Procore Technologies, Inc.

Good afternoon and evening all. I would like to thank you all for attending the Procore Technologies Fall Year 24 Q2 Earnings Call. My name is Brieke and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Mathieu Pluche, with Procore Technologies. So, thank you. You may proceed, Matthew.

Thanks. Good afternoon, everyone. Welcome to ProCourse 2024 Second Quarter Earnings Call. I'm Matthew Pulleys, SVP of Finance. With me today are Thuy Quartermansh, Founder, President and CEO, and Howard Fu, CFO. 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, among other things, our financial results, products, customer demand, operations, and macroeconomic geopolitical conditions. You should not rely on forward-looking statements as predictions of future events. All forward-looking statements are subject to risks and certainties and assumptions and are based on management's current expectations and views as of today, August 1st, 2024. 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-gap-to-gap measures is provided in our press release and our periodic reports filed at the SEC. And now, here's Dewey.

Thanks, Matt. And thank you, everyone, for joining us today. So, I'd like to start by thanking our team for their continued hard work and our customers for their continued partnership. Despite the tough demand environment, we continue to see bright spots, including revenue growth of 24% year-over-year and an operating margin of 17.6%. We hosted our annual Innovation Summit, a virtual product showcase where over 4,000 construction professionals registered to learn about our latest platform and feature enhancements. Our newest product, Pay, had good traction in the quarter, and we expect to see continued demand for this offering in the future years. And in June, we were included in U.S. News' list of best companies to work for, a testament to the strength of our culture and our employees' belief in our mission. as we continue to grow and scale. In the quarter, we continue to add new customers, including Perlow Construction, one of the largest locally-owned general contractors in the Pacific Northwest. Perlow has been using a competitive solution and a number of point solutions. And when they learned that a key part of their tech stack would be phased out and that the replacement options would not meet their needs, they began an extensive competitive evaluation. Procore was selected after joining Perlow on-site thanks to our connected platform, brand, and best-in-breed solutions to support their continued growth. We also closed a number of additional transactions with new and existing ENR 400 contractors, including a major expansion with one of the largest GCs in the world and a partnership with a major non-residential contractor driven by strong support from their field teams. While our success with large GCs continued to shine this quarter, it also highlighted the diverse range of customers who find value in ProQOL. We welcome clients from many sectors, including a leading industrial gas company with over 750 production facilities operating in 50 countries, one of the fastest growing data center owners and operators in the world, a leader in artificial turf installation, as well as the Ministry of Health from a country in Asia, among others. All right, now I'd like to shift gears. Our goal has always been to treat shareholders as partners and to ensure that they understand the journey that we're on as Procore continues to evolve. In that spirit, I'd like to spend some time today discussing changes that we're making to the business. This year, we are guiding to surpass $1 billion in full-year revenue. And while this is an important milestone for Procore, it also represents a key inflection point as we move towards becoming a multi-billion revenue company. You know, I've spent a lot of time reflecting on what got us here and what we need to do to prepare ourselves for this next chapter of growth. And it's become clear to me that in order to achieve our long-term goals, we need to refine our approach and mature our operating model. This is a natural and healthy part of growth. And in my 22 years leading Procore, we've gone through many iterations of how we operate. So today I want to talk about the next evolution of our go-to-market motion. But first, let me provide an example of a similar evolution we made in technology and share some context around why we believe this is the right decision for the business. You know, an important part of setting ourselves up for long-term success was getting the right leadership team in place to bring our vision to life and to drive execution. Specifically, one that has successfully managed businesses and navigated growth at the scale that Procore hopes to achieve. Over the last few years, I have strategically reshaped the executive team, and the impact that I've witnessed these leaders have on the company has me incredibly excited for the future. You know, one great example of this is the evolution that we've seen in our technology organization. In the last few years, we have brought this organization forward for this next chapter of growth by evolving the technology operating model, topology of solutions, and corresponding team structures. We then build out these resources, growing teams in scalable, high talent geographies. And by doing all of this, we've not only improved our velocity in delivering high quality, high customer value solutions, but simultaneously improved gross margins and R&D efficiency. Our product and technology team has been able to move products from concept to closed beta in a matter of months. You know, frankly, it reminds me of the early days of Procore. when we could roll things out rapidly, except now what we're rolling out is enterprise grade. And on top of that, we are seeing better platform performance. You know, it is incredibly rewarding to partner with Steve Davis, our president of product and technology, and the rest of our technology leaders on maturing, not just the engine of how we build our products, but the products themselves. The improvements that we've seen with our technology team is now what we intend to bring to our go-to-market motions. You know, I've been working closely with my leadership team to develop an evolved go-to-market operating model to set us up for durable growth in the long term. Over the last couple of months, it's become clear that we have an opportunity to accelerate its rollout. Most of my remarks today are going to focus on this evolution in our operating model and our rationale for accelerating the timing of its rollout. So since joining Procore in February, our Chief Revenue Officer, Larry Stack, has focused on evaluating our entire go-to-market and customer lifecycle and has helped us validate and fine-tune our plan. While our current operating structure was the right one to get us where we are today, we need to evolve the current model to take us to the next level of scale. With Larry now ramped and on board, we have pulled this plan forward and are beginning to implement it. We're being intentional with the timing of this decision. We have a lot of conviction in this evolution. And when you believe that you found the right plan, you take action. The sooner we get started, the better we expect it will be for the long-term prospects for the business. And quite frankly, I didn't want to wait until next year. We also believe that there's an added benefit of starting this process now during an economic down cycle to ensure that we are best positioned to capture the market when it inevitably improves. So now I'd like to walk through some of the specific changes that we're making to our go-to-market operating model. First, we're moving from a matrixed organization structure to a general manager model. Today we have a global head of sales and a global head of customer success model, which is not uncommon for companies of our size. But this model has constraints that have become more evident as we scale globally, as it requires coordination and alignment across departments and geographies in order to move quickly on customer needs. General managers will have combined teams reporting into them, which should streamline engagement across the customer lifecycle. The general manager's roles will cover the following regions, North America, Europe, Australia, New Zealand, and the Middle East, which represents our current geographic coverages. In the future, when we elect to move into new countries within these regions, The general managers of these respective regions are going to be better positioned to determine specific strategies and tactics for that particular country. Second, we will begin building out more robust public sector and channel motions. You know, a few weeks ago, you may have seen that we announced our intentions to obtain FedRAMP authorization, which we expect to open up an incredible amount of opportunity with the federal government. And given Larry's experience working directly within the public sector, he's uniquely equipped to help us capture this opportunity. And we're going to share more on this as this initiative continues to develop. And finally, it is natural for changes in operating models to be accompanied by changes in roles, responsibilities, reporting lines, and eventually compensation plans, all of which will follow as part of our go-to-market evolution. We expect some disruption with this evolution of our go-to-market motion, which Howard is going to outline shortly, but I am confident These changes will take us to the next level of scale, and that this is in the best interest of both our customers and our shareholders. As I shared, I see many parallels to how we've fine-tuned our technology organization over the past couple years to how I expect our go-to-market organization to benefit. It's been exciting for me to be a part of, and I look forward to reflecting back on this time as a critical period that enabled the durability of our long-term growth. We expect that a variety of benefits will come from this go-to-market model, including ensuring our customers get the greatest value out of Procore by helping them run more efficient, productive, and profitable businesses. Here are some ways that we intend to evaluate our performance in this evolved model. First, we expect to see even stronger and deeper customer relationships. This model is designed to create greater focus and to enable our teams to be more strategic with each customer These advisory relationships are expected to not only lead to improvements in retention rates, but in expansion rates as well. We also have an opportunity to improve adoption rates of our newer solutions within pre-construction, resource management, and pay. This includes a greater number of product specialists who are experts in these solutions and will be working onsite with customers to help ensure that they are successful. Second, this creates nimble teams that can quickly address on-the-ground dynamics as they arise. General managers will have the autonomy to respond to the local nature of construction and to tailor and customize their own motions specific to the needs of the markets that they serve. This approach aligns with our belief that the best decisions for customers are made in the field, not back at headquarters. And third, we believe that this will ultimately improve our go-to-market efficiency. As customer relationships become deeper and more strategic, we expect that product adoption and usage is going to increase, leading to stronger retention and expansion rates, and improving the lifetime value of a given customer, which in time will be reflected on the P&L. So I want to close by reiterating how much conviction I have in our path ahead. This evolution is a natural part of scaling, and this model is more suited to serve our increasingly diverse product suites global customer base, and upmarket focus. We're proactively making these changes from a position of strength to maintain Procore's leadership position and ensure that we are ready to capitalize on the next upturn construction is going to experience. This is an incredibly exciting chapter for Procore, where I have the privilege of guiding our business towards becoming a multi-billion revenue enterprise. We are the undisputed leader in the early innings of transforming one of the world's largest and least digitized industries. And we're confident that the path that we've laid out will set us up for even greater success, especially when the economic cycle improves. And with that, let me hand it over to Howard.