PROCORE TECHNOLOGIES, INC. Q4 2025 earnings call

Good afternoon, and welcome to Procore's 2025 Fourth Quarter Earnings Call. I'm Alexandra Geller, Head of Investor Relations. With me today are Ajei Gopal, 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, platform and 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, February 12, 2026.

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. 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 Ajei.

Thank you, Alex, and welcome everyone. I'm excited to join you today to discuss our Q4 and Fiscal Year 2025 Results. As this is my first earnings call as CEO, I want to start by expressing my strong conviction in Procore's future. During my first few months, I have been spending time with customers and employees and evaluating the business objectively to ensure our strategy is built for long-term value creation and that our operations are scaled for peak efficiency. These initial months have reinforced my belief that Procore possesses the hallmarks of a best-in-class vertical software leader and is building one of the most mission-critical vertical software platforms. As a crucial system of record for the built world, our ability to drive collaboration across all construction stakeholders creates a powerful network effect.

Furthermore, I believe Procore is uniquely positioned to lead in the AI era, driving unprecedented efficiency gains across the entire construction lifecycle. I am confident that the scale of our business, the capabilities of our products and platform, and the depth of our customer relationships give us a clear path to drive durable growth, meaningfully expand margins, and compound free cash flow per share over the long term. I am incredibly energized by the opportunity to scale this company to its full potential. My evaluation is happening in lockstep with disciplined execution across the company. As our Q4 and fiscal year 2025 results demonstrate, our operational pace continues to improve as we strengthen our position in the market. Let me shift to business performance. Building on four consecutive quarters of strong business momentum, we ended the year with an exceptional Q4 that exceeded the high end of our guidance.

For the full year, we delivered 15% revenue growth and 14% non-GAAP operating margin, which represents year-over-year expansion of 400 basis points. I am particularly pleased with this result, given the ongoing headwinds from a challenging construction environment, with the U.S. Census reporting negative growth for the combined non-residential and multifamily sectors. Let me take a few minutes to walk you through some of the highlights of our strong quarter. I'd like to start with the largest and most mature part of our business today, U.S. general contractors. I am encouraged by how much opportunity exists within the segment. From new logos to volume expansion and product cross-sell, I believe this cohort of our business remains a cornerstone of our growth. In Q4, we added three new ENR 400 logos and expanded our run rate with more than 70 ENR 400 customers.

One of our new ENR 400 additions joined Procore as our largest new logo win of the quarter and displaced an incumbent vendor. They partnered with Procore because of our unified enterprise-grade platform and their strong internal demand for our products. They also adopted Procore Pay to automate their manual processes and Procore Resource Management for their growing fleet of capital assets for their self-performed work. With Procore, they expect to achieve a return on their investments in a few key areas: the ability to scale labor efficiently, drive schedule and cost predictability at the portfolio level, and gain new levels of enterprise governance and visibility. We have a track record of displacing incumbent vendors, and we believe this is yet another example of the construction industry realizing that Procore is the gold standard. Of course, our U.S. GC opportunity goes well beyond the ENR 400.

To illustrate this market depth, we signed more than 30 $100,000+ ARR agreements this quarter with contractors outside of the ENR 400. An example of this is with an enterprise general contractor based in Georgia, who returned to Procore as a significant win-back. After leaving Procore in 2024 for a cheaper solution, they returned to us in Q3, and then in Q4, they deepened their partnership with Procore even further. They adopted our platform enterprise-wide and added Procore Pay and Resource Management, resulting in a high six-figure expansion. With Procore, they expect to enhance efficiency, support growth, and anticipate savings of more than 27,000 labor hours per year, the equivalent of adding roughly 13 full-time employees. While we never want to see a customer leave, this win-back reaffirms a simple truth: the value of Procore creates an advantage that price alone cannot match.

These wins illustrate the clear value our GC customers realize from using Procore. Our newer products, including Pay, Resource Management, Preconstruction, and Analytics, are compelling value drivers. We see these products as notable expansion opportunities for our global GC customers to drive incremental growth. Beyond U.S. GCs, we see substantial opportunity with the other stakeholders we serve, specifically owners and subcontractors. With our demonstrated product market fit and our continued product innovation, these stakeholders represent extensive white space globally and will serve as significant growth levers for Procore. In the interest of time, let me focus on owners, the most diverse group of customers spanning industries such as Technology, Energy, Utilities, Education, Healthcare, and Real Estate. Our owners business continues to scale, with Q4 marking another quarter of consistent growth in this segment.

To meet their evolving needs, we're planning to launch a suite of specialized products later this year, including portfolio management, planning, funding, and asset management. This empowers owners to more effectively manage their project portfolios, mitigate risks, and optimize costs. I'm also proud to report that Procore for Government achieved FedRAMP Moderate authorization this quarter and is now available in the FedRAMP Marketplace. This milestone validates our commitment to some of the most stringent data security standards in software, which will unlock further opportunities with U.S. federal and state government customers. A primary example of the growing demand for these solutions is in data centers, where AI infrastructure is driving unprecedented investment. Procore is the clear leader for data center construction. While data centers currently represent a modest 2% of total U.S. construction activity, the growth trajectory, fueled by the global demand for AI, is compelling.

Procore is ideally positioned to capture these tailwinds as this sector becomes a more substantial component of total construction spend. For example, our largest international Q4 deal, at seven figures annually, was a big up-and-coming hyperscaler in the U.K. data center market. This customer selected Procore in Q4 to establish a single source of truth and ensure consistency across the global projects. And within weeks, they expanded construction volume to meet accelerated data center deadlines. Moving beyond data centers, we also added new owner customers, including the Central Ohio Transit Authority and one of Canada's largest real estate developers. We also expanded with existing owner customers, such as a globally recognized online retailer and a leading semiconductor manufacturer. I would now like to move to a discussion of strategy. There are rare moments in history when a technological shift accelerates industry-wide adoption.

At Procore, we last saw this with the ubiquity of broadband and the rise of mobile devices. This was a major catalyst for our business, as Procore was initially built to bring efficiency and collaboration to the job site, unlocking value for the people with mud on their boots. We believe AI stands to be an even more meaningful catalyst than any that we've seen before. Procore's category leadership position did not arrive overnight. We started as a system of record for the built world, and we have evolved into a system of collaboration as we hit scale across the globe. Over time, we earned the right to turn trusted, dynamic data into action. Today, Procore is a digital window into the built world. We are where physical assets and activities are digitized and where actions are taken to change the physical world.

This journey is what makes our move into Agentic AI feel inevitable rather than opportunistic, and our recent tuck-in acquisition of Datagrid leverages this leadership position to accelerate our AI strategy. We believe that the combination of Procore Helix and Datagrid will generate notable product synergies due to our highly complementary capabilities and roadmaps, bringing premier advanced reasoning and broad third-party integration capabilities into Procore. We call this combined offering Procore AI. To demonstrate the potential of Procore AI, I'd like to share a recent example from a superintendent at a joint Procore and Datagrid Enterprise GC customer that showcases our most recent advanced reasoning capabilities. Like most superintendents, their day consists of walking the job site and taking videos to share with off-site stakeholders. On this particular walk, they noticed a potential issue with a structural column.

They took a video and sent the footage to our AI agent with a simple prompt: "Identify the issues here." Using advanced reasoning, our agent didn't just watch the video, it understood it. By simultaneously analyzing the audio and video cues, the agent identified the exact column and utilized reasoning to know where to go in Procore to pull the drawings, specifications, and documents related to that column. The agent concluded that the column had been incorrectly coded, determined the required rework, automatically created the work order, and notified the relevant stakeholders. The agent also triggered related downstream workflows in Procore, halting further work on that area and scheduling the rework. Historically, these tasks would have demanded several hours of manual effort and individual expertise to navigate across project specifications. This is not just a hypothetical possibility.

This is a real-world example of Procore AI turning a standard job site walkthrough into an autonomous resolution. This illustrates the true power of Procore AI's construction-aware multimodal reasoning. This scenario occurs thousands of times across the job site. This is true special-purpose AI, built for construction. It has the domain expertise to understand the context, the access to search records, and the authority to trigger actions, and it was built for project teams out in the field, delivered through the tool they use every day. This seamless integration of intelligence and utility is a direct result of four foundational points that will enable us to lead in the AI era. First, as construction's mission-critical system of record, with nearly three million active users, Procore has a massive proprietary dynamic data set, and the value is not only in the volume of data, it's in the depth of its context.

Thanks, Ajei, and thank you to everyone for joining us. The main topics I would like to cover today include our Q4 and full year financial results, additional color on the business, and our outlook for fiscal 2026. Total revenue in Q4 was $349 million, up 15.6% year-over-year. Our Q4 international revenue grew 14% year-over-year and was impacted by currency headwinds. On a constant currency basis, international revenue grew 15% year-over-year. Q4 non-GAAP operating income was $52 million, representing a non-GAAP operating margin of 15%. As for our key backlog metrics, current RPO grew 22% year-over-year, and current deferred revenue grew 18% year-over-year. As you heard from Ajei, Q4 was an exceptional quarter to round out a strong year.

Let me share some additional color on our performance. Beginning with the top line, our strength in the quarter came from robust execution across multiple areas of the business. We are seeing broad-based momentum upmarket, higher pipeline conversion, and improving renewal and churn rates, which we largely attribute to our go-to-market operating model. Our strength upmarket is reflected in the number of six- and seven-figure deals, which grew 20% year-over-year on top of a very strong performance last Q4. The total number of $100,000+ ARR customers now totals more than 2,700. Within our strength upmarket, we ended the year with 115 customers spending more than $1 million in ARR with Procore. This represents 34% year-over-year growth, further demonstrating our ability to scale to the largest customers around the world.

We also continue to see strong momentum with Procore Pay, ending the year with nearly 450 customers, representing more than 70% year-over-year growth. As we've been messaging throughout 2025, we believe the number of $100,000+ ARR customers is the best representation of our business performance and our revenue growth, as it represents the vast majority of our customer base at 66% of total ARR. In contrast, our total customer count growth is heavily impacted by our SMB customers, and therefore is not reflective of our underlying business performance. As such, and in line with our commentary to investors over the past year, this will be the final earnings we will be disclosing total customer count. However, we will continue to disclose the $100,000+ ARR customer count on a quarterly basis.

Our strength in the quarter also contributed to the strength in CRPO. This metric continues to benefit primarily from longer average contract duration. When normalizing CRPO for this dynamic, the year-over-year growth is consistent with both Q4 revenue growth and ending ARR growth. Once contract duration stabilizes, reported and normalized CRPO growth will eventually converge with revenue growth. With respect to margins, we delivered 400 basis points of margin improvement for the year, all while investing in our go-to-market operating model and our platform. While our margin improvement may not be linear within the year, we will continue to deliver incremental margin expansion on an annual basis, which is also reflected in our fiscal 2026 guide. Now let's turn to our north star metric: free cash flow per share.

We delivered our strongest free cash flow quarter in history, generating $90 million in the quarter, bringing full-year free cash flow to $215 million, representing 69% year-over-year growth and a 16% free cash flow margin. This result reflects our strong bookings, which translated into higher billings and collections, as well as continued margin expansion. We are also focused on limiting our share count dilution rate. Our weighted average diluted share count grew less than 1% in Q4, which reflects our continued discipline on equity compensation. We believe our share count growth is a leading indicator of SBC leverage over the long term. SBC, which is a lagging indicator, can be impacted by accounting rules that have no impact on dilution.

Our Q4 results were an example of this, with SBC increasing to 23% of revenue, driven by a one-time charge of unvested equity related to the transition of our former CEO. This charge only impacted the P&L and was not an acceleration of equity compensation payout. Excluding this one-time charge, SBC would have been 16.6% of revenue, which is in line with Q3. Our Q4 and full-year results demonstrate that we remain focused on delivering durable growth, margin expansion, and modest share count growth in order to compound free cash flow per share. Our strong results and momentum were all achieved before any material top-line benefits from AI that we expect to realize in the future. Looking back on the year, I am proud that we delivered on the commitments we made for fiscal 2025, particularly while facing ongoing headwinds from a challenging construction environment.

Our go-to-market motion is yielding tangible and more consistent results, characterized by improved sales productivity and a noticeable shift towards larger enterprise-wide relationships. This motion, combined with the compelling ROI of our platform, has not only solidified our category leadership, but has also created a more durable business. More importantly, we have achieved this while remaining laser-focused on our north star metric: free cash flow per share. With that, let's move on to our outlook. For the first quarter of fiscal 2026, we expect revenue between $351 million and $353 million, representing year-over-year growth of 13%-14%. Q1 non-GAAP operating margin is expected to be 14%-15%.

For the full year fiscal 2026, we expect revenue between $1.489 billion to $1.494 billion, representing total year-over-year growth of 13%. We expect our non-GAAP operating margin guidance for the year to be between 17.5%-18%, which implies year-over-year margin expansion between 340-390 basis points. Additionally, to closer align our guided metrics to free cash flow per share, we are now formally guiding free cash flow margin on an annual basis. We expect free cash flow margin for the year to be 19%, which implies year-over-year margin expansion of 270 basis points.

To wrap up, we are pleased with how we ended the year and the momentum we have across multiple aspects of the business, and we are confident that we can deliver on our promise of a stronger P&L in Fiscal '26. We expect our category leadership, strong execution, and AI capabilities to drive shareholder value in the years ahead. With that, let's turn it over to the operator for Q&A.