PROCORE TECHNOLOGIES, INC. Q3 2025 earnings call

Good afternoon and welcome to Procore's 2025 third quarter earnings call. I'm Alexandra Geller, Head of Investor Relations. Before I begin today's call, I wanted to share that Howard Fu, our CFO, is unexpectedly out of the country attending to a sudden family emergency and will not be joining today's earnings call. For that reason, with me today are Tooey Courtemanche, Founder, President, and CEO, and Matthew Puljiz, Senior Vice President of Finance, who will be joining in Howard's place on a one-time basis. You will hear from Howard again soon. 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 model, CEO transition, platform and 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. All forward-looking statements are subject to risks, uncertainties, and assumptions, and are based on management's current expectations and views as of today, November 5th, 2025. 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. Let's start with our Q3 performance, which represented another strong quarter. Some highlights include. Revenue growth was 14.5% year-over-year, which is consistent with last quarter's growth and reflects our underlying business momentum and performance that we've seen this year. Non-GAAP operating margins increased quarter-over-quarter to 17%, reflecting our commitment to improving our efficiency profile. We had another strong quarter for large deals, with the number of six and seven-figure deals accelerating to 31% year-over-year growth, and the number of $100,000 plus ARR customers now totals more than 2,600. Our go-to-market model is yielding benefits, positioning Procore for efficient growth. Another very important highlight from the quarter was our announcement that Ajay Gopal would join Procore as our next CEO.

Ajay officially steps into the role on November 10th, at which point I will focus exclusively on my role as Chair of the Board, where my commitment to our customers, the industry, and Procore's mission will remain as strong as ever. I've had the privilege of serving as Procore's CEO for nearly 25 years, and it has been the honor of a lifetime. Needless to say, the Board and I were incredibly diligent and thoughtful in our search for Procore's next leader, and I can confidently say that we have found the ideal person, both in operational track record and in his sincere quality of character, to guide Procore through this next phase of growth. Ajay has more than 35 years of proven experience, including leading a multi-billion dollar global technology company and driving shareholder value. He has relevant vertical software experience, most recently serving as the CEO at Ansys.

During his tenure, Ansys significantly improved its operating performance and more than quadrupled its market value. His prior roles, including serving as operating partner at Silver Lake, have shaped him into a versatile leader who knows how to scale innovation, navigate complexity, and deliver lasting impact. Ajay's track record is clearly impressive, but his deep passion for transforming the physical world through digital innovation is what ultimately convinced me that he was the right choice. He recognizes and values the privilege of leading software companies that help its customers build things that are lasting, tangible, and impactful. In his career, he has been inspired by the pride those creators felt in building something so transformative, and he sees the same pride in construction and in Procore's customers. That shared sense of purpose is why I know he is the right leader to guide us into the future.

You'll hear directly from Ajay later in the quarter once he officially steps into the role as CEO. Since this is my last earnings call at the helm, I want to take a moment and leave you with why I am so optimistic and confident about the future of Procore. First and foremost, let me remind you that construction is one of the largest and most essential global industries, estimated to reach $15 trillion in construction spend by 2030, and yet it remains one of the least digitized. With Procore as the clear category leader, I believe that this market is ours for the taking, offering tremendous opportunity for durable long-term growth. Construction is a massive yet cyclical industry that has been operating in a down cycle for quite some time, which has been a steady headwind to our business. For example, our focus area of U.S.

Non-residential and multifamily construction has gone from growing 25% year-over-year in Q1 2023 to negative growth of 2% for the last two quarters, as reported by the U.S. Census. That represents a staggering 27-point reduction in growth over two years. Yet, in that same two-year period, Procore has continued to grow faster than this end market by approximately 10-20 percentage points. During that period, we also increased the annual construction volume committed on our platform by more than 30%, even in the face of this headwind. I am proud that in Q3, Procore reached another exciting milestone, surpassing $1 trillion in annual construction volume contracted to our platform across all global stakeholders. This clearly demonstrates our team's ability to execute and take market share even in challenging construction cycles.

I want you all to know that when this cycle inevitably turns upward, and it will, we strongly believe this headwind will become a tailwind. My conviction for Procore's future is further reinforced by the strength of our platform. From day one, we've been solely focused on construction and have built the only unified construction platform that supports all types of projects from vertical to horizontal across the entire construction lifecycle. By connecting people, processes, and data in one place, we believe our platform is uniquely positioned to harness the power of AI for our customers. This was a key topic at our annual industry conference, Groundbreak, just a couple of weeks ago. We announced exciting new innovations, including our agentic roadmap that harnesses our comprehensive and unmatched corpus of proprietary construction data to further extend our platform advantage.

Our customers were able to interact with our agents on the expo floor, and they shared that they believe that these innovations will be game-changing for the industry. At Groundbreak, I met with our Customer Advisory Board, and during a Q&A session, unprompted, our customers raised their hand one by one, sharing that Procore's partnership and unwavering commitment to our customer success is why they selected us and why they continue to stay with us. It was truly a powerful moment for me, one that reinforced the impact of our true partnership approach. Over our nearly 25-year history, this dedication has earned Procore the trust of the construction industry, which is paramount for a sector defined by high risk and tight margins. I think this long-time customer quote from Brassfield & Gorrie sums it up well.

The Procore Platform and the people behind it are enabling our teams to collaborate more effectively, operate more efficiently, raise the bar for excellence in project execution, and drive innovation in how we work. We look forward to continuing to build on this partnership in the years ahead." My confidence in Procore's future is further bolstered by our commitment to improving our margin profile. While we have achieved 1,900 basis points of non-GAAP operating margin improvement since the start of 2023, this only scratches the surface of our profitability potential. Our business model offers substantial margin leverage. We're deeply committed to unlocking this potential and view continuous improvement here as a priority for our business.

The changes implemented over the past year have positioned us for future leverage, and we currently see no structural hurdles that would prevent us from reaching our profitability milestones and compounding free cash flow per share. I also believe that we are in a stronger position with our go-to-market model yielding positive benefits and improved execution. To share some specifics, we are seeing higher year-over-year pipeline conversion, improved expansion rates, and lower voluntary sales headcount attrition. Our customers continue to share overwhelmingly positive feedback on the increased technical resources now at their disposal, which are making them even more successful, productive, and efficient. Naturally, there are areas where we want to improve and continue to get better, but overall, we are pleased with how our team is executing. This motion continues to secure new logos and strengthen existing customer relationships.

In Q3, we added new customers across all stakeholders, including one of the largest defense contractors in the world, a top 40 E&R general contractor, Valvoline, one of Canada's largest electricity transmission companies, the Department of Transportation for Mid-Atlantic State, and Horowitz Mechanical. This quarter, E2 Optics, a leading technology infrastructure contractor, also became a large new Procore customer. While they initially approached us for help with pre-construction, the conversation quickly shifted from software replacement for a specific pain point to full operational transformation. E2 Optics chose Procore's unified platform to gain visibility and control across the entire project lifecycle, connecting estimating, operations, resource management, and analytics. The key differentiator for them was the power of Procore Analytics and our reporting dashboards. By standardizing their data on our platform, they can now measure performance, fuel continuous improvement, and finally unlock critical project data that's trapped in siloed systems.

Moving forward, E2 Optics will use Procore to build hyperscale data centers, healthcare, higher education, and other commercial facility projects. Another new large logo win in the quarter was with the medical facilities arm of one of the largest managed care organizations in the U.S. In Q3, they purchased Procore to replace a host of fragmented solutions that led to inefficient processes and highly manual workflows. The decision to partner with Procore was driven by our proven ability to provide a construction-specific solution that streamlines operations and enhances scalability across their entire organization. They'll use Procore to build hospitals and medical office buildings across the country. We also had strong expansion wins across stakeholders in Q3, including a leading Irish construction company, E&R 23, Brassfield & Gorrie, a top five E&R 600 specialty contractor, Goodman Australia, and a Fortune 200 natural gas company.

One of our largest expansions in the quarter was a seven-figure win with a leading hyperscale data center campus provider. With major data center projects across the U.S., EMEA, and APAC, they more than doubled their annual construction volume to $10 billion, and they went all in on Procore spanning the entire construction lifecycle. A key driver in this deal was their interest in leveraging our new Resource Management products to create a system of record for assets and materials tracking, as well as Procore Pay for lien waiver and compliance tracking.

Thanks, Tooey, and hello, everyone. Today, I'd like to cover how our Q3 performance is emblematic of our commitment to free cash flow per share improvement.

You've heard us reference free cash flow per share as our North Star metric, and the three ways in which Q3 specifically improved this are one, durable growth; two, margin expansion; and three, modest share count growth. First, let's cover our financial results for the quarter. Total revenue in Q3 was $339 million, up 14.5% year-over-year. Our Q3 international revenue grew 14% year-over-year and was impacted by currency headwinds. On a year-over-year basis, FX contributed approximately one point of headwind to international revenue growth. Therefore, on a constant currency basis, international revenue grew 15% year-over-year. Q3 non-GAAP operating income was $59 million, representing a non-GAAP operating margin of 17%. As for our key backlog metrics, current RPO grew 23% year-over-year, and current deferred revenue grew 14% year-over-year. Now, let me share some additional color on our performance.

Beginning with the top line, we delivered another quarter of net new ARR growth that was notably faster than revenue growth. This strength came from multiple areas, with outperformance from our owner and specialty contractor motions, strong growth from our mid-market team, and continued execution in North America. Expansion was also strong within many of these dimensions, and we continue to see CrossSell improve its contribution to expansion bookings, which we largely attribute to our go-to-market operating model. We are very pleased with these results, particularly given this execution took place in a construction macro where the combined U.S. non-residential and multifamily sectors had negative 2% growth. Procore's 14.5% growth is a premium of 16.5 percentage points compared to these sectors. We believe that continuing to execute the way we have will extend our category leadership and increase our market share.

Our strength in the quarter also contributed to strength in CRPO. Keep in mind that this metric has been benefiting primarily from longer average contract duration, and we saw this dynamic increase further in Q3, which incrementally benefited CRPO. When normalizing CRPO for this dynamic, the year-over-year growth is consistent with both Q3 revenue growth and ending ARR growth. We expect this disparity to shrink as early as Q4 as we begin to anniversary the longer contract duration impact. Taking a step back, the decision by our customers to lengthen their contract terms is a powerful reflection of their long-term commitment to Procore's platform. In addition to durable growth, we also delivered another quarter of improvement in our non-GAAP operating margin, which increased 380 basis points quarter on quarter. We are proud of this progression, which did include some one-time benefits in G&A, primarily pertaining to facility and tax reimbursements.

The entire management team remains aligned and committed to continued profitability improvement, and we believe we are well positioned for margin expansion in the years to come. From a share count perspective, our Q3 loss of diluted share count grew 1% year-over-year. Our lower dilution was driven by two factors. One, we continue to be disciplined in how we deploy equity compensation. And two, year to date, we have repurchased approximately $129 million in stock, representing 1.9 million shares. While our previously authorized repurchase program expired in October, we are pleased to announce that we have implemented a new repurchase program for another one-year period for an additional $300 million. This new program maintains our flexibility to opportunistically deploy a lever in our capital allocation strategy to optimize long-term shareholder value.

Our strong Q3 results reinforce the compounding power of our free cash flow per share algorithm, which can be summarized as: one, durable top-line growth. We feel very good about our ability to execute and take market share even in a challenging construction cycle. Two, continued margin improvement. We have demonstrated leverage in our model and are positioned for further margin expansion in the future. Three, we expect our diluted share count to grow modestly each year before repurchasing any shares. The combination of these levers is how we intend to compound free cash flow per share and drive shareholder value. With that, let's move on to our outlook. For the fourth quarter of 2025, we expect revenue between $339 million and $341 million, representing year-over-year growth of 12%-13%. Q4 non-GAAP operating margin is expected to be 14.4%.

For the full year fiscal 2025, we are raising our revenue guide to a range of $1.312 billion-$1.314 billion, representing total year-over-year growth of 14%. We are also raising our non-GAAP operating margin guidance for the year to be 14%, which implies year-over-year margin expansion of 400 basis points. Regarding fiscal 2026, we are generally comfortable with the Street's revenue dollar estimate per FactSet and do not feel the need to update estimates at this time. Given Ajay is starting as CEO next week, we want to provide him sufficient time to onboard and ramp before providing formal guidance. Before I close, on behalf of Howard and the entire Procore team, I want to say to Tooey, thank you. We are all grateful to have had this opportunity to work for you.

Your authentic leadership has influenced us tremendously, and I know I'm not alone when I say that you have truly made this world a better place, not just because of the success of Procore, but also because of the success of our customers and the success of all the individuals you have impacted by your life's work. For myself and on behalf of our leadership team, employees, customers, and shareholders, we are thrilled that your mission continues here at Procore, and we look forward to supporting you in your next chapter as Chair of the Board. With that, let's turn it over to the operator for Q&A.