. We aim to reward our customers for leveraging our technology and data to mitigate risk by providing them with better insurance pricing and terms. But to be very clear, Procore is not incurring any exposure to insurance claims with this program. We believe that we are uniquely positioned to solve this challenge for a couple of reasons. First, we've developed a trusted brand with over 15,000 customers and millions of users. giving us valuable access to and relationships with the construction industry. Therefore, we have a unique opportunity to expand our platform of solutions, enabling a virtuous cycle of product adoption. What I mean by that is the more product lines and the higher adoption a customer has, the more data they generate that can help them drive insurance savings. And second, our customers generate proprietary data that we can leverage to help them obtain favorable terms as well as enable us to offer proprietary insurance programs. This can also help our customers realize direct and tangible value from adopting Procore in the form of insurance savings. So Paul's going to share a bit more color on this later, but I want to emphasize that we are in the very early stages of this opportunity. And while it's a long-term initiative, we do look forward to sharing our progress as we continue to evolve and grow this offering. Finally, many of you know that effective next week Paul's going to be starting a new role at Procore as the president of FinTech, and he will be passing the CFO torch on to Howard. Look, personally, I want to just take a moment and thank Paul for his tremendous leadership and partnership over the past four years as CFO, helping to scale the business to where we are today. And I am thrilled to continue to partner with him to help unlock further value for our customers in his new role as president of FinTech. I also want to take a moment to welcome Howard as our new CFO. and I look forward to working more closely with them as we continue to scale. To wrap up, we have another quarter of growth on both the top and the bottom line as we continue our journey of efficient growth. Looking ahead, we remain focused on executing on the long-term opportunities in front of us and advancing our mission of connecting everyone in construction on a global platform. I believe our close partnership with the industry, the exceptional team we have in place, and our commitment to solving the biggest challenges in construction will create significant value for our customers and shareholders over the long term. With that, let me hand it over to Paul.