Procore Technologies Inc (PCOR) 2024 Q3 法說會逐字稿

Good evening, all, and thank you all for attending the Procore Technologies full-year '24 third-quarter earnings call. My name is Brika, and I will be your moderator for today's call. (Operator Instructions)

I would now like to pass the conference over to your host, Alexandra Geller, Head of Investor Relations, to begin. Thank you. You may proceed, Alexandra.

Thanks. Good afternoon and welcome to Procore's 2024 third-quarter earnings call. I'm Alexandra Geller, Head of Investor Relations. With me today are Tooey Courtemanche, 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 include forward-looking statements regarding, among other things, our financial outlook, go-to-market transition, products, customer demand, operations, stock repurchase program, and macroeconomic and geopolitical conditions.

You should not rely on forward-looking statements as predictions of future events. Our forward-looking statements are subject to risks, uncertainties, and assumptions and are based on management's current expectations and views as of today, October 30, 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-GAAP to GAAP measures is provided in our press release and our periodic reports filed with the SEC.

With that, let me turn the call over to Tooey.

Thanks, Alex, and thank you, everyone, for joining us today. So I'd like to start with some highlights from the quarter.

In Q3, revenue grew 19% year over year. Procore wins because we have the most connected platform in the industry and our partnership with construction is simply unmatched. Let me be clear. We are the undisputed leader in construction software, which is reflected in our consistently high win rates against our main competitors, all of which have much smaller construction software revenue than Procore.

As expected, non-GAAP operating margins were 9%, which is lower than Q2 due to various one-time and seasonal investments, but we are on track to expand operating margins by 900 basis points for the full year at the high end of guidance, and we intend to continue expanding margins next year.

In Q3, we began communicating as well as implementing the go-to-market changes we previously announced. The two primary focus areas of our go-to-market evolution are: moving to a general manager model, this can localize our go-to-market motion and better serve the regions in which we operate; and introducing new technical roles to support all buyer personas and realizing the full value of the Procore platform.

We believe this evolution will position us to become a multibillion revenue company while building deeper, lasting partnerships with our customers. We have received overwhelmingly positive feedback from our employees, customers, and partners. Our sellers tell us that these changes are exactly what they've been asking for. Our international teams have long been advocating for a local go-to-market approach to drive a more connected customer experience.

Our sellers in all regions are thrilled to have technical product experts to help them convey the ROI of our platform to a diverse group of buyer personas. Our customers tell us that our platform has unlocked invaluable insights about their businesses and operations, and they're excited to have technical specialists and deeper relationships with Procore to unlock even more value.

This feedback tells me that we have correctly identified areas of opportunity within our sales motion that once executed, will accelerate value creation for our customers while better supporting our sellers. As part of these changes, we'll also share that we are investing in our sales teams, part of which involves bringing on a couple of hundred net new go-to-market resources with the intent of hiring quickly to get them ramped and productive.

We're only about a quarter end, but we are pacing well. All general managers and their leadership teams are expected to be in place by the end of the year. We've also done a considerable amount of hiring, both for generalist sellers and the new technical roles.

I am pleased to report that we are hitting our weekly hiring targets, and we are on track to hit the goals that we set for next year. In order to onboard and ramp these employees, we are building out specific role-based learning paths and have launched a weekly onboarding series focused on scenario workshops, deep-dive training, and leadership panels.

We will also be distributing territory and compensation plans at our sales kickoff this coming January as we do at the beginning of every fiscal year. While we're making good progress on our go-to-market evolution, we recognize that it's going to take some time to work through this transition and there will continue to be moving parts in the coming quarters.

So I want to remind you that we have strong conviction in these go-to-market changes because we have seen this model play out with a number of enterprise customers. When we support our customers with a tailored approach and ample technical resources, it generates improvement in retention and expansion rates.

So for example, an Australian mining customer had an inconsistent application of Procore within their standard operating procedures. Our technical teams conducted an in-depth process mapping analysis to embed Procore into their day-to-day operations.

This resulted in significant ROI by streamlining the onboarding experience for deeper subcontractor engagement. This allows the customers to confidently leverage the robustness of our platform, which leads to more effective and standardized processes and increased adoption by the project teams.

In addition to furthering their strategic partnership with Procore, this technical deep dive created a pathway to capture the customer's entire annual construction volume across 90 global locations, and they're evaluating additional products, including financials.

This engagement demonstrates the value of leveraging technical teams to focus on the unique needs of our customers. It's just one of many examples that give us the confidence in our ability to accelerate [time to] value for our customers under this new model.

Throughout the quarter, I continue to connect with customers around the world and their perspective on the demand environment remains largely unchanged. We are operating in a challenging and mixed environment. However, many of our larger customers continue to grow and they are seeing strength within infrastructure, manufacturing, and data centers.

You can see this dynamic play out in our customer wins this quarter. One of the biggest general contractors in the US and a long-time Procore customer had a seven-figure expansion to add on more volume for new projects, including stadiums, data centers, and high-rises. This Q3 expansion followed a seven-figure expansion just last quarter.

Although this firm is one of our largest customers, there is still considerable room to grow their Procore footprint, both with volume and new products. Suffolk Construction, a top-25 ENR contractor, already had all of their volume on Procore, but this quarter, they expanded with us to support their growing business.

Renowned for their innovative approach in the construction industry, Suffolk focuses on integrating cutting-edge technology, modern project delivery methods, and data-driven solutions in its operations, setting the gold standard for innovative construction.

Procore is proud to continue to partner with Suffolk in its efforts to integrate the entire building lifecycle into a seamless platform to redefine how America builds. So you just heard me reference two large ENR 400 expansions. As we continued to demonstrate, there remains a significant growth opportunity for us within the ENR 400.

But when I speak to investors, I've noticed that there's a misconception that the ENR 400 represents the entirety of Procore's growth opportunity. I want to be very clear, it does not. While the general contractors listed within the ENR are an important cohort, they represent less than half of the GC opportunity within the US. It also completely excludes owners and specialty contractors.

We've continued to demonstrate strong traction with owners and specialty contractors in Q3, including Al Saedan, a real estate company, a leading real estate developer in Saudi Arabia, who faced significant project management limitations with their existing ERP vendor due to numerous manual processes.

In Q3, they became a Procore customer to streamline all processes and communications with stakeholders on a single platform to house all project information in one place and generate real-time reporting and dashboards, not only at the project level, but more importantly, at the portfolio level.

VSC Fire & Security is a leading specialty contractor for fire safety and security. They had previously been using point solutions that were unable to provide a holistic view of project performance or how certain areas of the project were progressing. They began looking for a single, unified solution to enhance data accuracy, reduce costs while increasing profitability, and ensure everyone was working off the same information.

They also wanted to find a solution that seamlessly integrated with their financial solution and they offer dashboards for both the office in the field, helping to ensure everyone had real-time visibility into project budgets. VSC will be using Procore across all of their projects, primarily focused on fire suppression systems across the US.

So as you can see, Procore's business is diversified across all three types of stakeholders, and the opportunity becomes even more significant when you factor in the international construction market. Furthermore, we have seen the owners can be as large, if not larger, than our ENR 400 customers. In fact, today, two of our top five largest customers are owners.

We believe our new go-to-market model will best position us to capitalize on the growth opportunity across all global stakeholders. At our upcoming Investor Day, we'll discuss this dynamic further and why we believe our runway for growth continues to be very attractive.

So speaking of Investor Day, in our upcoming Groundbreak conference, I look forward to showcasing how Procore is the only truly unified construction platform that connects all people, products, processes, and data across the entire construction life cycle. Each product that we offer helps our customers build more efficiently and productively. But the real power comes from our connected platform.

When a customer purchases any Procore solution, they immediately get access to our enterprise-grade platform capabilities, capabilities unmatched by any other solution in the market. With over 2 million construction professionals around the world collaborated on our platform, we have an unmatched corpus of construction data.

This data allows us to provide customers with actionable insights that are not limited to one product or workflow, but rather span projects and portfolios, giving our customers a comprehensive view of their projects and their businesses. We believe that because Procore is the only truly connected platform in the industry, we are the only solution that can fully harness the power of AI for our customers. You simply cannot maximize the benefit of these technologies if data is stuck in silos.

Back in August, I had the privilege of hosting a dozen leading construction CIOs at our CIO Forum in Austin. Their feedback was unanimous. In order for them to be successful, they must build their business on top of a truly connected platform so that they can connect all stakeholders, gain insights, leverage AI, and more.

It's incredible to be at the forefront of digitizing this industry and I see the momentum building around connected technology, and to see how we have become a core component of how leading construction companies run their businesses.

So we're going be covering all of this and much more at next month's Groundbreak Conference in Denver, where we're going to showcase how we are continuously innovating and evolving our platform. We'll be unveiling exciting new developments that leverage platform functionality to make all of our products more powerful, as well as the investments we're making to better support owners, general contractors, and specialty contractors in delivering all types and sizes of construction projects.

This Groundbreak is shaping up to be our biggest and most impactful event yet. And I cannot wait to see our customers, prospects, partners, employees, and shareholders and to share our latest product innovations with all of them.

So before I turn it over to Howard, I'd like to announce that we have authorized a stock repurchase program of up to $300 million. This program reflects our conviction in the business and allows us to flexibly leverage our balance sheet to efficiently deliver returns to our shareholders. The repurchase authorization is intended to be deployed opportunistically and judiciously.

We are excited about expanding the levers within our capital allocation philosophy and Howard is going to elaborate further on this in a moment. So to wrap up, I am confident in our go-to market evolution and the progress that we made so far. This is an incredibly exciting chapter for Procore as we move towards our goal of becoming a multibillion-revenue enterprise.

And now, with that, let me hand it over to Howard.

Thanks, Tooey, and thank you to everyone for joining us. The main topics I would like to cover today include our Q3 financial results, additional color on the business, and our capital allocation philosophy.

Total revenue in Q3 was $296 million, up 19% year over year, and international revenue grew 26% year over year. Our Q3 international results were slightly impacted by currency headwinds. On a year-over-year basis, FX contributed approximately 1 point of headwind to international revenue growth. Therefore, on a constant currency basis, international revenue grew 27% year over year.

Q3 non-GAAP operating income was $26 million, representing a non-GAAP operating margin of 9%. Our key backlog metrics, specifically current RPO and current deferred revenue, grew 16% and 18% year over year, respectively.

Now, let me share some additional color on the business. As our guidance indicates, we expect to deliver 900 basis points of margin improvement at the high end this year. This includes various one-time and seasonal investments in the second half of the year. These investments range across technology and marketing, including our annual customer conference, Groundbreak, and will result in operating and cash flow margins in the second half of the year that are lower than the first half.

Investors should not assume our second-half margins represent our expectations for fiscal '25. Instead, please refer to our margin guidance for next year. Note that we will be expanding margins on a full-year basis in fiscal '25.

Moving to our go-to-market transition. At this stage, we are focused on communication, change management, enablement, as well as onboarding new sellers. We are pleased with the positive feedback so far from employees and customers. Our hiring plans are on track and our progress further reinforces our belief that these changes will enable long-term growth for the business. Since we are early in this transition, it is premature to provide an update on specific benefits of the new operating model. We expect to have better insight into these benefits as we approach the back half of fiscal '25.

Taking a step back, the business is going through two distinct transitions. The first is a challenging and mixed construction demand environment, which began in 2023. The second is a go-to-market operating model shift, which began in the third quarter. Both of these represent near-term headwinds to revenue growth, but we believe these impacts are temporary. The power of our platform and brand continues to be a strong competitive advantage.

In fact, the combined average win rate against our top competitors over the last few fiscal years is north of 60% and has improved year to date. And against our largest competitor, the average win rate is even higher. These stats are undeniable, and we believe our business will be even stronger when the macro headwinds and go-to-market transition is behind us.

Lastly, let me turn to our capital allocation philosophy. As you've heard me say many times, we are committed to increasing free cash flow per share, and we have multiple levers compounded to growth over time.

First, our top investment priority continues to be driving organic and efficient revenue growth, which is the primary lever to compound per-share metrics and deliver shareholder value. We are the technology leader and a projected $15 trillion construction industry that remains in the early stages of digitization with significant market opportunity ahead. At this stage of our business and market evolution, we believe we will consistently generate free cash flow going forward and thus has sufficient capital to fund our organic business objectives.

The second lever is investment and accretive M&A. Our M&A strategy has primarily focused on accelerating our product roadmap to deliver the most comprehensive platform that solves the unique challenges within construction. The acquisitions we have made in the past have generally been smaller tuck-in companies that we know very well.

Most of these companies came from our app marketplace, and were already integrated into the Procore platform, which further ensures that our products come together in an elegant solution. Although we are not actively considering large scale M&A at this time, in the future, we may choose to pursue larger, more transformative M&A with financial synergies that are accretive to our long term per-share objectives.

The third lever is returning capital to shareholders. The $300 million stock repurchase authorization we announced today is intended to be deployed opportunistically during the one-year authorization period depending on market conditions. Our guiding principle is to repurchase shares to provide notable accretion to per-share targets in order to optimize long-term shareholder value. As always, we will regularly evaluate and optimize our capital allocation strategy across these levers to do what's best for the business and to optimize long-term shareholder value.

Now, moving onto our outlook. As a reminder, our guidance philosophy for fiscal '24 remains unchanged from 90 days ago. For the fourth quarter of 2024, we expect revenue between $296 million and $298 million, representing total year-over-year growth of 14% to 15%. Q4 non-GAAP operating margin is expected to be between 3% and 4%.

For the full year fiscal 2024, we are raising our revenue guidance to be between $1.146 billion and $1.148 billion, representing total year-over-year growth of 21%. We are maintaining the high end of our non-GAAP operating margin for the year between 10.5% and 11%, which implies year-over-year margin expansion between 850 basis points and 900 basis points.

We have not previously provided any quantification of our outlook beyond the current fiscal year. As such, we would like to address the dispersion across the sell-side estimates by providing an initial guide for fiscal '25. Given we are providing this guidance a few months earlier than typical, we are applying incremental conservatism. We recommend investors to view this revenue outlook both as a [floor] for fiscal '25 as well as guidance.

For the full-year fiscal 2025, we expect revenue to be $1.275 billion, representing total year-over-year growth of 11%. And we expect non-GAAP operating margins of 13%, which implies year-over-year margin expansion of 200 basis points to 250 basis points.

To wrap up, we are pleased with the early progress of our go-to-market evolution, and we have conviction that these changes will generate returns to both the top and bottom line. Long-term growth remains our priority, and we are confident that these investments will best position Procore to capture the massive and underpenetrated opportunity ahead of us.

I'd like to close again by thanking our customers, partners, employees, shareholders, and the industry as well as the communities we serve for giving us this opportunity. With that, let's turn it over to the operator for Q&A.

(Operator Instructions) DJ Hynes, Canaccord.

Hey, guys, thanks for the early look at '25. I appreciate that. I think maybe that's a good place to start. So I don't know if it's for you, Tooey or Howard, but look, I know calculated billings and cRPO-based bookings aren't a perfect indicator for you guys. But if I look at the growth rates there year to date, it doesn't look like we're setting up for 11% growth next year.

So I guess the question is, what are you guys seeing the business that these metrics might not be picking up that gives you reason to guide growth as you have for 2025?

Hey, DJ, this is Howard. Thanks for the question. Look, I'm going to reiterate that the fiscal '25 guidance we provided, both on the topline and the bottom line, but specifically on the topline, it's an early guide. And so, we are applying that incremental conservatism there. We've always talked about in early guides on our revenue, it's something that we have high confidence that we can achieve and there's incremental conservatism on top of that.

And remember that it's not only an early guide. We got our biggest quarter that we still have to get through in Q4, and we've just gotten into the early stages of this go-to-market transformation. And so, the early guide, coupled with those pieces really makes it such that we want to provide something that's a little bit more conservative and the other thing on that is, look, when we get into next year, we'll have a better sense of what this transformation is going to hold.

Okay. Maybe that's a good segue to the follow up. I think it was in Q3 of last year that we really first started talking about customers showing up to Procore with more conservative commitments. And now that we're starting to [anniversary] those deals, like how have those customers fared relative to the lower commitments that they were making at Procore?

Yeah, we talked about the cohort, the data that we were seeing in the first two quarters this year. And the third-quarter cohort has remained largely consistent with what we saw in the first half of the year. And so, we look at folks that in the cohort from Q1 and Q2 and into Q3, those that expanded continue to expand, those that remain flat started to expand a little bit more, and so forth, and that has remained consistent.

Keeping in mind, though, those expansion rates are still not at the levels that we had seen historically prior to this downturn.

All right, great. I'll hop back in the queue. Thank you, guys.

Joe Vruwink, Baird.

Thanks for taking my questions. Just on the early view on 2025, when you say the go-to-market changes, you'll see the benefits more in the back half, does that also translate to revenue growth rates that are likely higher in the back half? And relatedly, is there anything you would point to during the first half that we on the outside, it can be watching as evidence that things are moving in the right direction?

At this point, I'm not going to comment about the shape of anything in terms of from a quarterly basis. But what I will say is that in fiscal '25, it does represent conservatism, but we're doing this such that it's going to eventually result in better topline growth as well as bottom line growth.

The other thing I'll just add on top of that is we recognize that fiscal '25 is a transition year and the P&L at our guidance reflects that. The thing that I would note that is going into fiscal '26, the P&L is going to look better than it does in fiscal '25. And that's the way that I would think about fiscal '25.

In terms of some of the things that you'll start to see, the progression of that, really internally is going to be things like pipeline generation. It's going to be velocity through the pipeline. It's going to be conversion rates, and that's ultimately going to result in higher productivity, better retention metrics. And then eventually, as those flows through, it will show up at our financial results.

The last thing I'll add to that is keep in mind, we've always talked about this transition causing a disruption to our go-to-market, and that's going to dovetail into fiscal '25. And again, that's why we talk about fiscal '25 and view that as a transition year. As we then exit fiscal '25 going into fiscal '26, you'll see a better P&L.

Thanks for that. And then, I appreciate most of your opportunity and inbound leads are still Greenfield. But when the largest company in a category announced as they go-to-market change, that doesn't go unnoticed by competition. Very clear and appreciated the comments on competitive win rates year to date.

Maybe, what's your expectation going forward and how that might play out?

Yeah, so this is Tooey. Look, I'm going to start by saying that we release those competitive win rates because we've actually wanted once and for all to just put to rest the question around how are we doing in the competitive environment. I think that those numbers speak for themselves.

And if you've been following us for a while, you know that we've been saying these are consistent numbers quarter over quarter. And so, what I can tell you is that getting more customer-centric and being a better partner to your customer and putting your salespeople up for success will set us up, we believe, for a tremendous amount of success in '25 and '26.

So we think, from a competitive environment, that we are setting ourselves up for even a better position going forward.

Thank you.

Brent Thill, Jefferies.

Thank you. This is Luv Sodha on for Brent Thill. Thank you, Tooey and Howard, for taking my questions. Maybe first one for Tooey. Tooey, I appreciate your traction on the large customer side. Could you just dissect what you saw in terms of the macro this quarter across the customer base? And I appreciate some of the alternative data that we track, it tends to be mix.

So what are you seeing out there that gives you hope that '26 will be better than '25?

Yes, by the way, Luv, great question. I think the key word in there is hope because I do talk to many, many folks in the industry all throughout the quarter. I will say that though the overall sentiment is very similar to what has been over the last few quarters, which is in the short term, pretty conservative, a little uncertain.

Look, we're facing election. I think people are hoping for more interest rates to drop. So there's still a lot of uncertainty. But there is a, I would say, a slightly elevated amount of hope because those things are going to come to fruition. At least the election is going to come and go. And then hopefully, there'll be some more interest rates cuts.

So from a macro environment, I think it's -- long term, it's looking better. But again, it's still mix because of the just the overall macro headwinds.

Got it. And Howard, I know you don't obviously guide quarter by quarter for next year, but you are guiding to some margin expansion next year. Could you just talk about maybe how that will flow through throughout the year? And will you be through making the go-to-market changes by the end of this year? Thank you.

Yes. First of all, we are really happy with how we're progressing in terms of the foundational aspects of the transition and the changes. So those are all on track. Remember, we also talked about the disruption that this is going to cause, and we've anticipated those and it's playing out as we expected. And we've also always talked about how this transition and the impacts of this transition moving into fiscal '25, and that's still holds and we still believe that.

In terms of the margin profile in our initial guide again, which is early for next year at 13%. We do believe that there is room to continue to execute to that and to do -- and continue to have a cadence of [beating] rates on that. Remember, though, that it's still very early at this point.

And so, our intent in providing both the margin guide and the revenue guide for next year is really to address the variability that we're seeing, particularly on the topline to make sure that folks get better clarity in terms of where our expectations are, given that it's quite early at this time. So that's the best that I can tell you at this point.

And Luv, I want to add, I think I heard in there, are we going to be done with this transition by the end of the year. We're in the early stage. We're one quarter into this. And as I mentioned in my opening remarks, we were pleased with where we are in the process, but this is really around hiring. This is really about enabling, this is onboarding, this is ramping, this is putting together all of the assembly and the teams, getting the comp plans and territories in place.

So all of those comp plans and territories are not going to be released until sales kick off, which is going to be in January. So I like to tell the team internally, the real work starts then because that's when the machine has actually been upstarted. So it will definitely not be done this year, but Phase 1 of getting us ready will be done.

Got it. Thank you.

Saket Kalia, Barclays.

Okay, great. Hey, Tooey. Hey, Howard. Thanks for taking my questions here. Tooey, maybe just to stay on the go-to-market transition. Sorry if I missed it in the prepared remarks, but can you just talk about how many salespeople you brought on this quarter, where you want to be by the end of the year, broad brush, of course? And how are you sort of planning on minimizing that disruption?

I think we're doing a really smart thing of sort of [manhandling] estimates for next year. But from a tactical perspective, how do you minimize disruption next year?

Yeah, so Saket, so probably not going to go into the detail of how many heads and which rolls and all of that, it's just there's too many to add into here. But as I mentioned in the opening remarks, it's a couple of hundred net new. And so, it is a considerable amount of changes, there's a lot of work that goes into it. But how we manage it, I think Howard is going to add something to this, but how we manage it really starts with a great plan and then communicating that plan effectively.

And so, people understand not only what is happening, but why we're doing what we're doing.

Absolutely. Communication is definitely a part of that, Saket, making sure that folks are brought into the process of enablement, compensation planning, and the actual design and organization of the GM structures and the technical roles. That's what we're doing right now.

Keep in mind that a lot of these changes, particularly around things like territories and comp plans, are not going to take effect until January. And so it's really human nature to want to look ahead. And so part of what we're doing to make sure that we communicate early, bring folks into the fold, and to participate in this evolution is to really balance looking ahead and being prepared for that, but also making sure that they're focused on delivering Q4, which we still have to get through two-thirds of, which is the biggest quarter of the year.

And so really focusing on those communications, enablement is key for us.

I think that's really prudent. Tooey, maybe a follow-up for you on a totally different topic, but I'll just touch on Procore Pay. What's been the reception and how are you feeling about it? I'm sure we'll hear more at Groundbreak, but can you give us a preview?

Yes, I'm not going to divulge too much because there is going to be a lot of ground breaks talk about. But as you remember, last Groundbreak is when we announced Procore Pay. And I think the last thing that we told you all about was in Q1, that we had over 100 customers on the platform. I would say that the enthusiasm has not waned by any measure. It is still a very big bright spot in Procore, which we're all happy about. And it's just another reason why we win.

And second, I got to say that it's still very, very minimal in terms of the financial impact for both this year and next year. But we are excited about it.

Makes sense. Thanks, guys.

Brent Bracelin, Piper Sandler.

Thank you. Good afternoon. Howard, really appreciate the preliminary look on next year. As we think about the 11% guide here, I'm curious how much weight did you put on the internal challenges given the go-to-market overhaul versus external being challenging? Just trying to think, is it 50-50? Is it 80-20? Any sort of color as you think about headwinds next year? You have two majors. How did you bake that into the preliminary look here?

Yes. In terms of the external environment, we are, right now, still anticipating that the challenging demand environment that we've seen this year continues through next year. So that's what we've contemplated in that guide. But the major factor beyond that from an internal standpoint is that now we've got another quarter under our belts. We've got just over a quarter how we're executing to the foundational pieces and how we're tracking against that, which is good.

And then really, it's the early guidance and being several months earlier, making sure that we apply an incremental level of conservatism in that in terms of how we're progressing, which is what we expect it to. It's really -- and considering it that way in terms the fiscal '25 guide.

And I'll just say again, it is a (inaudible) that we have high confidence that we'll achieve incremental and above what we would typically do in within the fiscal year.

And then Tooey, I guess, if we take a step back here, you have these external challenges, you've got some internal challenges if you make the global go-to-market overhaul, but you're still going to grow double digits next year. You still have a best-in-class [gross] retention, 94%, 95% here.

What's your best guess when the cyclical headwinds turn into potential tailwinds? I mean, do we need to wait another year, another two years? I love the framework of folks that you're talking to are slightly more hopeful, but walk us through your best guess at this point when you can actually start to see some headwinds turn into tailwinds for you? Thanks.

Yes, Brent, I wish I knew that answer because I would be -- I'm probably doing a different job. I knew the answer that quickly. Let me tell you what I think I know about this industry, having worked in it my entire life. Nothing rapidly changes in one direction, one way or another, really.

And so the optimism that's there is -- I should always kind of couch this with the -- it is incremental optimism. It's not exuberant optimism, right? So I would say, if you've got a couple of more rate cuts, we get past this election that the optimism level will have increased a little bit more. But I don't think our industry moves at such a fast pace that it's going to make a huge difference in a short term or short period of time.

But I will say, during the COVID time when the wind was at our back, we know what an optimistic market looks like, and we are hoping someday to get back to something that looks a little bit something like that.

Helpful color. Thanks, guys.

Adam Borg, Stifel.

Awesome, and thanks for taking the question. And I do appreciate the early look into next year. Maybe for Tooey, in the past, a lot of growth has come from ACV and we've talked a little bit earlier about how things have been kind of status quo quarter versus earlier in the year.

And as I think about kind of the go-to market evolution and then we think about the opportunity to further penetrate module adoption, how do you think about how that mix evolves over time and the incremental opportunity to sell more of the platform to your customer base?

Well, that is one of the big driving forces behind why we're making this change, Adam, is that we believe that demonstrating the value of our adjacent products to project management. When we do it effectively, we sell a lot of products. So for us, changing the way we do our go-to-market to really be more customer-centric and then create these tiger teams that are really effective at helping share the value of the different products, because remember we used to sell to just project managers, right?

We're selling now to the CFO, we're selling now to the Head of the VSC department, we're selling now to the Head of safety for an organization. So these sales motions are all unique and they require a specialist.

So for us, the mix will definitely move more towards new products when this new model comes to fruition, because we were really heavily weighted towards volume increases for a long time. And we believe that that's going to change.

That's really helpful. That's it for now. Thanks so much.

Dylan Becker, William Blair.

Hey, guys. I appreciate the questions here. Tooey, maybe starting for you since you called it out kind of the ample opportunity on the owner side of the equation. Not to frontrun Groundbreak here either, but could you dive a bit deeper there? Do you think the general perception is that's kind of largely bucketed as developers, but it feels like there's ample opportunity as we think about kind of global CapEx from other large enterprises?

Yeah. No, absolutely. By the way, this is one of my favorite topics because people don't give us enough credit for the owners business that we built. I'm very proud of our owners business. So yes, when people think of owners they usually think of real estate developers, and that's such a small portion of it.

A great way to think about owners of the way I do is, I can tell you 1,000 of them right now, the Fortune 1000 are all owners, right? All of those represent some form of opportunity for cohorts. And then you get into hospitality, and you get a university, you get into the pub sector where those folks are owners as well.

Every project has an owner and frankly, every owner has more money than the contractor they're working with. So to me, it's just a very, very large opportunity in an area where we've already demonstrated tremendous success across all of those sectors. But yes, it's just an area where doing more is going to yield, I think, great results.

Okay. That's really helpful. And maybe sticking with you two here. As we talk about kind of the cadence of hiring, getting more aggressive as we think about bringing these teams on board. I guess, could you give us a general sense of where these people are coming from?

Maybe more importantly, how you're ensuring that you're going to bring in those right people on board to sustain maybe the differentiated culture that you guys have done such an exceptional job of building and maintaining over the years? Thanks.

Yeah, Dylan, and by the way, I'm really glad you brought that up because I've been heavily involved in this process. I meet with every new onboarding class, get to know a lot of the folks that are in there, and the caliber and the quality of the folks that we're able to attract is just remarkable.

But you're right, it all starts with our hiring process and our hiring process always starts with our values. And we make sure that we're hiring people that will live to the Procore values and people who are hungry and humble and smart and people that are very, very interested in solving the problems for the industry that we serve. And so we've been very fortunate.

So a lot of these folks, some of them come from the industry. Some of them come from other sales organizations elsewhere. They kind of are coming from all over, we really are looking for the best and the brightest. And so I'm very happy with how we've gotten through our hiring numbers, but more excited about the quality and the caliber of the talent that we brought in.

I also should say, too, this isn't just those 200 net new. Larry has done a wonderful job building out his general manager team. Those folks are all in place now and their teams underneath them are almost all in place and will be done by the end of the year. And so getting the right leadership in place as well as bringing in the right folks that are going to be doing the problem by work is all part of the game and it is progressing to plan, and that gives me some optimism.

The only other thing I'll add, Dylan, is that the process from a culture standpoint in terms of caliber standpoint, it doesn't stop when these folks step foot in the proverbial door. There's a tremendous amount of enablement that we provide and have orchestrated around this transformation that is critical and integral to the success of the organization and to the individuals that we bring in.

And so it's not just one component, it's all these components put together.

And Dylan, by the way, I've made my entire leadership team and myself go through all of the sales enablement that we make all of our new hires go through. So we're eating our own dog food.

Great. Thanks, guys.

Jason Celino, KeyBanc.

Hey, Tooey. Hey, Howard. So maybe one question on the quarter. So the 16.5%, 16.4% cRPO growth really didn't budge from last quarter. It's kind of impossible to know or quantify, but what level of go-to-market changes was disruptive in the quarter? If you're able to maybe anecdotally think about it?

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Okay, perfect. So in the quarter, you saw 16.4% cRPO growth, really didn't budge from last quarter. So with these go-to-market changes, I guess, any way to quantify how disruptive they were? Because the numbers themselves look pretty good.

Yes. Look, we are seeing the disruption, Jason, that we anticipated. The cRPO may not be from a sequential sample reflective of that, there's going to be some noise in that. But we are seeing the disruption that we anticipated and that's going to continue into Q4.

And as I talked about before, it's going to continue into fiscal '25, but things are progressing as we expected, and we're addressing those things proactively to make sure that we still focus on Q4, but it's progressing as expected in terms of the impacts.

Okay. Excellent. And then we know that RPO, an out-year revenue growth, those are correlated. They're tied together. So your initial outlook for next year, this 11% growth, this floor, is it appropriate to think that this is maybe also kind of a framework for how to think about Q4?

I think you can take that 11% and we extrapolate it to what that would imply in Q4, and I think that's the right way to think about it. And I think the main thing you said is what we reiterated, which is that it's a floor.

Okay, thank you.

Nick Altmann, Scotiabank.

Awesome. Thank you. Tooey, in your prepared remarks, you guys talked about how you're seeing some encouraging signs on the go-to-market changes, how it's resonating with the reps and international leader. But can you maybe share how it's resonated from the customer's perspective?

I know it's kind of early days and maybe it's a little bit more of a 2025 dynamic, but maybe just kind of share how it's resonating with the installed base?

No, I'm glad you asked that question because I have obviously talked to our customers a lot about this and got their feedback. A lot of our customers are just really excited about the customer centricity. We have a customer on site today that was talking about the fact that we surround them with resources. And this is one of our test cases that we're running, and how -- what a difference it makes that we bring the right people in the right time to help them be successful.

And it's just a much more coordinated and kind of purposeful engagement. So the customers are really excited about it. I have not heard anything negative, but you can imagine from their perspective, they're getting more resources and they're going to be able to realize more value out of the dollars they're spending with Procore every day, which is great for Procore and it's great for them.

Great. And then I wanted to circle back to the two of the top five customers being owners. I found it really interesting. When you think about things go-to-market changes, is there any particular stakeholder where you think the changes can be a little bit more impactful in the near term?

And then just going back to Adam's question on what has historically driven the customer expansion. Is the opportunity on the owner side for the module upsell to drive the expansion, maybe a little bit more prevalent than the GC side or the subtype? Thanks.

Sure. So when you're talking about stakeholders, there's not one particular stakeholder that kind of benefits even more than the others because customer centricity starts with the customer, it doesn't have to be an owner, GC, or [specialty] contractor.

And then when it comes to cross-sell, I wouldn't look at any one of the stakeholders that's being any more susceptible or more interested in buying more products from us than any other ones. Our products are very -- we make them available for all the different stakeholders.

And there's a lot of reasons why our stakeholders should buy more of Procore's products and it's kind of our responsibility to help them understand the value that we're offering.

Hey, Nick, this is Howard. The way I think about it is there's different cross sections of our business across [geos] and segments and stakeholders that are maybe at different stages in terms of their digitization and adoption. And so the typical progression that you'll see is you'll start to (inaudible) start with maybe a small set of products and then they'll then transition into expanding volume and then they'll eventually transition into additional modules.

When you look across the business there, there's different cross sections that are at different stages and there's opportunities across all of them.

Great. Thank you.

[Siti Sanzanini], Mizuho.

Hi, this is [Sameer] calling in for Siti. Thanks for taking the question. Just wanted to get a sense of the DTM rules that you are hiring for. You mentioned you had 25% along and the plans. Are you able to hire the talent as you need or any challenges you see in especially the technology side of things?

And second part to that is when you expect these new reps to be like fully productive, you mentioned that you'll have all sales products and territories assigned in Q1. But how long does it take for the sales reps to be like 100% productive? Thank you.

So yes, sure. So we're not seeing, Sameer, any challenges in any particular roles that we're trying to fill. That's a very big, bright spot for us. On the technical roles, interestingly enough, a fair number of people we're hiring for those technicals come from industry.

So they actually understand, at a very fundamental basis, that the problems facing the (inaudible) helping us solve for. And in other cases, they're Procore users, so they actually understand the solution to that problem as well and they're very, very effective at speaking to prospects about end customers about these products. So in general, no particular challenges on the hiring.

But we've seen a tremendous amount of enthusiasm and perceptiveness to these roles as we've gone out to higher (inaudible). I don't think there's an issue there. To your question about when these votes will be [brands], it's going to depend on the segment that they're in.

Obviously, when you start to get into the enterprise and above segments, those ramp times are going to be a little bit longer and they get shorter as you go mid-market and down. And part of that is the reason why it gets started as early as possible in the middle of this year to make sure that we get those folks on board, and they get started on the ramping so that they are well -- more ramped as we go into the start of next year.

Great. Thank you.

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