Procore Technologies Stock

Hello, everyone. Thank you for joining us, and welcome to the Procore Technologies Fiscal Year 2026 Third Quarter Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Gal Munda, Investor Relations Gal, please go ahead.

Good morning, and welcome to Proker's 2026 Third Quarter Earnings Call. I'm Gagan Munda, VP of Investor Relations. With me today are Ajei Gopal, President and CEO and and Rachel Pyles, CFO.

Further disclosure of our results can be found in our press release issued last night, 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 performance, our platform, products, our partnerships, customer demand, AI, drone deploy and our business strategies and operations. 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 4, 2026. Procore undertakes no obligation to update any forward-looking statements, except as required by law. If this call is replayed after today, the information presented may not contain current or accurate information. Therefore, statements made during this call 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.

And with that, let me turn the call over to Ajei.

Good morning, and thank you for joining us. I'm excited to report that our business continues to perform exceptionally well with outstanding financial and operational results for the quarter. Procore has built one of the most essential vertical software platforms. We are at the center of the construction industry. capturing information, automating workflows and enabling collaboration among every stakeholder on a project.

We operate with a physical and digital worlds meet, driving designs and decisions into the field and turning jobsite realities into actionable intelligence. We believe we are well on our way to becoming a next-generation AI native construction management platform and a true system of intelligence for construction. One that automatically sees what happens in the job side understands what it means and act on it. Such a system will deliver meaningful efficiency and safety gains across the construction life cycle, saving our customers time and money.

This quarter, we completed our acquisition of drone deploy, which adds visual intelligence to our platform and accelerates our transformation. I'm also delighted that the executive changes we made earlier this year are already making a difference.

Procore now has a veteran team with deep vertical software experience that is working well together and driving outstanding results. At ground break, our customer conference, we hosted more than 5,000 attendees, and what I heard from customers there strengthened my belief in our portfolio and the value it delivers.

I'm more confident than ever that the strength of our business, our ability to execute and the depth of our customer relationships gives us a clear runway to durable growth meaningful margin expansion and compounding free cash flow per share. Q3 picked up where Q2 left off, and both revenue and margins came in above the high end of our guidance.

Revenue for the quarter grew 18.7% year-over-year or 17.1% year-over-year, excluding grown deploy, and non-GAAP operating margins was 23.5%. Given this momentum, we are raising full year guidance beyond our Q3 beat.

Rachel will share the details shortly. Growth this quarter came from all 3 of our customer stakeholders, general contractors, specialty contractors and owners. GCs are our largest segment at about 60% of our business, and we see opportunity in both new logos and expansion. For example, in Q3, we signed a new contract with Suffolk a top 25 ENR contractor and long-time customer to leverage Procore to standardize their project and financial management workflows into more of their many projects.

The company uses Procore to consolidate field to office workflows and improve project team performance and efficiency. One of our largest contracts this quarter was with Schneider Electric Secure Power, a specialty contractor that designs, builds and manufactures data center infrastructure. As the company ramps up production to meet hyperscale AI demand, it is expanding Procore usage across the Secure Power organization and broadening the solution scope to include project execution and resource management to connect engineering, program and project management, and construction field operations, with the goal to unify the customer execution and experience from deployment through handover.

Owners are another important part of our business. And in Q3, we added a notable new one, a U.S. government agency. This contract was won in part, thanks to Procore for government's FedRAMP Moderate authorization. The agency is replacing both a competing solution and spreadsheet-based project tracking.

By standardizing growing distribution and version control on Procore, the agency aims to eliminate manual revision management, enable real-time reporting and meet federal security requirements.

During Q3, we completed our acquisition of Jon deploy. As a software offering, grown deploy works across various hardware environments, including drones, ground robots, mobile devices and cameras, connecting what Procore already knows about a project with what drone deploy sees on site is how we build the system of intelligence I described earlier. Product integration is underway, and our early focus is on expanding the pre-acquisition connectivity between the 2 product suites, connecting data sets and bringing drone deploys AI agents into Procore AI.

Moving to go to market. I'm excited about the revenue synergy opportunities ahead of us. At the time of the acquisition, Procore and drone deploy shared approximately 600 customers, which shows clear demand for the 2 product suites working together. Beyond expanding within those customers, we see significant near-term cross-sell opportunities in both directions.

Procore customers can add visual intelligence that works natively with the Procore tools they already rely upon. And many drone deployed customers are owners to whom we can introduce the full set of Procore's owner solutions.

Rachel will discuss the combined financial outlook shortly. Procor shift to an AI native company builds on 4 advantages, which are hard to replicate.

First, users data in context. More than 3 million active users this year more than 20 years of project data and activity history, and now drone deploys approximately 20 trillion square feet of visual data.

Second, security and trust. Customers already run their most important projects on Procore's platform, which is designed to be secure and compliant.

Third, our network effect. Dozens of companies work together and Procore in every project and each new project can bring more of them onto the platform.

Fourth, action. Procore is where decisions turn in to work on the job site. We believe these 4 advantages empower us to use AI more effectively to both augment our flagship products and to create new offerings. We are using AI to make our flagship products more powerful and easier to use. This helps us attract new accounts and expand usage within existing customers.

Takes the middles, one of construction's most labor-intensive schedule critical workflows. A submittal shows the GC and design team exactly what a subcontractor plans to install, and nothing gets ordered or installed until it's approved. The GC runs both ends. It builds a log of every submittal the spec requires, sends it to subcontractors and then approves or rejects each response.

Our submittal builder, part of our flagship project management offering builds that log. It cut days of coming through spec books down to minutes, but it only read the submittal section of the spec book. Our recent AI upgrade reads every section in full. It catches requirements buried elsewhere like warranty and closeout items and fills in each submittals type and title.

Teams start from a far more complete log and finish in a fraction of the time. We're also building products that weren't possible before generative and agentic AI, including Procore AI Go and our digital coworkers, which became generally available in Q3. One of them, the submittal review agent handles the GC's review at the other end of the workflow, a problem software hadn't previously solved.

It checks each submittal against the specs and contract flags deviations and unapproved submissions and drafts a response. Macao and Gordon, the Kansas City GC shows how the pieces fit. It is already standardized on the upgraded submittal builder, and they recently signed on for Procore's digital coworkers using the submittal review agent to check subcontractors responses.

In one case, the agent caught 10 door openings missing from a submittal before the error reached the field. avoiding costly rework. Procore AI Go, introduced a ground break is a voice-first mobile app now in beta. Cruise asked questions about the drawings, specs, RFIs and submittals and here are the answers without stopping work. Through a new collaboration with Meda, workers can use Procore AI Go hands free on Meta's AI glasses.

On the construction project, one question is rarely a single task. Answering it can mean pulling dozens of records from multiple tools and checking each against the current borings and specs. Version 3.0 of MAG Buy, the reasoning engine behind Procore AI breaks questions like these into parts, sending specialized sub agents across the project and return answers with cited evidence. Based on our internal testing, we believe Mac by outperforms the leading frontier models and construction tasks.

At ground break, we also reaffirmed our commitments to improving the core products our customers rely on every day and we are delivering. Beyond our new AI offerings, we shipped more than 500 new capabilities in the last 12 months. We have delivered every major product that we announced at last year's groundbreak in GA or beta. That track record is what earns us the right to introduce customers to new technology. And as we saw at groundbreak, customers are excited about our new AI offerings. Procore AI Go and Procore's digital coworkers enable customers to see what's actually happening on a project, understand the impact of decisions and then take action to change the outcome. That's real value for customers. It offsets labor shortages and saves time and money.

We believe that the opportunity is large and that AI will help us unlock labor budgets that sit outside traditional software spend. At ground break, we introduced new and expanded partnerships. NVIDIA's CEO, Jensen Huang, joined us virtually to announce that we are extending our digital twin capabilities beyond AI data centers to other mega projects, including health care facilities and critical public infrastructure. The solution now in closed beta lets teams see a project in realistic 3D and understand how disruptions would ripple through the schedule, so they find problems earlier and avoid costly rework.

Switch, a joint Procore and NVIDIA customer designs, builds and operates advanced data centers. Switch uses 3D visualization to gain greater clarity into construction progress. make better informed decisions earlier and keep complex projects on schedule. We also announced a partnership with IBM that creates a continuous flow of acid data from the job site into IBM Maximo, IBM's enterprise asset management software.

For many owners, asset handover is still slow, manual and error-prone with turnover packages assembled from spreadsheets and untagged photos. Partnering with leaders like IBM, lets us focus on our strengths while reaching a broader customer base.

To summarize, Q3 was another excellent quarter for Procore. We exceeded the high end of our guidance on every key metric and raised our outlook for the year. We delivered new capabilities across our flagship products, made Procore AI's Digital Coworkers generally available. and closed and began integrating grown deploy.

All of this serves our vision and mission of improving the lives of everyone in construction. With a platform that connects those stakeholders a growing AI portfolio and an experienced leadership team, we are well positioned for durable growth, meaningful margin expansion and compounding free cash flow per share. I'm excited about what's ahead.

I want to thank my colleagues around the world. Their hard work drives our success and our customer success. And with that, I'll turn the call over to Rachel. Rachel?

Thanks, Ajei, and thanks, everyone, for joining us. Before I get into the numbers, a note on Hai will present them. With the drone to Play acquisition closing on September 9, I will review our Q3 results, excluding drone deploy consistent with the guidance we gave in July, and I will also give you the consolidated figures.

For the outlook, I will provide the total revenue, including the inorganic contribution of drone deploy. The supplemental presentation on our website shows the bridge between the two. As Ajei highlighted, we had an excellent Q3. Excluding drone deploy revenue was $397 million, up 17.1% year-over-year an acceleration from 15.8% in Q2.

That was $13 million above the high end of our guidance range, our largest dollar beat since 2023. Revenue outperformance was driven primarily by stronger bookings and the consistency with which they landed throughout the quarter, including $5 million from drone deploy reported revenue was $402 million, up 18.7% year-over-year. Our non-GAAP operating margin, including drone deploy of 23.5% and was 400 basis points above the high end of our range.

Free cash flow was $73 million, an 18.1% margin, including approximately $19 million of onetime cash costs at the closing of drone to play, primarily the accelerated vesting of certain drone to play equity awards. Excluding these onetime costs, free cash flow was $92 million a 23% margin, up 36% year-over-year.

Our Q3 international revenue grew 30% year-over-year or 26% on a constant currency basis. We ended Q3 with broad-based momentum and strong execution across our portfolio. The improvement in large deal execution that we highlighted in Q2 continued this quarter and was the single biggest contributor to our bookings strength.

Our new go-to-market leadership team has improved our execution, and we are now seeing the success of that work. We are seeing customers continue to commit to larger, more strategic partnerships with us which speaks to the critical role we play in their operations.

The quarter was well balanced among our stakeholders, and that balance gives us confidence as we head into the final quarter of the year. Our booking strength in the quarter is also reflected in CRPO, which grew 22.6% year-over-year, excluding drone deploy, an acceleration of approximately 70 basis points from Q2. Most of that growth came from the strength of our underlying bookings, particularly the large strategic expansions we signed in the quarter. Average contract duration increased again, but by less spend in Q2, including drone deploy, CRPO grew 28.9% year-over-year with drone to play contributing approximately 6 points.

Turning to profitability. Non-GAAP operating income was $94.4 million and our consolidated non-GAAP operating margin reached 23.5%, a year-over-year improvement of approximately 620 basis points. That improvement reflects the operating leverage in our business model and disciplined spend. and it comfortably absorbs the modest dilution from closing drone to play in the quarter. Most importantly, this quarter is a further step along the trajectory of profitable growth we outlined last quarter.

Next, a brief update on drone deploy, which we closed on September 9. As a reminder, we acquired Drone Deploy for $845 million in cash. We financed the transaction with cash on hand and the proceeds of our $950 million 0 coupon convertible notes due in 2031, which we issued in August. Concurrent with the convertible note offering, we repurchased approximately $175 million of our shares. We believe that the demand for that offering was a strong signal of support for our strategy as we continue to invest in best-in-class solutions to deliver on our vision of improving the lives of everyone in construction. Our financial view of the transaction is unchanged, and drone to play's early performance is in line with our expectations, with revenue tracking slightly ahead.

Drone deploy contributed $5 million of revenue and for the approximately 3 weeks since close, and our guidance includes approximately $19 million of inorganic contribution in Q4 or approximately $24 million for the full year.

The acquisition is accretive to our revenue growth, and we are absorbing its near-term margin headwind while still raising our FY '26 margin guidance and reiterating our FY '27 outlook. We will continue to disclose its inorganic contribution separately through Q4 and then provide a view of the expected inorganic contribution for FY '27.

We ended the quarter with $614 million in cash and investments. Separately, our Board has adopted a new share repurchase authorization for $300 million, consistent with our prior program.

With that, let's move to our outlook. Our approach to guidance is unchanged from prior quarters. I will give you Q4 and full year guidance on a reported basis, including drone deploys inorganic contribution. The bridge is included in the supplemental materials on our website. For the fourth quarter, we expect reported revenue between $420 million and $422 million representing year-over-year growth of 20.9% at the high end.

That includes approximately $19 million of inorganic contribution from Demdeplay. Excluding drone deploy, the range is $401 million to $403 million or 15.4% growth at the high end. Q4 non-GAAP operating margin is expected to be between 15.5% and 16% on a reported basis, which includes dilution from drone to play.

For the full year we now expect reported revenue of $1.557 billion to $1.559 billion, representing year-over-year growth of approximately 17.9% at the high end which includes approximately $24 million of inorganic contribution from DroneDeploy. Excluding drone deploy, that is a raise of approximately $21 million at the high end. We are also raising our non-GAAP operating margin guidance for the year by 50 basis points to 19% at the low end and 19.5% at the high end on a reported basis, including the dilutive impact of drone deploy, which implies year-over-year margin expansion of 540 basis points versus 14.1% in FY '25. I

Finally, free cash flow. We are maintaining our FY '26 free cash flow margin guidance of 19.5%, excluding the onetime drone deploy closing costs I described earlier. For the year, these costs total approximately $23 million or 150 basis points. After accounting for those impacts on a reported basis, we expect free cash flow margin of 18%.

Looking ahead, we remain committed to driving sustained efficiency, and we are reiterating our FY '27 guidance for non-GAAP operating margin of 25%. As a reminder, our preliminary FY '27 operating margin target does not depend on the revenue growth outlook for next year, which we will introduce with our Q4 results.

As we scale further, we will continue to optimize our cost structure including tailwinds from AI efficiencies. In that context, we disclosed at ground break that more than 80% of our code is now written by AI. In summary, we delivered an excellent quarter that showcases the strength of our financial model with organic growth above our expectations and a significant step-up in our operating margin profile. Our execution over the last few quarters has been consistent, and we are taking that focus into the final quarter of the year.

With that, let's turn it over to the operator for Q&A.

[Operator Instructions] Your first question comes from the line of Saket Kalia from Barclays.

Sure. Ajei, maybe for you. First of all, it's great to see the business accelerate organically. Maybe the question is, can you just give us a state of the union on how Procore push to sort of gain more wallet share in the ENR400 is going? And maybe specifically, how much is that sort of helping with this better growth versus maybe what seems like underlying improvement in the construction market overall?

Great. So Saket, thanks for the question. The overall macro from this quarter to last quarter is pretty consistent. And so there hasn't been any fundamental change in the overall macro. And you asked specifically about large contractors Look, they have -- when I talk to them, they're oversubscribed, they have really healthy businesses.

They've got significant backlogs. And their constraint is really not having enough people to get the work done. So when I think about our relationship with them, there's a couple of things. There's a product and the go-to market. So let me just briefly talk about product. We have more product capabilities than we've ever had. And you heard me in my prepared remarks, I talked about the capabilities that we announced at ground break and that we have through the year.

I talked about enhancements to the flagship products, how we are adding AI to the flagship products. And then, of course, all of this, the AI activity that we've put in place around the C understand a loop and the new products that we've built. It's generated a tremendous amount of excitement in the market, and you certainly saw that a ground break.

And this is exciting to both existing as well as potentially new customers. And customers are thinking about how we can help them address some of these challenges. I mentioned this is a ground break for Ovel, an incredibly large contractor. They are looking at redoing some of their fundamental processes rebuilding them because they have a profound shortage of skilled labor.

And they're working -- we're working with them around AI and using Procor Digital coworkers who try to see if we can help them optimize their performance and drive some of these really large projects. So there's a lot of activity that I'm excited about from a product perspective.

On the go-to-market perspective, Walt is a proven operator and I say that having worked with him for many years, and he's been personally involved in some of our largest deals. He's built -- he's bringing deep experience in building relationships at the most senior levels in our customers. And so those relationships are deepening and broadening. So we continue to see a lot of opportunity in large deals and with large customers.

Got it. That's great to hear. Rachel, maybe for out for you. First of all, thanks, Tom, for the clear disclosure on DroneDeploy. My question is around. -- your customers continue to partner with you for longer durations. How do you think about the impact on CRPO? And do we still expect this growth to eventually moderate organically?

Sure. So as you noted, CRPO did go up this quarter, and we signed a lot of large strategic deals. If we take out drone deploy from the increase in CRPO, it was up 22.6%, so about 70 basis points faster than we saw last quarter. Now most of that was underlying bookings. The contract duration did go up a little bit, but it went up actually less than it did last quarter. When we look at CRPO on a normalized basis, it's growing in line with revenue and ending ARR growth. And so I think we have not yet seen that duration stabilize. It is accelerating at a slower rate but not yet stabilized.

Your next question comes from the line of Josh Tilton with Wolfe Research.

Maybe my first one Ajei, your message has and continues to be that of durable growth. However, today, you're obviously accelerating growth. It sounds like the improvements in execution are driving better underlying booking trends. You also have new AI offerings. And I'll say everyone that I spoke to at groundbreak about DroneDeploy was pretty bold up. Ao my question is, should we view this as the new baseline of durable growth for Procore?

Firstly, thanks for the question. I'm glad you enjoyed groundbreak Look, we're not giving any kind of long-term view of the business at this point, where specifically, I think, talking about kind of where we are I think the -- I think what you're seeing in our results is a reflection of both the product capability and our ability to execute. And I also think that the acquisition of DroneDeploy, as you pointed out, I think that's really very consistent, very consistent with our strategy on being able to see, understand and act.

And when you put all of that together, customers are seeing the innovation that's coming out of Procore. And customers are also seeing the relationship in terms of both customer success as well as the sales relationship moving in a really positive direction. So taken together, we're excited about our business, and we believe we bring real value to the market.

Super helpful. Maybe just for a quick follow-up. Any clarification you can give us on the acquired deferred revenue from DroneDeploy,maybe just what the organic deferred revenue growth was in the quarter?

SP1 Sure. So you'll see this in our 10-Q, but the opening balance sheet contribution from DroneDeploy is about $37 million on deferred revenue.

Your next question comes from the line of Brent Thill with Jefferies.

Ajay, you're 1 week away from, I think, your 1-year anniversary. I'm just curious if you kind of look back and say what has surprised you the most? And then maybe if you could just talk about the international business. good acceleration. What -- what are next steps there to unlock what is your biggest opportunity?

Look, I think coming on board as a new CEO, you obviously have to spend time on strategy you have to look at the operational capabilities of the business and make sure that you have the right people to deliver against it. It's sort of the strategy, operations and people. Those are the kind of loops that are on a company.

And what I would say is I am delighted with the people that we have at Procore. We have people up and down the chain who provide incredible value to customers every day. Obviously, we've made some changes to the executive team. But we have experts who collaborate exceptionally well, and that's fantastic.

As far as the operations go, obviously, we've made some changes, but that -- the results of the last few quarters should speak for themselves. And I'm really excited about the rate of innovation, the success that we're driving to the customers. And the depth of the relationships with our customers, I think, is something that is unique hallmark of Procore.

And you certainly saw this reflected at groundbreak. Strategically, we had to deal with a -- obviously, a very rapid change in the AI environment. And I think that I'm really excited about how the company has responded -- we've talked about the C understand strategic paradigm that has been the basis of driving some of the decisions that we've done, the acquisition of DroneDeploy the new AI products, including things like Procore AI Go -- all of those, I believe, are spot on.

And we -- I feel like we're really -- I feel very excited because the capabilities that we're providing are resonating with customers. So it's been a really interesting year. And what I've particularly found gratifying is the relationship that we have, the depth of the relationship that we have with our customers, and frankly, the dedication of Procorions around the world to our success.

As far as -- you asked about international as well. So international, I think Rachel said this has -- we've had another strong quarter revenue was up 30% year-over-year. I think it was 26% in constant currency. And that's not an accident. If you look at some of our international success -- it's been pivoted upon having both the right product as well as the right go-to-market. And so what I talked about in the last call, I think was the one before, I talked about how we're investing in a product that is specifically purpose-built for the U.K., Ireland and European market, a common data environment.

We focused on building that product. We concluded that product. We released it, and that's been a real step forward that's resonating with customers. And of course, we have a good market around it. Each local market has its own requirements. And so as we enter these international markets, it's about understanding the product market fit and making sure we have the right capabilities and then, of course, building the go-to-market around that.

Your next question comes from the line of Taylor McGinnis with UBS.

Congrats on a really strong quarter. So first, you mentioned the strength was largely driven by your own execution, but hoping you could just give a bit more color on the areas that exceeded your expectations? When I look at the numbers, it looks like international was a big one and large deal activity. But when you think about the biggest unlock for the growth algo, I'm just curious if there's anything you'd highlight more specifically?

Sure. I'll start, and then Ajei can jump in here. For us, the growth was really broad-based. So it didn't come from any one particular place. We saw strength across our stakeholders, that's GCs, subcontractors, owners. And then we also saw success both internationally and domestically. So really, the growth was broad-based.

Perfect. And then, Rachel, maybe just building off of that. If I look at the organic revenue growth guide for 4Q, stronger than what we've seen in past guides. So one, is that indicative of the organic inflection you expect to continue to see in the business, and maybe secondly, I know you mentioned in your prepared remarks that the guidance philosophy remains unchanged. But just given the various levels of outperformance we've seen so far, could you just unpack the assumptions embedded in the guide?

Sure. So for the full year, we did raise the guidance by $45 million at the high end. Now that included $24 million of inorganic contribution from DroneDeploy. If you set that aside, the underlying business is performing really well. we beat the guide by $13 million this quarter. We flowed that through to the full year and then we're also raising the Q4 guide as well. So what you're really seeing is the momentum that we had in Q3, giving us confidence as we go into Q4. But nothing about our guidance philosophy has changed.

Your next question comes from the line of Joe Vruwink with Baird.

Ajei, something that really stands out in your remarks today and also I hear Ambra is wanting to see if the job sites, and it does seem like Procore has taken the most aggressive stance around capturing the visual elements of construction I'm just wondering about all the strategic implications of this and whether the end outcome might actually be your ability to bring faster automation to customers if agents don't have to work through, maybe established workflows or document heavy workflows.

If the path is faster -- if you're overseeing kind of the visual side of the site.

Joe, thanks for the question. I think at the end of the day, -- what -- the C understand Act paradigm, we put that in place because -- if you anthropomorphize AI and you put it in the complex situation like a construction site, that's what you have to deal with. You have to be in a position to bring the physical into the -- you have to bring the physical into the digital. You have to understand what's taking place based -- and it has to be based on what's actually taking place, not some theoretical view that someone built months ago. You need to know exactly what's happening. So that's the -- the immediacy of the physical meeting the digital. That's why we needed to see.

And then, of course, they understand and act, I think, are failure obvious. So the C understand Alok is really part of the way that we've been thinking about it and that's influenced a lot of the activities. On the Act piece of it, Construction is kind of a unique vertical because you've got multiple stakeholders and working together and they are real financial consequences to decisions and decisions, you need to be able to log and understand those decisions. That's 1 of the reasons why we've -- that's one of the reasons why Procore has been successful as we brought all of these stakeholders together in this rigorous environment secure environment.

And certainly, from our ability to act its being able to tag information so that we -- people understand what drove decision-making. And so that's really an important aspect. So this whole loop drives drives the way that we've been thinking about our AI strategy. Now as you extrapolate, you can take it in multiple directions. And certainly, you can -- I think you're referring to, can you see an extension that moves into robotics? Or can you see an extension in other areas? And those are all things for the future. But I think the -- obviously, we support robot cameras and things of that nature, but if you're thinking about full-fledged robotic construction, that's something for the future. But the reality is that this paradigm, the strategic paradigm gives us -- if you forgive upon lots of legs as we start to build our -- as we build our business going forward.

That's great. Thanks. If I can follow up, any stats to share on the adoption of the digital coworkers. I think this was the first full quarter of their broad commercial launch and -- it might just be too early still, but when you mentioned maybe capturing labor budgets, what that looks like in practice?

I think it's -- look, I feel really good about where we are. We're 3 months into general availability there's a lot of demand. But as you know, we're early in the adoption cycle, and I think we're exactly where we need to be. I think the technology is resonating. I'm really excited about MAG 3.0, which is the reasoning engine we showed a groundbreak, and I would direct you guys, there's a blog on MAG that we just got published today, and I would direct you to that. that shows it performs really well.

And in a cost-efficient manner, we're really excited about May -- and even though it's early days commercially, I gave you a couple of examples on the script, I talked about Mccowan Gordon and earlier I talked about Perovial. These are sophisticated customers, and they are seeing value in the technology, and they are using the technology to solve real and fundamental problems, the one of their big challenges being how do I deal with the labor shortage supporting my industry.

So we are excited about this about what we've done, and we feel like we're in a really good place given how early the release has been.

Your next question comes from the line of Matt Martino with Goldman Sachs.

Maybe just taking a step back on Magpie. A lot of software companies are building their own layer between the model and the work their customers do. So as those underlying models get better, what does the company like Procore actually need to own to keep its advantage? And how does owning that piece change what customers will pay you for?

I think it's worthwhile -- maybe in response to your question, if you indulge me, perhaps it's worthwhile by stepping back and trying to take a top-down view on that question. So I'll talk about the application kind of what we have and what we built. The first thing to recognize is our customers build buildings they'll obviously, they'll run IT information technology. They'll use implementation technology. They're not in the business of building information technology, they build buildings. And construction is really unlike any kind of horizontal application or vertical application.

And there are a few reasons I mentioned them already, and let me quickly go through them. One is scale. In construction, you've got hundreds of thousands of documents. You've got gigabytes of data including multimedia data, that's spread across multiple locations. It's unstructured and a decision that's captured in some documents some place could have a profound impact somewhere else on a schedule or it could trigger rework, and you need to be able to kind of have a broad view across all of this.

Secondly, I mentioned this earlier, it's the physical and the digital. You have to be able to reason about what's actually happening on the site as opposed to a digital abstraction of what's going on. You need to know what's really taking place. The other thing is the application is being used by people who are physically on the job site. And you can't fire up a laptop and take advantage of technology. You've got to start to deliver technology in a manner that's appropriate that means mobile, smart classes, things of that nature of voice.

And as I said earlier, it's multiple stakeholders working together and that's real money every day decisions that are being made. And when a decision is made, you need to know who made that decision, otherwise billing and payments won't work. So you need a secure system.

I've talked about kind of the -- a lot of the moat that we've built over the years, and I mentioned this in the script, so I won't repeat it about data and users and context and security. And that's what gives us kind of the foundation on which to build.

And what we've built is essentially a multimodal index, that beats the drawings and photos, meeting minutes, it reads them all we have a construction ontology and ontology is a live map of the construction logic based on our years of working in the industry, our decades of working in the industry, that connects kind of documents, actions and decisions and we can recognize patterns across these things before they can turn into rework.

And our reasoning engine Mac by, which I talked about earlier, what that does is it breaks complex SaaS down it can route each step to the right tool, the right model, including open weight, and it can cite government -- the specification or the drawing or whatever it is used behind every single answer.

So that's a lot of machinery that we've built. And then we've done acquisitions with respect to drone deploy, I already talked about drone deploy bringing dual intelligence into the proper family. So the physical world comes in. And then, of course, these new applications like AI Go and these Digital Coworkers, which -- and AI Go, obviously, is supports mobile devices, the integration with Meta, with smart glasses and of course, the digital coworkers as well as AI inside our flagships.

That is a significant corpus of work. And we're excited about it. It's something that gives us, we believe, differentiation in the market based on our experience, based on our history, based on our understanding of the customer, the unique nature of the customer, what we've built, what we've acquired. And we believe that this gives us the foundation for this rock-solid system of intelligence that delivers for our customers in a complex environment.

So we're excited about this. It is an important aspect of our strategy, and we believe that we're well on our way to delivering what we need to.

Appreciate the perspective there, Ajei. Rachel, for you. Look, if the recent acceleration in organic growth persists, how much flexibility do you have to reinvest behind that momentum while still delivering the 25% fiscal 27 margin target? And are those productivity benefits you're seeing from AI materially changing that trade-off between growth investment and margin expansion?

Yes. So I don't think that we are in a position where we have to make a choice on growth versus profitability. We're still investing significantly in the business. We're investing in new capabilities for our customers. We're investing in AI, we're -- what's really changing is the scale. So we've reached a point where we don't need to add operating expenses in proportion to revenue. You see that for sure in the back office in G&A.

So that means that every dollar of revenue is coming with higher incremental margins. The margin expansion that we're planning for is a natural result of the financial model. It's not about pulling back on the investment. And so I feel really good about our ability to continue to invest in the capabilities that our customers need while also doing it in a very profitable way.

Your next question comes from the line of Jay Lascar with Griffin Securities.

Ajei, Rachel earlier this year, you introduced 4 new bundles. Could you comment on the contribution of those new bundles to results so far and what your expectations might be for those? And more broadly, before I ask a follow-up, what is your philosophy towards product packaging and segmentation, particularly as the portfolio has become increasingly complex.

So I'll start with your question on the bundling. So as you noted, we did roll out new bundles this year. What we like about those is that they give customers a way to expand with us depending on what they're looking for. And so we have this concept of good, better, best, and you can kind of move through those packages and then you get more and more features and functionality, depending on what package you're in.

And so for example, in some of the higher tiers you would have access to more of the AI capabilities that are embedded within our platform. And so I think those are performing really well. We've been really pleased with them, in particular, as we bring new logos on that's a helpful way for them to kind of buy and sort of simplifies the buying experience for them.

And as far as the packaging is concerned, Jay, the bundles gives and we have an opportunity as we think about packaging to figure out how we can add value to customers when we bring incremental capabilities in. So I'm thinking about tiers of capabilities. So if you think about some of the packaging that we introduced earlier, it's -- at the low end, you have a certain subset of capabilities.

And obviously, you've got more at the high end. And as we start to introduce AI capabilities into the flagship offerings, for example, some of that can happen more at the higher-end tiers within some of these bundles and so we have an incremental ability to monetize some of those capabilities.

So it really gives us our flexibility as we start to think about deploying products, as you note, we have lots of products, and it's fairly sophisticated. So selling a SKU at a time, sometimes it's less efficient than thinking about it from a bundle perspective.

You noted earlier go-to-market and I just commented to a prior question regarding internal investing, a short-term question, over the last few months, there's been a bit of an uptrend in your open sales positions since the spring through the end of October.

On the other hand, the positions related to customer success or what might otherwise be called applications engineers, has been flat to actually tailing off a bit. Wouldn't it stand to reason that particularly with all the new products coming to market and all the complexity in the portfolio, we just talked about there would be more of a rebuilding or addition to that field support or AE support capacity?

Jay, we've got a lot of great people across the company who are able to support our customers. As Walt is taking a broad -- and of course, customer success as part of Wells organization. As Walter is taking a broad look and he's been with the company for about 6, 9 months, as he's taking a broad look at the go-to-market, he's organizing his teams in the most effective way that's necessary.

Your next question comes from the line of Adam Borg with Stifel.

Awesome. Jump all for either Ajei or Rachel. When we think about the data center opportunity, it was great to hear continued momentum in the customer example you talked about -- maybe talk a little bit more about the momentum of the business, the current size of the business. And if you just think about the recent election results from last night, does that have any impact on the data center market opportunity for you guys? And then I have a follow-up.

Yes. So let me start, and then I'll turn it over to Rachel. Look, data centers are clearly important, and they're a very complex build. AI factories are -- as they sometimes Vertu are complex. They're sophisticated. They need to be built quickly. And that's exactly the kind of the complexity that Procore can help solve. But it's important to understand that our exposure -- we price on annual construction volume.

Many of our customers are building data centers, of course, but they're also building hospitals and they're building warehouses and they're building residential, multifamily and manufacturing. They build different multiple things. And we're exposed to that entire nonresidential multifamily end market, not just to one segment. I mentioned earlier that our customers many of our customers have a significant level, significant backlog.

And that backlog is across the spectrum of market or subsegments that they support. And so they're not building one thing, they're building something else. Their gating factor is labor. They're gating factor is the ability to be able to get to the backlog and to be able to move forward.

So our exposure to data centers is roughly in line with the overall market. obviously, be very capable of supporting these complex bills, which is why, and as customers are building, you certainly see that and you see us highlighting that. But at the end of the day, you have to understand that we are tied overall to the construction of the annual construction volume, and our large customers do multiple things, not just data centers.

That's really helpful. And maybe just as a follow-up for Rachel, I really appreciate all the inorganic disclosures across the business. One I was curious about was just drone deploy and your international exposure. So any color there on of the $5 million in the quarter or the $24 million for the year, how we should think about international versus domestic? And any color on inorganic to total RP would well would be really helpful.

Yes, sure. So on international, we haven't disclosed that specifically, but you should think about it as roughly in line with the Procore business, so not different than our core business, not having a significant impact on those splits at all. And then in terms of the inorganic contribution on CRPO, so as I mentioned in the prepared remarks, if you exclude the contribution from CRPO is about 21% of the increase in CRPO growth in CRPO was 22.6%, up from 21.9% in the quarter prior.

That was great. I was just talking total RPO, any color there, if not, really appreciate it.

No, I don't think that we have disclosed that.

Your next question comes from the line of Jason Celino with KeyBanc Capital Markets.

Maybe this is a build off of Adam's question. But if we annualize the Q4 revenue from DroneDeploy, we get like $76 million I think when you acquired it, is it done $78 million on a last 12 months basis. Is there something about the Q4 seasonality with DroneDeplo? Or are there certain accounting haircuts? Maybe that is my first one there.

Yes. So when we announced the deal, we said that drone deploy would be accretive to growth, dilutive to margins and cash flow breakeven. That's exactly how it's playing out. So in Q3, it contributed $5 million of revenue. That was for roughly the 3 weeks after September 9. For Q4, we expect the inorganic contribution of $19 million. So that's about $24 million for the full year? And then to give you a sense of scale, their trailing 12-month revenue as of September was about $83 million. And then we're absorbing the margin dilution in our 25% target for FY '27.

Okay. Great. That's very helpful. And then nice to hear the U.S. agency win. I'm just curious, is this the first U.S. agency that you have as a customer and then curious if there is a percentage of revenue that you have in your business today that you attribute specifically to public sector?

Yes. No, it's a -- we obviously have U.S. government customers. But this is about FedRAMP because FedRAMP is really an important aspect of this particular contract. And what's important to recognize is that -- we have customers who deal with both federal business as well as nonfederal business. They're as not GCL uniquely focused on just the federal business. For example, I mean, there may be some, but many of them focused on will do everything, including federal.

And so having that capability, the FedRAMP capability helps us certainly with GCs who are specializing on the federal business, but it also helps us more broadly across other general contractors who are looking at a broad portfolio of activity, including federal. So that was an important piece of work that we did earlier this year. We were very proud of the rate and pace at which we were able to get that done, and that's obviously yielding results.

And then just to add on that in terms of the contribution -- if you think about what Ajei said, it's not just specific U.S. government customers, it's really broader than that. So from our perspective, we see FedRAMP as helping us only get public sector business, but also customers see that designation, and that kind of assures them of the security of the platform. And so we think about it as helping us across a broader base than just pubsect.

Your next question comes from the line of Alexei Gogolev with JPMorgan.

Congrats with great results. I wanted to start with gross margin, Rachel, it stayed at 84% even as AI prudence and 1 employees consolidated. So what's the sensitivity of gross margin to AI compute at scale?

Yes. So first of all, AI is already built into our core products. And as you noted, our gross margins have been stable. So while there is some gross margin impact from our new agentic Digital Coworkers, we're seeing efficiencies elsewhere in the business, and we've contemplated all of that in our 25% operating margin target for FY '27. We don't see AI as a structural risk to the margins, and that's really for 3 reasons.

So first, we price our agents on usage. So customers are committing to a level of consumption cost is a component when we consider that pricing.

Second, the cost of AI is coming down. models are getting smarter. You don't need the most sophisticated models for every task. And so it's about using the right model for the right task. That's very similar to what we saw happen with cloud infrastructure costs and how those came down over time. Same thing is happening with AI just at a much faster pace.

And then finally, third, customers really want certainty over their spend. So we introduced control tower, we demoed that at ground break, and customers can use that to see exactly how much their team is using in selements. -- we're not selling an all-you-can AI solution.

Okay. And Ajei, very strong gross revenue retention of 95%. Could you maybe decompose what's driving that renewal execution versus pricing or customer health? And are you seeing any churn, downsell, concentrated thing in cohorts, specs versus specialty or domestic or international?

Nothing stands out. It's very consistent. Our business performance is very consistent as it has been in multiple quarters, that 95% is pretty consistent across multiple quarters. Look, at the end of the day, what customers care about is are we able to help them solve their problems, and they want to be able to build buildings.

They want to be able to manage those buildings. We sell to GCs. We sell to owners we sell to specialty contractors. And what you're seeing is innovation across the portfolio that's giving them the tools that they need to be able to do their jobs. And so obviously, that shows up in the performance of our business, and I'm excited about that.

We have reached the end of our Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon, everybody. Thanks for hanging around for the last session of the day. It should be a good one. We've got Rachel Pyles, the CFO of Procore. Rachel, welcome to the conference.

Thank you. Great to be here.

Awesome. Well, let's start it off high level. You joined Procore alongside a new CEO, a new CRO. Business is entering an important next phase. A few months into the role, what has surprised you most about the business? And what do you believe matters most as Procore enters this next chapter?

Yes. So when I joined the company, what I was really excited about was a compelling financial profile, strong performance of the products and customer sentiment. And I have been surprised by just how much customers love Procore. I saw that when I did my initial diligence on the company and deciding to join. I heard from customers how much they liked it. But then that has really shown through every time I go on the job site tour, I hear that. And so that has really surprised me.

Have you been putting the hard hat on a lot since you joined?

I have actually had the opportunity to do several job site tours. So I did one in my hometown of Cincinnati. And then I've also done -- I did one in New York. I've done them in Austin. So I love going out to...

Awesome. I love that. Well, let's move to the financials. So Procore has been sustaining mid-teens growth through one of the more difficult construction environments in recent memory. What does that performance tell you about the underlying strength of the business? And how does it influence the way you think about Procore's potential growth through a healthier cycle?

Yes, for sure. So Procore has been able to sustain that growth that outpaces the market really because of 4 things. So the first is that construction is a very undigitized industry. And so we continue to sign new logos onto the platform. And a lot of that comes from customers who aren't even using anything today. So they're not using another software. They're coming on. This is kind of their first construction tech investment. So that's kind of one way we've sustained the growth. The other way is that within our existing customer base, we have the opportunity to increase our share of wallet. We have a land-and-expand motion.

So when you sign with Procore, you typically buy our project management solution and you commit to a small piece of your volume because you're not going to switch out something mid-project. You're going to wait until the project finishes and put new projects on to the solution. So you commit to a small amount of volume. And then at the next renewal, you add more volume in the next renewal. And so we think it takes roughly 3 contract cycles to get all your volume.

In addition to that, we sometimes have large customers where the buying decisions are somewhat fragmented. And so you may sell the product to one part of a business and they may not use it across all the company, and then you're selling it again to another part and again to another part. So that's another opportunity for us to expand.

In addition to that, the next lever that we have is going into adjacent stakeholders. So Procore started as a tool that was really for general contractors. We've expanded now into serving owners and subcontractors. Owners and subcontractors were used to using the solution because we really have created this kind of a network where the general contractor is using Procore and they are able to give access to it to their subcontractors and the owner of their project. They start to use Procore and then think, "Hey, maybe I want Procore for myself." We've also made investments that are specific to those stakeholders, things like capital planning for an owner or resource management for a subcontractor.

Okay. I definitely want to get into owners a little bit down the line here. But maybe just to think about the broader growth algorithm and maybe the path to the next stage of scale, how do you see the relative contribution of new customer acquisition, construction volume and broader platform adoption evolving over time?

Yes. So today, about -- when we think about our new business, about half of that is coming from new logos and then the other half is coming from expansion within our existing customer base. That comes from those share of wallet gains that I talked about a minute ago and then also cross-selling additional products. If we think about growth in the future, I see continued opportunity to cross-sell new products. And so specifically, I would highlight our AI capabilities as one way for us to do that. We just closed our acquisition of DroneDeploy yesterday, and we're really excited about the cross-sell opportunity that, that also brings to us and the enhancements to our AI capabilities that now having reality capture gives us. So we're excited about those.

And then in addition to that, I really see an opportunity within international. So we've made some investments in there that are starting to pay off. And so I see that as another lever for us as we kind of go into the future.

Okay. Great. Let's touch on the quarter. It feels like forever ago, but it featured stronger bookings, several significant enterprise wins. What's changing in Procore's ability to win larger and more strategic relationships? And how much runway is there to really deepen that over time?

Yes. We were really excited about our performance in the quarter. We did have strength in large enterprise deals, but the growth was really broad-based across customer sizes, across geographies and across stakeholders. In terms of enterprise contracts, customers continue to want to expand their relationships with us. We have a strong sales motion around that, but really, our growth was broad-based.

Okay. Great. Let's talk about owners. It's -- owners are interesting because it can sort of shape the technology standard across an entire capital program. With portfolio management and capital planning now coming into the platform, how could that change Procore's position with owners and across the broader project ecosystem?

Yes. So if you think about a general contractor, they're using Procore to get all of their projects done. It's kind of the lifeblood of their company, really. They're like running their product through Procore. If you're an owner, though, if you're an owner builder, that likely works for you and you want that same sort of capability. But if you're an owner operator, you want to be able to look across all of your projects and see exactly what's going on. And something like capital planning gives you the opportunity to do that.

And so we really designed those additional modules or features, if you will, as a way to give a product to the owner that was specific to the owner, where we didn't want them to come to Procore and say, "Well, this is a GC product that I'm using as an owner." We wanted them to come in and say, "This is a product that was designed for me." And that's really what those enhancements were meant to do.

We also have a product that connects the instances. So if you're an owner and you want to use Procore across all your projects and then you're working with the GC who's also using Procore, we can connect those 2 instances and you can share things seamlessly in between them. So the GC gets what they need, the owner gets what they need and then Procore is able to essentially monetize that ACV twice.

Right. Okay. And owners seems like a place with a lot of white space because you're -- it's only a fraction of the ARR today, and you've now got an anchor product to land with. So I guess what's the aspiration from a growth standpoint, even maybe across the stakeholders?

Yes. So GCs remain our biggest penetration or the biggest part of our portfolio, but owners and subcontractors are continuing to become bigger pieces. And actually, owners in the second quarter was our fastest-growing stakeholder segment. Now I don't think you'll ever get to a place where it's 1/3, 1/3, 1/3, but I do think we have a lot of opportunities in owners and especially as we've made these investments in products for them, I think that's continuing to drive the growth.

Okay. Great. And I think international was another sort of standout in 2Q, we finally saw the growth rate inflect there. It sounds like Europe, Middle East were good contributors to that. So what's driving the improvement there? And what's going to determine whether international becomes a more consistent contributor to growth over the next couple of years?

One of the things that we learned as we investigated international, and it's been an area that we've looked at for some time, and I think many of you have heard us talk about it before. What we realized is that what the product needs to do is a little bit different than what it needs to do in the U.S. And so what we needed to focus on was making sure that we had product market fit that would go into those regions. And so you saw us make an investment in a common data platform, CDE, and that really has contributed to that growth. We did that specific to the U.K. and Ireland. That was kind of our first release of that.

The other thing that's important when you go international is having a local sales presence and go-to-market is also really important in that region. So we shifted the go-to-market to address that specific to the U.K. and Ireland. So we're excited about the traction that, that's getting now. We see further opportunity to address that local go-to-market through potentially a channel partner motion, which many of us on the management team have had success with in the past. And so we see that as a way to kind of address that specific nuance with the European market.

And maybe like 2 follow-ups there. I guess like on the localization point, I think this is something Procore has talked about for a while. So is there something, I guess, in more recent months that you've done to sort of tweak the motion there? I'd be curious to kind of get your perspective.

Yes. I think this happened before I got to Procore. But over the last year, we kind of changed the go-to-market motion in Europe, having a leader there, putting feet on the street there and having sellers there, and that has really yielded success. Now obviously, as soon as you do it, you don't get success the next quarter, right? It takes time. And so now you're kind of seeing that come through in these results with that change many months ago.

Okay. Great. Let's switch gears to everyone's favorite topic, data centers. It was a meaningful source of demand in 2Q. You're already serving many of the large projects out there. As customers scale their build-outs globally, where do you see the next leg of growth? Is the opportunity mainly driven by more projects and more geos or by expanding Procore's role into, let's say, adjacent workflows before and after the construction phase?

So we have great product market fit in data centers, both from the GC side, but also from the owners side. So we can kind of attack it from both of those angles. I think that as the data centers continue to grow, more and more data centers getting built, we obviously have an opportunity to capture that through our GCs and owners. But then even over time, the owners of data centers, that's an opportunity for us.

If you also bring in our recent acquisition with DroneDeploy, they also have a presence with data centers and owners. And so that kind of builds on that. So data center certainly is an area with good product market fit. In general, Procore serves all industries within construction. So we're not necessarily over-indexed to data centers. But certainly, as data centers grow, that helps us, but there's other parts of the construction market that aren't growing, and so that kind of offsets.

Okay. Great. I'd love to spend a minute on just sort of moat competition. Like Procore spent years building a platform that connects owners, general contractors, subcontractors. What are you seeing in that position that creates advantages that would be difficult for, let's say, a point solution to replicate?

Yes. So that network effect is really kind of the strategic advantage that Procore has. So we are not a system where you go in and just your company is using Procore. When you buy Procore, you use Procore, but then all of your subcontractors are using Procore and your customers actually, right, the owners of these buildings are also using Procore, which is very unique. If you think about other software that organizations buy, typically, you're buying software that sits within your organization and you don't have third parties coming in and using it. That's very different for us.

And that gives us an advantage because if you think about -- if I were to put in a point solution or some other solution, I would have to train all of those third-party users to use my thing. And they've gotten really used to using Procore because we are so penetrated in the industry, it's become sort of an industry standard to use Procore. In fact, many engineers graduating going out into the construction industry have learned to use Procore at their universities.

So they're coming into organizations saying, "I want to use Procore, I've learned how to use Procore." I had a -- I was on a job site tour, and I heard one of the -- I think, a project manager where she said, "Hey, I was at a company that had Procore. Then I came here to this company and they didn't have Procore." And I said, "When are you getting Procore?" And then they got Procore, and I was really excited. So you have people coming into these organizations saying, "Hey, I want to use Procore." It's become that kind of standard.

Okay. So a lot more folks championing the software. I guess maybe just relate that to just broadly what you're seeing in the competitive environment, right? You've got Procore as sort of the predominant platform, but then there is another competitor out there in the category who's trying to do something similar. So what are you seeing in terms of competitive win rates in the deals that are competitive, appreciating that there is a lot of greenfield out there?

Yes. So we continue to win against our competitors in places where it is competitive. We haven't really seen a change in the win rates. If you just take a step back and look at the numbers because I like to look at the numbers, we, if you think about what our guidance would be for revenue, are around $1.5 billion, our closest competitor, I think, is just over $600 million. If you think about how many dollars we're adding every year versus how many dollars they would be adding every year, we continue to win more and more business. So we feel really good about our position.

All right. And let's maybe talk about some of these products that I think are certainly important to the story, but maybe don't get as much play every quarter, right? Financials, pay, preconstruction, resource management. That gives Procore several different avenues to deepen the customer relationships. So when you look across the platform today, where do you see the largest untapped monetization opportunities?

Yes. So I think I said a moment ago that we -- project management is like the big thing and you had to buy that first. The next 2 that get bought the most often are financials and quality and safety, although those continue to be, I would say, underpenetrated. So opportunity certainly exists there. And then I'm really excited about our AI products that just went live in July. I think we have an opportunity there to cross-sell those into our customer base and really tap a different part of a customer spend than we have historically.

Yes. Let's talk about digital coworkers because they're now live, and I think you've got some folks that are moving from concept into production deployment. So as you've spent time with early customers, which use cases have generated the strongest response? And what have you learned about where AI is creating the most meaningful value today?

Sure. So we designed our digital coworker packages kind of based on feedback we got from customers and where we heard they got the most value. So our entry package is our Digital Coworker Starter Pack. And in the Starter Pack, you get access to 5 agents, daily logs, submittals, RFIs, deep search and contract review. That's where we saw customers getting the most value initially. And so we put those into the Starter Pack as a way to essentially prove value to the customer at a price point that was known to them. It's a fixed price. It's over 3 projects that's very contained, but it gives you the opportunity to try out these agents.

We saw customers do tasks on submittals where it would have been taken them a week to do something. Now it's 10 minutes. So certainly, there's definitely an ROI there with some of these use cases. Now that's in the Starter Pack. You can then -- assuming you really like the Starter Pack and you want to move up, we also have the Pro package where you have access to over 20 agents, and they do more complex tasks.

And then you can move into our Enterprise package where you have access to more agents and then also access to Agent Studio, where you can actually build your own agents and customize them to your workflow and prove out some of your company-specific use cases right in Procore where you know your data is governed, where the security is there and kind of all the advantages that come with having it all inside of Procore.

So 20 agents is a lot of agents and then Agent Studio doing like bespoke custom agent work. That's very technically, I suppose, complex for maybe a lot of the customers that you're selling into. We hear a lot from folks that sell into physical industries that there's sort of a spectrum of maturity around technology adoption. So in terms of your customer conversations today, like where are we for, let's say, the mass market in terms of being able to adopt this technology?

Yes. So what I learned when I asked that question to customers is they're at varying places, which is why we have those varying packages because it's all about how do we meet them where they are. So if you are very sophisticated and you want to build your own agents, perfect, Agent Studio. If you're like, hey, I'm not really sure about this, well, let's try the Starter Pack. In our industry, customers want to get their building done faster and more efficiently, and they want to be on time and on budget, and they're going to do things that make their job easier. They will adopt technology if it gets them an outcome.

But they are not going to adopt technology just because it's the latest technology. So I don't think if you talk to the construction industry, everyone working in there is out getting the latest foldable iPhone, they're probably not doing that. But if you can give them something that simplifies what they're doing, they'll adopt it. And if you think about something like the daily logs agent, when I talk to a superintendent, he's like, "Every morning I come in, I spend a few hours every day reading through daily logs and checking, okay, we need to do this. We need to do this. We need to do this." Now if I go to him and say, "Hey, we have an agent now that does daily logs, you can come in the morning and execute your agent or it just runs by itself, and then we'll come back to you with the list of things you need to do." He's going to adopt that because you just made his life easier. If I told him he had to code that agent, like that's not happening.

Yes. Okay. Very clear. Let's talk about the pricing model around digital coworkers. So historically, Procore is priced on construction volume, right? And then digital coworkers arguably creates the potential to participate in labor and productivity budgets as well. So how do you think about the way that could change how customers measure Procore's value over time, if you will?

Yes. So what we heard from customers is they want predictability in how these coworkers are priced. They don't want to get into a situation where they have bought XYZ coworker and then -- and they thought it was going to cost them, I'm making this up, $50,000, and then it actually costs them $500,000, right? I mean they just -- that's not going to work for them. So what we heard from them is they want predictability. And so I think over time, we're going to see pricing models evolve where you could get to an outcome-based pricing, you could get to maybe ACV-based pricing, you could get to maybe volume of data or -- but the idea is you need to give them a metric that they can use to predict so that you can price it appropriately. So the answer to your question is it's evolving, and we are still kind of very early days in the go-live of these products.

And I guess I'd be curious like how you guys are thinking about -- internally about how you're scaling sort of digital coworker. Like what's the aspiration on sort of attach rates and monetization? Like when should we expect that to play out?

It's still definitely early days with the product only being live for a couple of months. But we have this vision of being able to solve more and more complex problems for customers. That was why we did the DroneDeploy acquisition because today, in Procore, you have the ability to act and the ability to understand, but we didn't have the ability to see. And in an industry like construction, you need to bridge the physical with the digital to see the realities on the job site and then take action on them. And so for us, we think that, that is the future of construction. And so we would have a vision of all of our customers use these digital coworkers.

Great. Well, we've referenced DroneDeploy a couple of times. I want to bring that into the discussion now. This, to your point, gives Procore a visual understanding of what's happening on the job site alongside the project and the workflow data that you already have in the platform. What made that combination strategically compelling? And where do you see the greatest potential for these 2 businesses to come together?

Yes. So DroneDeploy was a long-time partner of ours. So we knew that the solutions were complementary. So that was kind of the first thing. If you go into our marketplace, they were one of the most popular things that our customers wanted in the marketplace. So we knew there was kind of a strategic fit just going into it. And we already had a connection to them through that, which makes the immediate cross-sell opportunity really viable. And so that was something that I was excited about when looking at it.

Thinking about it longer term, though, the digital coworker strategy is what really made that compelling. So contrary to their name DroneDeploy, DroneDeploy is not just drones. They don't sell any hardware. They are a software business. Their software is hardware agnostic. So you can think about it on a drone, a robot dog, a hard hat camera, a fixed camera that is on a post at a job site. It can be a mobile phone taking the pictures. What -- the value that customers get from it is this visual understanding of what those pictures are. So you can think about in Procore, I have a BIM drawing of what my job site looks like. Now I have a picture and the software knows that, that picture goes in that BIM drawing and now I can see the visual representation live of what that actually looks like. So I see my drawing and now I can see that in real life in a picture.

And how does that tie back to the digital coworker?

So now if I know that I took a picture and there was supposed to be ductwork here and there's not ductwork there. Well, now the software knows that, and it kicks off a workflow that says, "Hey, there was supposed to be ductwork there, there's not, what's going on?" Or imagine a column that you find a safety issue on. Well, now we can kick off the process to let the subcontractor know, now the subcontractor is going to come and fix it, then there's going to be confirmation that, that has been fixed. So think about being able to see what's on the job site and then knowing what workflows to kick off and that all happening autonomously without the intervention of a human.

Okay. Yes, really compelling. I guess, how should we think about sort of like the integration time line here? Obviously, you had an existing partnership. So I wonder sort of like how much leg work there is on the technical side, the go-to-market side. Just tell us a little bit more about how you plan to integrate this.

So we already had a partnership, which means our platform is already connected. So we can immediately start cross-selling it, and we're really excited about doing that. In terms of the digital coworker and building those out, that's going to take longer. It just closed yesterday. So I don't have a time line to give you, but we're really excited about the opportunity. And then if you just use -- think through the Datagrid acquisition that we did, we were able to integrate that very quickly into our platform, and we were really excited about being able to do that.

Great. And then just on DroneDeploy, like this was a pretty significant capital commitment pretty early in your tenure. So what does that transaction tell us about the types of opportunities Procore is willing to pursue? And what criteria will effectively guide future acquisitions?

So the first thing -- the first comment I would make on that is that M&A in and of itself is not a strategy. We think about M&A as a way to execute against our strategy. So Procore has a strategy, and we execute against that in our capital allocation. So first, our organic investments are in support of that strategy. Then we invest in strategic M&A, but it's got to be something that is part of our strategy and that's accelerating our road map and that we can fit into our financial profile. And then our final priority is returning capital to shareholders to the extent that we are not able to invest it in those other ways.

Okay. I think, look, the other big stamp you made on the business was you guided to this 25% non-GAAP operating margin in fiscal '27. You're still investing across AI, international, new products. So tell us a little bit about what gave you the confidence that the company can deliver that level of profitability while also preserving the capacity to pursue its growth opportunities.

Yes. So when I came into the company, I talked to a lot of investors after the first quarter I was there, and I heard from a lot of people, hey, Procore has constantly said we can get to best-in-class margins, but we haven't seen evidence of that necessarily. And so I took that back and we really spent time going through the cost structure and looking at where are there opportunities to scale and get leverage in the business because there isn't anything structurally about Procore that says we can't have the same margins as vertical software peers. We can. And so the question was, well, how quickly can you get there? And what does the milestones really look like? And so we put out that milestone for 2027 to give investors a view on how we were thinking about the first step in getting there.

And so I think like best-in-class for vertical software is pushing 40% plus. Is that sort of the aspiration for Procore?

I mean, I think there's no reason that Procore cannot get to those best-in-class margins. Now obviously, we're not going to get there in 1 year, but it's going to be a process to get there. But we wanted to put out the first milestone to put out that first marker, but that is just the first milestone. That is certainly not the destination when it comes to the margin.

And can you just like peel back the layers of efficiency that you see in the model? Like what should we be looking at across sales and marketing, R&D, G&A because I'm sure you did this very bottoms up.

Yes. Yes. So if I just kind of step through the P&L, I'll start with sales and marketing. We made a lot of go-to-market investments when we did our go-to-market transformation just 18-plus months ago. Those are starting to pay off. And so you're starting to see leverage coming out of those investments that we made. I think you'll continue to see that over time. If I move down then to the R&D line, we are seeing improvements in R&D because of our use of AI. R&D has really been the first place where we've seen efficiency gains with AI, both in our ability to deliver products sooner, but then also in our ability to do that more efficiently. And so that's another area where I'm seeing leverage.

And then finally, from G&A, when you think about where the company has come from, when you are a start-up and you're moving into an IPO, you're focused on grow, grow, grow. And you're investing in sales and marketing, you're investing in R&D and then kind of the back office is just whatever we need to do to make sure that we bill the customers and collect the cash and kind of run the back office, they're sort of the last ones to optimize because that's just not where your focus is. Now that the company is maturing and kind of coming out of that cycle, we're going to focus on G&A and kind of optimizing those processes to get the efficiency that we should out of them.

Okay. And then maybe take the other side of that. Where are the investment priorities? Like what has the highest potential return just in terms of the investment envelope going forward?

Yes. So we're certainly investing in AI. So you've seen that -- us do that now with 2 acquisitions. So we're clearly putting a lot of capital into AI. So that's certainly an area that we believe in. We have put money into international. I think you'll see us continue to do that. And we've also put money into some of these adjacencies and getting the product in a place where it's built out for these adjacent stakeholders, and I talked about some of those with owners, subcontractors, et cetera.

Okay. Great. And maybe just to close out in the last couple of minutes we have here. As you look out over the next 3 to 5 years, what do you think investors will view as the most important thing Procore accomplished during this next chapter of the company's evolution?

Yes. So the first thing I would highlight is we are focused on continuing to kind of live out our mission of connecting everyone in construction and simplifying and making everyone in construction's lives easier. And so the fact that us continuing to do that for our customers is going to be success. And then on the financial side, just if you take a step back and look at kind of what's the most important metric to think about, I continue to think that maximizing free cash flow per share is something that we're going to be focused on doing that kind of brings it all together at the end. And so that to me would be success.

Excellent. Well, I think that's a great place to leave it. Thank you so much for joining us.

Yes. Thank you for having me. And thank you all for staying until the last meeting of the day. So I appreciate your endurance.

Yes, thank you, all.

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Procore Technologies, Inc. FY '26 Q2 Earnings Call. [Operator Instructions]

I would now like to turn the call over to Matthew Puljiz, SVP of Finance. Please go ahead.

Good morning, and welcome to Procore's 2026 Second Quarter Earnings Call. I'm Matthew Puljiz, SVP of Finance. With me today are Ajei Gopal, President and CEO; and Rachel Pyles, 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 performance, platform and products, customer demand, business strategies, transactions and operations. 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 July 30, 2026.

Procore undertakes no obligation to update any forward-looking statements, except as required by law. If this call is replayed after today, the information presented may not contain current or accurate information. Therefore, statements made during this call 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.

And with that, let me turn the call over to Ajei.

Good morning, and thank you for joining us today. I'm delighted to report that our core business continues to perform very well as evidenced by our outstanding financial and operational results for the quarter. Nearly 9 months into my tenure as CEO, I have a clear view on Procore's go-forward strategy and the operational rigor needed to execute it, and I'm more excited than ever about our prospects for the short and long terms.

Procore has built one of the most essential vertical software platforms in the industry. A system of collaboration that creates a powerful network effect across the industry's stakeholders. We sit at the intersection of the physical and the digital world, where the decisions made on paper meet the realities of the job site. I believe we have the opportunity to lead in the AI era by continuing to build a true next-generation AI-native construction management application that delivers meaningful efficiency and safety gains across the construction life cycle. Saving our customers time and money.

We have taken concrete steps towards that vision, through both organic development and two targeted acquisitions, including our agreement to acquire DroneDeploy which we announced yesterday. Even as we pursued our strategy, we have continued to execute, recruit key personnel and organize ourselves for success. This quarter's outstanding results and our raised expectations for the year reflect that discipline. My conversations with customers these past months have only fortified my conviction in our business and our path to long-term value creation.

I'm confident that the strength of our business, our ability to execute and the depth of our customer relationships give us a clear runway to durable growth, meaningful margin expansion and compounding free cash flow per share.

Let me start with the quarter. Q2 was an outstanding quarter for Procore, where we delivered 15.8% year-over-year revenue growth and 21.5% non-GAAP operating margin, which represents 800 basis points of year-over-year margin expansion. I'm excited that in Q2, we signed a contract for the King Salman International Airport or KSIA in the Kingdom of Saudi Arabia. This public investment fund project, which will become one of the largest airports in the world is implementing Procore for unified digital construction management.

Working with strategic delivery partner to Salman, KSIA will use Procore to have one connected source of project data from design through delivery with stronger governance and transparency from the earlier stages. To reflect our momentum in the market, I'm pleased that we have raised our annual guidance just as we did last quarter. I am also excited about the margin expansion we have delivered over the past few years. The operating leverage we are building and our commitment to sustained profitability. Rachel will walk through the details in a few minutes.

Our core U.S. residential and multifamily construction market has experienced significant growth deceleration over the past 2.5 years, leading to negative growth in late 2025. Despite this, Procore has sustained mid-teens top line growth, significantly outperforming the end market and reflecting the critical nature of our products and our ongoing success across stakeholders.

Today, we are seeing an uneven end market with weakness in certain subsectors, such as manufacturing and unprecedented strength in data center construction, driven by ongoing investments in AI. In the U.S. alone, construction spending in the data center subsector has tripled over the last 3 years, according to Goldman Sachs Research. Commercial real estate services company, JLL reports that nearly 100 gigawatts of new data centers will be added between 2026 and 2030, doubling global capacity.

The enormous magnitude of spending on data center construction will continue to drive top line benefits to Procore. And of course, any acceleration in data center construction would be an additional tailwind for us. Procore is the market leader in data centers with 9 of the 10 largest North American data center sites using our solutions during construction. Because data centers is a highly sophisticated facility built on the tight deadline. Our customers rely on Procore to automate approvals and communication and to keep every stakeholder collaborating in real time on a single platform.

We are expanding our solution set with new product capabilities in connected commissioning and asset workflows. And through our NVIDIA partnership, we are streaming Omniverse powered 3D digital twins of data centers directly inside Procore. In Q2, we closed our largest contract in EMEA history. A nearly $7 million agreement with a European company that builds hyperscale AI data centers across Europe, the U.S. and APAC. This company will use Procore as a system of record for the entire global construction program, including project execution, document control and cost management. In the process, this customer will replace size spreadsheets with a single standardized audit-ready platform integrated into ERP.

Moving to our products. Procore was founded with a mission to bring efficiency and collaboration to the job site. Since then, we have expanded our market leadership evolving from a system of record to a global system of collaboration. We are with physical assets and activities are digitized and where actions are taken to change the physical world. And our technology strategy is anchored by four key pillars: our extensive data set and depth of context, fueled by nearly 3 million active users, the trust we have established through a secure and compliant infrastructure, the powerful network effect of having dozens of stakeholders collaborating on every project and our focus on moving work forward in addition to providing insights.

Building on this foundation, we are now integrating AI into our platform's core to address the industry's most pressing challenges, including a labor shortage of nearly 350,000 workers in the U.S. alone. Our AI-powered digital coworkers are designed to bridge this gap by delivering purpose-built capabilities for every project stakeholder. To accelerate our ambitious road map, we are driving organic innovation alongside strategic acquisitions. Specifically DataGrid, which joined our portfolio in January and DroneDeploy our latest announcement yesterday.

After closing the DataGrid acquisition, we focused on technical integration and launched Procore AI through a dedicated specialist team working as an overlay alongside our core sales force. Our product enabled customers to use construction-specific AI natively and with full context within their existing Procore environment. In the last week, we have expanded our library of prebuilt digital coworkers to 20 AI agents purpose-built for construction, and we expanded sales to include our broader go-to-market organization.

Initial customer interest has been very positive with leading companies, including HASCO and Level 10 Construction amongst the early adopters. Another great example is Consigli a top North American general contractor and Procore customer for more than a decade. As part of our early limited availability program, the company moved from an internal AI hackathon to deploying four Procore AI agents in three test projects to help with common workflows like reviewing submittals or drafting RFI.

Switching drawings that once took their project engineers 30 minutes now takes 5. Material verifications that took 10 minutes can be accomplished in seconds. With that success, Consigli is now deploying the generally available Procore AI across 50 projects. We are very excited about the speed at which data grade has been integrated. The reception by our customers to our Procore AI strategy and the momentum we are building in our AI business. This early success gives us further confidence to make another AI accelerating acquisition in DroneDeploy.

I will cover the strategy around DroneDeploy, while Rachel will discuss the financial details. As a leader in reality capture and robotic automation, what we are calling visual intelligence DroneDeploy bridges the physical construction site with the digital world, delivering critical real-time visibility into job site activity. While its name reflects its origins with drone-based imaging, the company has evolved over the last 13 years into a fully unified platform for three-dimensional ground and aerial imaging. Spanning drones to ground deployed robots as well as mobile, fixed and wearable cameras.

Their products are based on artificial intelligence and machine learning with particular focus on computer vision and image recognition. Their robotics solutions enable robots and dock drones to conduct scheduled fully autonomous missions, launching, capturing and uploading data without on-site personnel. DroneDeploy is being used on over 3 million job sites across more than 180 countries, including many of the large data centers that I mentioned earlier. It is important to note that Procore and DroneDeploy offer complementary solutions that do not overlap. As long-term partners, we have market tested integrations that joint customers are using today. As soon as the transaction closes, we intend to rapidly build on those integrations to deliver AI-enabled intelligent multimodal capture via cameras, drones and robots deeply integrated into the Procore platform. We expect our augmented solutions will address some of the most challenging pain points customers are facing.

Building on their strong AI and technology foundation, DroneDeploy has recently developed three AI agents to enable customers to track progress like safety risks and monitor asset conditions. These agents, which are in the early stages of commercialization, are intended to optimize entire workflows, and they help point the way to how Procore AI will transform construction management software.

To illustrate, I'll reference the customer scenario I mentioned on our Q4 call. I described how during a job site inspection, a supervisor manually took videos of a column to share with stakeholders. An early incarnation of a Procore digital coworker analyze the audio and visual cues and the specifications and determined that the column had been coded incorrectly and ordered remediation. What would have normally demanded several hours of manual effort and specialized expertise to navigate across project specifications was solved by Procore AI in minutes.

When DroneDeploy added to the scenario, the manual job site inspection and logging up observations will no longer be the trigger. Instead, a multimodal perception capability driven by a range of cameras, drones, robots and other devices will regularly evaluate the construction site and automatically initiate any appropriate response, securely, compliantly and in the right context.

With the acute shortage of labor faced by the construction industry, even the simple example shows that AI-driven automation is a potential game changer because action can be taken without waiting for a site visit by an overscheduled supervisor. This example demonstrates how Procore in the future will incorporate a seamless integration of several capabilities, purpose-built for construction, specifically advanced reasoning or the brain, perception or the eyes and ears and a secure, collaborative and auditable platform where actions are taken or the arms and legs.

Such a system will enable us to deliver digital coworkers. For the field and in the back office. The track what's actually happening on a project make sense of it and they take action to change the outcome. That's real value for customers. It offsets labor shortages, and saves time and money.

Now let me talk about the power of data. Data is the lifeblood for AI. Access to relevant data separates a proof of concept from a mission-critical AI offering. DroneDeploy has captured 20 trillion square feet of visual construction data, an area about the combined size of California, Arizona, New Mexico, Texas and Louisiana. And it goes well beyond raw reality capture. That data includes tens of millions of user-generated annotations, image segmentation, construction progress labeling and well over 100,000 label safety issues. That data will enable us to create smarter AI solutions to solve genuinely meaningful problems in construction. Once the transaction closes, we plan to immediately cross-sell DroneDeploy solutions into our broader customer base and vice versa.

We already share nearly 600 mutual customers, including enterprise brands like Skanska and Turner, a substantial number that validates both the organic demand and the clear synergy potential. Beyond this overlap, we estimate that there are several thousand existing customers of Procore, who could benefit from a combined offering.

As a trusted partner, Procore is well positioned to drive adoption of DroneDeploy across those customers. As I reflect on the quarter, four key points stand out. First, our core business is performing incredibly well. Second, we have a well-defined strategy to emerge as a leader in the AI era. And I'm excited that DroneDeploy with its strong AI foundation will make a significant contribution to that strategy.

Next, even as we are implementing our strategy, we continue to improve our operational capabilities as evidenced by our exceptional results in the quarter and our raised guidance. And finally, as I speak with customers, I'm even more confident in our direction, our ability to execute as a success of our company. Let me end by thanking my fellow Procorians for their tireless dedication to our customers.

And with that, I'll turn the call over to Rachel. Rachel?

Thanks, Ajei, and thanks, everyone, for joining us. Before I get into the results, you will notice we are introducing a new supplemental earnings presentation this quarter, which can be found alongside our press release on our Investor Relations website.

We had an excellent Q2, beating the high end of our revenue guidance by approximately 2.5% and delivering our first quarter of GAAP operating profitability. Total revenue in Q2 was $375 million, up 15.8% year-over-year. Our Q2 international revenue grew 23% year-over-year or 19% on a constant currency basis. Q2 non-GAAP operating income was $81 million, representing a non-GAAP operating margin of 21.5% and up 800 basis points year-over-year. And free cash flow was $65 million, up 507% year-over-year.

We ended Q2 with broad-based momentum driven by strong operational performance and robust demand across our portfolio. Large deal execution led the way. We are seeing customers increasingly commit to larger, more strategic partnerships with us, which speaks to the critical role we play in their operations. When we look under the hood of the large deal performance, the strength was multifaceted. We gained significant traction landing high-profile new logos across both domestic and international markets while rapidly accelerating our momentum in large-scale data center opportunities.

This ability to win across multiple vectors gives us confidence as we head into the back half of the year. Our strength in the quarter also contributed to improvement in cRPO where our year-over-year growth rate accelerated by 100 basis points. The primary driver of this quarter's acceleration was stronger underlying bookings performance. cRPO also benefited from an increase in our average contract duration. When normalizing cRPO, the year-over-year growth remains highly consistent with both our Q2 revenue growth and ending ARR growth. As a reminder, once contract duration stabilizes, reported and normalized cRPO growth will eventually converge with revenue growth.

Turning to profitability. We are pleased with the margin expansion delivered this quarter, which is reflected in both our non-GAAP and GAAP results, the latter reflecting the company's first quarter of GAAP operating profit. This reflects not only strong execution across our teams, but also the growing inherent operating leverage in our business model. This quarter's performance is an initial step in a broader trajectory of profitable growth. Looking ahead, we are committed to driving sustained efficiency.

Specifically, we are initiating FY '27 guidance for non-GAAP operating margin at 25% which would represent nearly 1,100 basis points of improvement versus FY '25. As we scale further, we will continue to optimize our cost structure, which includes tailwinds from AI efficiencies. We intend to build on the significant margin expansion we've delivered over the past few years, carrying that same upward momentum into the future.

Next, I want to discuss our exciting agreement to acquire DroneDeploy for $845 million in cash. We approach M&A with a high bar for both strategic alignment and financial rigor. We selectively evaluate targets that can accelerate our strategy but maintain strict discipline by ensuring every deal is financially accretive to our business over time. That dual focus on strategic acceleration and financial returns remain central to our capital allocation philosophy.

As Ajei detailed, this acquisition represents an important component of our AI strategy, and we see significant synergy opportunities across the combined businesses that will directly benefit customers. To give you a sense of scale, DroneDeploy has generated approximately $78 million in trailing 12-month revenue. We expect this transaction to be accretive to organic revenue growth, and importantly, we expect to absorb their near-term margin headwind with no changes to the FY '26 and FY '27 margin outlook we have shared today. We remain confident in our multiyear margin expansion road map.

In terms of funding, we have arranged committed bridge financing to fund a majority of the purchase price while we evaluate and finalize our long-term capital structure solution in the most EPS-accretive manner. Because we expect the deal to close later this year, we will provide formal financial details along with any relevant capital updates at the appropriate time. With that, let's move on to our outlook. And to reiterate, this outlook represents our organic business and does not reflect any contributions from DroneDeploy.

For the third quarter of 2026, we expect revenue between $382 million and $384 million, representing year-over-year growth of 13.3% at the high end. Q3 non-GAAP operating margin is expected to be between 19% to 19.5%. For the full year '26 we are raising our revenue guide to a range of $1.51 billion to $1.514 billion, representing total year-over-year growth of 14.5% at the high end. We are also raising our non-GAAP operating margin guidance for the year by 50 basis points to be between 18.5% and 19% and which implies year-over-year margin expansion of 440 to 490 basis points.

Finally, we are raising our free cash flow margin guidance by 50 basis points to 19.5%, which implies year-over-year free cash flow margin expansion of approximately 310 basis points. It is important to note, we are confident that we can maintain our margin guidance post the closing of our acquisition of DroneDeploy.

In summary, we delivered an excellent quarter that highlights both our top line growth and expanding margin profile by pairing our underlying business momentum with the synergistic acquisition of DroneDeploy, which bolsters our AI strategy we are setting up the business for sustained profitable growth. We remain focused on relentless execution and building on this momentum to generate compounding free cash flow per share over the long term.

With that, let's turn it over to the operator for Q&A.

[Operator Instructions] We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of David Hynes with Canaccord.

Congrats on a nice quarter and the exciting acquisition. I'll just start with DroneDeploy. I'm just curious what convinced you that, that business was an asset Procore needed to own rather than continue to partner with? I mean was it the pace of AI innovation, was it what you saw with customer demand, something else? I'm just curious kind of the motivation behind the deal?

Sure, I mean, that's a great question. Look, we are seeing right now, I think it's stating the obvious. We're obviously seeing a profound transformational opportunity in the industry. I think AI is making an enormous impact on a number of different industries. And certainly, we see an opportunity for us to be able to create this next-generation AI-centric AI-first construction application, which we believe will have tremendous impact on our customers.

And as we start to lay out the strategy of what we needed to do, it became very clear that the perception piece of it was something that needed to be part of our strategy towards delivering digital coworkers. I mean when you think about the concept of a coworker, the whole idea is to be able to collect information, reason about it and act and one aspect of that collection was something that we -- that aspect of perception was something that we needed to add into our business.

And obviously, when you look at the technology that DroneDeploy had developed, we are long-time partners. We understand how to work with them. We have a great culture. They have deep technology. They have really great people. And we saw that opportunity to be able to integrate them into our organization very seamlessly. We had, as I mentioned in my prepared remarks, we have something like 600 or thereabouts combined customers.

And having seen success at those customers, that gave us confidence and certainly our diligence work as well gave us confidence that we have an opportunity post close to be able to introduce DroneDeploy in the short term directly into our customer base, we have thousands of customers who are not using DroneDeploy today, and that represents incremental opportunity.

So we saw -- and as part of this acquisition, we saw the opportunity to not only drive our long-term strategic direction towards creating digital coworkers with some great technology, we also saw the opportunity in the short term to be able to achieve some of the synergies that I think are relevant in an acquisition and the strategic acquisition of this nature.

I'd also make the point about robotics. And this is something certainly we all believe that robotics has a future to play on the construction side. And obviously, DroneDeploy has investments in robotics, and that exposes us to the future of robotics as well. So there are a number of areas where we were very excited about this technology, very excited about the company and great partner. But certainly, the opportunity right now to build this AI native application for the future is on us. It's right in front of us. We have a great strategy. We have great momentum and the ability to execute that is something that we value and we were excited about.

Yes. Yes. Makes sense. Maybe we could zoom out with like a bigger picture AI question. I'm curious if you started to see any relationship between platform maturity and kind of readiness for AI adoption. For example, like are customers with deeper Procore deployments, adopting AI more quickly? Or is demand kind of consistent across the installed base? I'm just curious kind of where you see the most fertile hunting ground in the early days of AI expansion.

Well, I think it's pretty clear to say that everyone I mean you have to be living under a rock to not have heard about AI and the opportunity to impact your organization. And certainly, our customers are very sophisticated and our customers have all tried to understand what the impact of AI could be on their organization.

But as you dig into it, it becomes -- the path forward becomes very clear. Our customers recognize as, frankly, we do in our own IT infrastructure when we think about our own applications, when we're deploying AI, we're relying on people and vendors that we've used in the past, and so when we want, for example, AI in our HR systems, we're going to use our HRIS and leverage that vendor.

In our case, with respect to Procore, our customers are -- our customers are using Procore as a system of collaboration. They're using Procore as a system within which they operate their business. And so when we talk about digital coworkers and the opportunity to go after a fundamental problem such as such as savings, for example, labor, that resonates as long as it works in the system within which they're used to working.

And so that's one of the reasons why we invested in making sure that our AI capabilities are integrated into Procore. And that's the work we did certainly when DataGrid came on board, it was integrating data grid into Procore to create this Procore AI capability that we just made available generally to the market.

So that's what -- that's really what I think customers are looking for is, can I take advantage of AI, but can I do so in a safe and secure way, in a way that's convenient for my business, so I don't have all my employees don't have to become AI experts, but I can get the benefit of that in the context of the work that I'm doing. And that's what we're trying to roll out and make our customers successful.

Your next question comes from the line of Adam Borg with Stifel.

Awesome. Maybe just internationally, it was great to hear about this large airport deal in Saudi Arabia and then you talked about the largest EMEA deal ever. Maybe talk a little bit more about like a state of the union of what you're seeing in that region, and how you think about the opportunity going forward?

Yes. Look, obviously, we have a business which is primarily focused on the domestic market and about 85% of our business is domestic and about 15% approximately by business international. And we've seen an opportunity to continue to expand internationally.

And one of the key things as we think about international -- well, actually, there are two key things. One is product and one is do we have the right -- do we have the right go-to-market motion. Walt, who recently joined our company as the CRO. Some of you know him, Walt has a great deal of experience in being able to build out international go-to-market, especially in a vertically-enabled software business such as ours.

What we're seeing is really a couple of different kinds of international customers or international geographies. So let's take U.K., Ireland, for example. So U.K., Ireland, there are some product differences between the North American market and say, U.K., Ireland and other parts of Europe. Because in Europe, the technology -- the customers are CDE led. So they require a common data environment within which they can work. And that's an important aspect, and there's some very specific requirements in the market.

This year, we launched a CDE specifically for Europe, and we have seen very positive customer feedback as a result of that. And so that gives me a lot of confidence in our strategy of being able to establish beachheads in geographies and expand. There are other geographies where the U.S. product that we offer is very consistent with the needs of the market.

And an example of that is in the Middle East. And that's -- so that's been an area where we have made some incremental investments and focus in the recent past, resulting in success. And certainly, I talked about a very important and valued relationship here with KSIA. So we're excited about international. It's -- we have a path towards expansion. It is still early days. But I think the framework is in place, and we're excited about our opportunities.

That's great. And maybe just as a quick follow-up for Rachel. Great to see the guide for next year an operating margin, a really strong improvement. Maybe just help go a step deeper on what's giving the confidence a 6 quarters out to give that, what is the lever that you're seeing? that obviously you have to have some top line framework as you think about that. So lease qualitatively how you think about organic growth next year, acknowledging that we are 6 quarters out?

Yes, absolutely. Happy to unpack that for you. So as I began to talk to investors following our last call, it was really clear that there was a lot of interest in our margin profile and how do we get to be comparable with our vertical software peers. So I've spent kind of the last 4 months really digging into the cost structure and looking really hard at where those levels are.

Now that gave me a lot of conviction in our ability to improve the margins so much so that I wanted to be able to share that milestone with you now kind of rather than wait. That 25% non-GAAP operating margin, that represents almost 1,100 basis points of expansion. Well, that's really a notable milestone. It's really just the first of many in our long upward trajectory to get to those best-in-class software margins.

You mentioned a comment about the revenue, and we go through an annual planning process. We are in the process of doing that. We don't have revenue yet to share with you. That will come in the normal time frame early next year. But we were so confident in the cost structure that we wanted to give this metric out now because there's a number of different ways that we can get there. So you should view this as a comment on cost and not a comment on revenue.

Your next question comes from the line of Daniel Jester with BMO Capital Markets.

Maybe another one on DroneDeploy. So we were looking over them since you made the announcement last night. It looks like they also sell into end markets that aren't necessarily related to construction, it looks like they do site inspections for energy, they do agriculture things.

So is there a way to help us think about how much of the DroneDeploy product is directly applicable to your construction customers today? And how much of their product may be isn't as core to your focus?

The way to think about DroneDeploy, DroneDeploy has some very strong capabilities on perception which are certainly being used by sort of more traditional construction companies, but they're also being used by companies that I would classify as being owners in our category. So people who are building out infrastructure but managing infrastructure. So DroneDeploy is able to sell to both owners as well as well people who are actually performing the build on the ground.

The technology is tied to -- so it's very consistent with our with our end market view of owners and builders. Their technology is essentially they're rooted in AI and machine learning around visual intelligence. So it's about being able to capture images, whether they be from the drones or robots or other kind of cameras being able to capture those images process them and evaluate them.

So I'm sure -- I mean, obviously, you can see multiple uses for those images, but the focus clearly for us and for drone deploy has been on that around that construction build-out use case, which is all related to the business that we're in.

Great. That's really helpful context. And then on AI. I think you touched on this in the prepared remarks about the new agents becoming more generally available.

Can you just spend a moment around sales enablement? I know Walt is relatively new to the seat. But what are you doing to make sure your sellers have all of the tools available to go and now hit the ground running, that you're going to have a much broader AI product suite, both now and in the near future?

Well, I think the reality of selling AI and making sure that, that's something where the, as you say, the sales organization is enabled, that comes from experience. And what we've been very deliberate about is not trying to push the technology out to the general sales force, but to go through this limited availability period.

And if you look at the time from the time of acquisition of DataGrid into our portfolio, we already had our core organic innovation around AI, and you added -- we added in DataGrid, and rather than just simply push everything out to the market, we took a moment to integrate the technology and create them the right way and make sure the technology was available through a very small, very targeted team of just a couple of people facing customers who were able to bring in sort of lighthouse accounts -- earlier accounts where we could see how the technology would be positioned, how it could be deployed, what would be the low friction way to getting started.

And so that was the idea. And it actually worked out really well because as we started to go through that, it became clear to us that there was an issue of packaging that we needed to address in order to be able to be more rapid to market. And so we created these starter packs, as you saw in our most recent press release from a few days ago.

And the starter packs give teams a low friction way to get started. They are ready to use agents and things like submittals and RFIs and daily logs. And they have very -- they have restricted usage for a certain number of projects and a certain capability. So it's an easy way for a customer to come in and say, I want to use this -- I want to use AI, I'm not sure exactly how it's going to get used, but I want to take advantage of it. I'm going to use it across these few projects, I'm going to use it on this capability. That gives them the ability to come in and then that allows them to experience, use the technology and then to move onward.

So that's the path that we've laid out for ourselves based on this very deliberate limited availability or general availability rollout. And as I said, the product has just gone GA and so the sales. So now it's available to the broader sales force to position with their customers.

Your next question comes from the line of Jason Celino with KeyBanc.

Ajei, I think you mentioned something kind of interesting when we think about truly addressing the digitization of construction robotics has historically not directly addressed the physical opportunities with labor efficiency. With DroneDeploy, how does that bring you closer to that opportunity? And maybe what role do you think robotics has with the broader construction market.

Well, it's obviously early days. But if you think about robotics in general, there's always been a broad dream that robots are going to be in a position to address labor. And -- you see this certainly in industrial settings, which are very constrained. But in a construction environment, it's a much more unconstrained setting, and it becomes a little more challenging to imagine exactly the role of robots in conjunction with human beings and there's concerns about safety and so on and so forth.

So it's a very complicated problem. But there is an enormous amount of advancements that are taking place, and I'm not just talking about humanoid robots. I'm talking about special purpose robots that are working in mixed-use environments where there are human beings and robots working together. And that is work in progress, that's evolved.

What DroneDeploy brings to the table is they understand how to manage robots. And so part of their technology is the management of robots and management of drones and robots in these environments. So people are using robotic cameras, for example, or drones, being able to manage them so that you essentially have autonomous activity on the construction side is an important aspect.

So a great example would be I want to make sure that I get the exactly the same time and exactly the same path. I want to follow and get a perspective of exactly what's happened on that day. So at 5:00 every evening, I'd like over every afternoon, I'd like to understand what happened. Well, that's a predetermined prescheduled activity and DroneDeploy has the technology to be able to do that as a simple example.

So that gives us -- so we see ourselves from construction management as being able to expand broadly into as and when the industry is ready into the management of robots and robotics. So we don't see ourselves as building robots. That's not our business, but we certainly see ourselves in the management space. And again, this is early days, but we're very excited about the technology and the capabilities that DroneDeploy brings to the company.

Great. And then maybe just specifically on the second quarter. the revenue beat was bigger than what we've seen over the last couple of quarters, and it sounds like cRPO did quite well. You mentioned the better underlying bookings is like might be the primary driver, but maybe can you just elaborate on the strengths and maybe why specifically Q2 was so strong?

Sure, I'm happy to take that. So as you mentioned, we saw really strong underlying performance. The growth was really broad-based. So it was across multiple geographies. It was among multiple stakeholders, and it was also across multiple customer sizes. Specifically as it relates to cRPO, the majority of that acceleration was driven by the underlying strength in bookings.

There was a smaller portion that was related to duration. So I mentioned in my comments that we had strength in particular with some large customers. Those deals tend to be larger in duration, and so that did tick up duration a little bit. But that was only a small portion of the acceleration in cRPO. The majority of it came from the momentum that we saw in the overall booking number.

Your next question comes from the line of Matthew Martino with Goldman Sachs.

Ajei, maybe for you. The construction environment has been uneven for several years now. But at the same time, Procore is introducing products that could offer customers a more compelling ROI independent of project volumes.

How are those new capabilities influencing customers' willingness to invest? And what are you seeing in the relationship between technology spending and underlying construction activity?

Well, it's an interesting question. You can't -- any good company cannot focus uniquely on one go-to-market motion or one customer base or just one single customer as you start to expand the organization, you have to think you have to start to think more broadly.

And if you look at the origins of Procore, Procore started as a product targeting the larger North American general contractors. And we have expanded over the years. And if you look at our business from owners and subs, owners and subs represented, I would say, maybe 40% of our business thereabouts over the last -- today, and that came from almost -- from a standing start because, obviously, initially, we were focused on the general contractor space. We've also seen success with larger customers and smaller customers. And as part of our go-to-market or as part of our strategy, we are developing technology and solutions that are appropriate for those stakeholders.

So initially, we were -- we had a set of capabilities, which targeted the needs of general contractors and then we added in capabilities that would support the owners and the subs, but now we're adding in capabilities that we think are really important to specific to specific stakeholders. So for example, I talked about the CDE that we deployed in Europe that was very specifically targeting the European customers. And there, that large deal that I talked about in my script, that included the CDE. So it pays off. We have a solution with -- we just recently launched for owners around portfolio management and capital planning.

And that's specifically targeting the owners. And so what we see as our path forward is the ability to create both products that are targeting the stakeholders in a very specific way as well as it scores addressing our go-to-market to be able to make sure that we can address those customers. And the go-to-market sometimes can be direct, it can be channels.

I talked about expanding to channels as an opportunity. And in fact, one of the examples I gave earlier on the international with KSIA, that was done in part with the channel partner, done in part with the partner. So partnering direct the combination of the go-to-market, figuring out what the product looks like, making sure you have the right product for the right customer, all of that is part of the alchemy that needs to come together in order to continue to drive growth and success of the organization.

Helpful. And for you, Rachel, gross margins still hovering around the mid-80s over the last several quarters. As digital coworker adoption and compute consumption start to scale, is that still the appropriate near-term baseline? And what gross margin is embedded in the fiscal '27 operating margin target?

Yes. So as we kind of look at the components of what makes up our gross margin, we expect that, that will be consistent over time. I think that what you're starting to see is that you don't need the most expensive model to do every single task. And so our focus is on optimizing how we deliver those digital coworkers to make sure that we can maintain those margins.

Your next question comes from the line of Dylan Becker with William Blair.

I appreciate it. Maybe, Ajei, in the prepared materials, I thought there was an interesting one, and you kind of just touched on the stakeholder dynamics, but the overall stakeholder mix has been pretty stable and consistent over the last several periods.

So wondering how this gives supports conviction in the overall durability of the growth profile particularly in the more mature segments where the implication is that is still kind of growing relatively in line with the overall aggregate business. So kind of all of those pillars supporting the overall growth motion, if that makes sense?

So what -- so I just want to make sure I'm understanding your question. Just could you give me another sentence there, please?

Yes. Yes. So the mix of stakeholder contribution to growth how that holding steady helps drive conviction and grow to durability?

Look, I think the -- if you look at the mix today at a point in time, it is certainly -- it has been relatively stable for the last several quarters. But if you look at the mix as to where we were sometime back, you can certainly see expansion in both the owners as well as the specialty contractor segments or stakeholders.

And with respect to international, again, that's been an area where we see opportunity where we haven't seen as much expansion capabilities, and I think that there continues to be opportunity there, and it's a question of putting the right go-to-market in place. So some of these expansion opportunities are short term, some of these expansion opportunities are long term. So this is as far as sort of the stakeholders are concerned.

And then in terms of incremental growth opportunities, obviously, we see AI as we are making investments in AI, and we expect our digital coworker strategy to also monetize them to contribute in the future. So as we start to look at the aggregate, we see we see opportunities from our overall growth. We see opportunities with respect to the stakeholders, the go-to-market, AI.

And then, of course, the end markets. I mean, we talked about end markets, we are we are driven in part by ACV. And so as the annual construction volume, if there is a recovery in that in the aggregate, that translates into tailwinds for us. And there are certainly segments like for example -- like, for example, data centers if they continue to grow, we get benefit from that.

So look, we're growing 15 points plus faster than the end market. And so any upside on that translates into further upside on that. So we are we feel very good about our position. So I think there is a perhaps a misunderstanding that our business is really tied to the ENR 400 and GCs only. That's really not the case. We have a very broad set of customers across the different stakeholders across the different sizes.

Perfect. Very helpful. And then going back to kind of the agents and packages, I think it's abundantly clear, right, that they're trying to address the labor shortage need and the ROI of your solutions to help with that. But I guess to what extent and maybe the starter packages are a component of this, too. But are you helping with the change management component to where they can actually implement and deploy and ramp those digital coworkers across the entirety of their solution set. I understand that takes time, but how you're thinking of working through kind of the change management component with your customers?

I think you just -- you just articulated the answer in your question, which is, obviously, when we look at the rollout of innovative technology, it isn't simply a matter of rolling technology out and saying have added because of the change management issues. And so the start-up packs have been very well defined and thought through so that they are a bite-sized chunk that can be deployed and understood and incorporated into the way that our customers work.

And so in the spirit of trying to create a long-term sustainable business, we're trying to be thoughtful about how we do this. And this is clearly the strategy that we're pursuing, and we feel very good about the onboarding strategy here.

Your next question comes from the line of Ken Wong with Oppenheimer.

Ajei, since the start of the year, you guys acquired DataGrid and now DroneDeploy. Do you feel you guys have sufficiently filled the AI product gap? Or are these still maybe the first few dominoes to fall following some additional M&A to come? And then for Rachel, piggybacking off that question, the fiscal '27 margin target, a fantastic to lay that out there. Just wondering, does that also embed sufficient cushion to account for any potential M&A that you guys might do going forward?

Well, so as I said earlier, we -- as we were building out our strategy for AI, it became very clear that this was an area that we were excited about perception, sort of the eyes and the ears metaphor that I used in the script. We really were excited about that space. We felt that it was important to be integrated into our core platform. And so that's why we pursued the DroneDeploy acquisition.

Now I've always viewed acquisitions as a way to accelerate our strategy. So for us, building out, it's not a strategy unto itself. So we're not building out AI by acquisition where we have a well-defined strategy for our AI capabilities. And then we are determining whether to build, whether to partner or whether to buy based upon the needs at the moment.

And right now, we are -- we have -- I have tremendous confidence in our team, our capabilities to execute. I'm excited to welcome DroneDeploy into an already vibrant Procore AI environment. I'm excited of what we can be -- what we're going to be able to do together.

And then just to answer your question on the margin, as we evaluate acquisition opportunities, we are looking at their strategic fit and then also making sure that they fit within our financial profile. So as we thought about the margin target, we thought about the impact that future M&A would have. And in particular, as I noted in my comments, we see no change to that commitment. -- with the acquisition of DroneDeploy?

Your last question comes from the line of Joe Vruwink with Baird.

I'm wondering, does owning DataGrid make it easier to acquire DroneDeploy in terms of the indexing and retrieval you can now apply and how that ultimately feeds the downstream AI workflows. And maybe have you given any thoughts to how your TAM ends up growing across both traditional and AI workflows by adding the visual elements.

To the first point, look, again, as I said in my previous answer, Joe, for us, it's about the strategy. And there is no single element to the strategy. It's about the strategy it builds on each other. And so all the different elements that we have brought in and assembled as part of Procore AI and that we'll continue to build as part of Procore AI will facilitate that. But obviously, you're right to point out that there is synergy and there's technical synergy between the DataGrid capabilities and the DroneDeploy capabilities along the lines, as you suggested, and that's really exciting to us as well. So -- but we are -- we have a clearly identified strategy, and we're going to continue to execute that strategy.

And the second part of the question was what Joe?

How the TAM might grow by adding a visual elements into what Procore can offer?

So in the short term, I would point to -- rather than specifically talk about time, I would talk about short-term synergy opportunities. In the short-term synergy opportunities, and we have about slightly shy of -- and I think I mentioned in the script, slightly shy of about 600 joint customers who are using both DroneDeploy and Procore. But that means that there are thousands of customers who are not using DroneDeploy today who are Procore customers. And we have a cross-sell opportunity. So from our perspective, that is an immediate available opportunity.

In the long term, as we talk about digital coworkers, the opportunity, the TAM expansion opportunity is not so much about adding incremental software capabilities, it's really going after a different pool, which is essentially the labor shortage that our customers are facing. They just don't have people. So they have a budget for people, but they just don't have people set aside or they're able to hire people just for the task at hand. And so that represents a different pool of money that is accessible to us.

So that from a TAM expansion perspective, the digital coworker strategy exposes to incremental addressable market that goes beyond the traditional TAM's associated with construction management software.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to Procore Technologies, Inc. FY '26 First Quarter Earnings Call. [Operator Instructions]

I will now hand the conference over to Matthew Puljiz, SVP of Finance.

Good morning, and welcome to Procore's 2026 First Quarter Earnings Call. I'm Matthew Puljiz, SVP of Finance. With me today are Ajei Gopal, President and CEO; and Rachel Pyles, 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, May 5, 2026.

Procore undertakes no obligation to update any looking statements 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 Ajei.

Good morning, everyone, and thank you for joining us. Continuing our momentum from 2025. Q1 saw strong performance that exceeded the high end of our guidance. For Q1, we delivered 15.7% revenue growth and 17% non-GAAP operating margin, which represents 650 basis points of year-over-year expansion. I'm particularly pleased with these results given the ongoing headwinds from a challenging construction environment. On our last earnings call, I outlined why Procore will be an AI winner.

Our flagship products and early investments in AI, including our acquisition of Datagrid, has positioned us well to capitalize on the disruptive technology. Building on our flagship system of collaboration with nearly 3 million active users and a massive proprietary dynamic data set, Procore AI can deliver outcomes simply not possible with traditional software. In that call, I walked through a real example of a customer using our AI agents as a digital coworker capable of executing complex high effort tests with [indiscernible] a critical advantage for an industry facing a severe labor shortage. This also opened a meaningful new dimension to our TAM as Procore AI can access construction labor budgets well beyond the industry's software spend.

Our path forward is defined by a powerful economic duality, upside opportunity through AI monetization and downside protection through our volume-based model. I believe Procore will unlock unprecedented value as the definitive winner in the Agentic AI era. I would like to begin today's call by discussing the great progress we have made with Procore AI on last call. Then I want to discuss our continuing success with our flagship solutions. Finally, I'll discuss our intention to continue to improve margins and free cash flow per share.

Let me start the Procore AI, which include our recent acquisition of Datagrid. I am pleased that the technology integration has proceeded rapidly leveraging the foundational security and platform investments we had made earlier in Helix. We have taken the best of both products to provide customers with new capabilities and are now executing on a combined product road map for Procore AI. Our solution enables customers to deploy embedded Procore AI agents that can execute tasks such as RFI analysis submittal cross-checking and compliance auditor. We recently released agents in the triggers, which enable customers to define automated event-driven AI workflows transitioning from reactive to proactive test execution across their projects.

We are piloting a new voice AI interface designed for field workers who want hands-free access to project data on the job site. We also recently introduced a specialized contract review agent that can efficiently analyze construction documents that flag any risk in the contract. By building on the foundations already established in Procore AI, we were able to introduce this workflow in fewer than 30 days, and it is already being tested by customers. As the hard Procore AI is a reasoning engine purpose-built to construction. It understands the language and logic of the project. For example, when an RFI is how a submittal connects to a drawing, how a change order gets approved.

On top of that, it works as a [indiscernible] system that holds context across multiple steps. It don't just answer a question, it understands the threat. For example, why is the middle was sent, what is obligate and what needs to happen next. Think of it as a digital coworker that encodes the logical construction decision making, reasoning about the project the way and experienced practitioner would. This data and contact can only be accessed within a system of record and coloration like Procore. That capability is backed by a tool library of dozens of construction-specific capabilities, including co-compliance capulators, drawing analyses and documents cross-referencing engines. And it is still early. As we continue to develop Procore AI, going deeper into our proprietary data and broader across project types, the reasoning engine will only become more capable. We expect our solution to continue to improve with every layer we unlock, and we have a long runway ahead of us.

Turning to go-to-market. We made a deliberate decision to launch Procore AI through a dedicated specialist team working today as an overlay alongside our core sales force. The team is very small and intentionally so. The goal was to learn what the commercial motion looks like before scaling it. We are now working on translating those learnings into enablement for the broader sales force and we expect much of our sales organization to be selling Procore AI in Q3. I'm excited that customers are adopting our Agentic solutions in addition to our flagship offering. A great example of this is within the estimating department and one of our Enterprise customers Crest operations.

Crest is already seeing transformative ROI from Procore AI. For their most complex projects, bidding is an audios process involving thousands of data points across massive sets of doing. By leveraging Procore AI, Crest has done a manual process that could spend weeks of effort down to an automation that can take as little as 20 minutes. This isn't just an incremental improvement in speed. It is a fundamental shift in their competitive advantage, allowing them to bid more accurately respond to opportunities faster and ultimately drive a level of ROI that was previously unattainable.

Moving to our flagship solutions. In Q1, we have driven more innovation at a faster pace than ever before. We expect that these new product capabilities will help to drive sales, increase customer satisfaction, and improve retention. I'll start with the largest and most mature part of our business today, U.S. general contractors. We are focused on improving our platform by enhancing products like quality and safety and by extending Procore Connect to support RFI in addition to drawings. I'm particularly pleased with the general availability of the updated Procore scheduling, our natively connected scheduling solution that has already been implemented by over 2,000 companies since February launch, making it one of the fastest adopted products in our history.

Together, these releases defend and extend our leadership while opening new expansion opportunities in civil and infrastructure construction. In Q1, Trinity Group a long-time GC customer expanded its construction volume commitment to $1.1 billion, a 6x increase. Trinity is evolving from a heavy user of siloed tools into a platform-first organization to support rapid growth and the growing complexity of large-scale bills and is increasingly relying on the Procore platform to help run its business.

Now let me move beyond general contractors. On our last call, I focused on owners, including data center operators, this time, I would like to discuss new functionality available to specialty contractors as well as international customers. For specialty contractors, we introduced materials management which provides end-to-end supply chain visibility for self-perform contractors from procurement and better management through delivery tracking to the job site. This is part of our broader investment in a purpose-built self-perform platform that unifies resource management, financial and scheduling for the specialty and self-perform contractor market.

This represents a significant step in our strategy to serve the heavy construction market where equipment costs can be just as material as labor for some projects. Also in Q1, Helm Group, a leading specialty and mechanical contractor in the Midwest, ranked #61 on the E&R 600 significantly expanded its construction volume commitment after 18 months of successful usage. The company which specializes in major projects like data centers and Northwestern University's new football stadium initially started with only a portion of its construction volume. Following a successful initial rollout of project management tools, Helm Group decided to standardize on Procore. The primary goal of this expansion was to achieve increased labor productivity, mitigate risk and streamline project management operations in a single location.

Moving to international markets. We launched a new BIN model federation and streaming viewer, which enable customers to federate and navigate large 3D building information models directly within Procore. A key requirement for winning upmarket in Europe. This is the anchor of our European common data environment strategy, which combines bin, asset management document management and product execution into an ISL-19650 compliance solution. This positions Pro port as the connected construction platform for markets where CD clients is a contractual requirement. In Q1, we signed a new contract with Collin Construction Limited, a large general contractor headquartered in Dublin. Collin had been using over 25 disconnected point solutions and is now standardized on Procore's unified form to solve reporting and mobile access challenges. The customer anticipates saving over 46,000 labor hours over the next 3 years, the equivalent of more than 13 full-time employees as well as decreasing nonrecoverable change order by 25%.

Moving to strategic partnerships. In Q1, we announced that we are integrating the Procore platform with NVIDIA on [indiscernible] VSX Blueprint to accelerate the building of AI factories and other critical infrastructure. This integration will establish a digital thread throughout the entire construction life cycle to build safer, faster and smarter infrastructure. The combination of Procore and NVIDIA solutions will enable teams to rapidly model design changes using a high fidelity, physically accurate 3D digital twin resulting in infrastructure that comes online faster and is optimized for pet performance. This has started our strategy of developing meaningful relationships with leading vendors that will reap rewards in the long term.

Next, I would like to briefly talk about our use of AI to enable us to grow more efficiently in the future to increase the speed of the organization and to improve margins. Today, every Procore employee has access to at least one AI platform from the leading vendors. In R&D, we're in the middle of incorporating AI to transform our operating model. The part of that organization that have already gone through this position are able to deliver products faster and more efficiently than before. The rest of the organization will follow R&D leads, and we expect to see and efficiencies from these changes to provide our financial model with incremental leverage in 2027 and beyond.

Rachel will expand on this opportunity in a moment. And speaking of Rachel, I'd like to take this opportunity to formally welcome her to the team as our new CFO, along with our new CRO, Walt Hearn. Rachel and Walt, our business and technology [indiscernible] and each held a key leadership role with me at ANSYS. They are highly qualified individuals who is successful in vertical software. We have all worked together and know how to meet challenges and deliver value as a team. I'm excited they are joined Procore at this critical time. I have been CEO of Procore for about 6 months now, and my enthusiasm of the job, the company and the construction industry has only grown.

I remain optimistic for Procore's future, which is reflected in our financial performance for Q1, where we exceeded the high end of guidance and increased our full year outlook. A special thanks to my colleagues at Procore of their hard work and dedication to our customers and stakeholders. Looking to the future, Procore plans to grow its presence in the construction industry become wider in the AI era and continue to compound free cash flow per share.

And with that, I'd like to turn the call over to Rachel. Rachel?

Thank you, Ajei, and good morning, everyone. I am incredibly excited to be joining Procore at such a transformative moment. Before we dive deeper into the numbers in the overall business, I would like to briefly touch on why I joined Procore and my approach to the CFO role. Joining this organization represents a rare opportunity to serve as the CFO for a category leader that is digitizing the industry that builds the world. Beyond Procore's established leadership position, I see a compelling financial profile with clear levers for long-term value creation.

Furthermore, my prior history with Ajei and Walt ensure strategic alignment from Dave Batten allowing us to move decisively as we scale. I'm thrilled to be part of this journey and look forward to building on the strong foundation already in place. My philosophy as CFO will be anchored in the pursuit of durable, profitable growth. Given Procore's market opportunity, this should remain our top priority. The pursuit of durable growth will be underpinned by disciplined and thoughtful capital allocation strategy, specifically to reiterate our capital allocation philosophy.

First, we will prioritize high ROI organic growth investments. Second, we will remain targeted with acquisitions that accelerate our strategic road map. Finally, we are committed to returning excess capital to shareholders via opportunistic share repurchases. By aligning our investments with this framework, we aim to consistently compound free cash flow per share, ensuring that our category leadership translates directly into long-term value for our shareholders.

Moving on to our Q1 results. Total revenue in Q1 was $359 million, up 15.7% year-over-year. Q1 non-GAAP operating income was $61 million, representing a non-GAAP operating margin of 17% and up 650 basis points year-over-year and free cash flow was $56 million, up 20% year-over-year. As for our key backlog metrics, current RPO grew 21% year-over-year and current deferred revenue grew 17% year-over-year.

Turning to commentary on our results. We delivered another quarter of durable revenue growth driven by healthy demand across our customer base. This performance was underpinned by 3 primary strengths. First, we secured several significant new logo wins that highlight our increasing market share. Second, we saw a meaningful shift towards larger-scale engagements with a 6-plus figure ARR wins growing 24% year-over-year. And finally, we generated strong pipeline in the quarter. This momentum in high-value customer wins and overall pipeline strength gives us confidence in our trajectory and sets that a favorable foundation for 2026.

Our strength in the quarter also contributed to 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 was consistent with both Q1 revenue growth and ending ARR growth. Once contract duration stabilizes, reported and normalized CRPO growth will eventually converge with revenue growth. Our performance this quarter unexplored our commitment to driving long-term shareholder value. By delivering durable top line growth, combined with strong year-over-year margin expansion, we improved our growth in year-over-year free cash flow. Those items, coupled with limiting our share count growth via disciplined equity compensation and our share buyback activity drove meaningful improvement in our North Star metric, free cash flow per share.

We believe this approach of compounding free cash flow while managing our share count remains the most effective way to maximize returns for our shareholders over time. Looking ahead and to expand upon Ajei's commentary, we view AI as a fundamental catalyst for our long-term financial profile. On the top line, we expect AI to serve as a tailwind to revenue growth as we monetize high-value capabilities and deepen platform engagement. Regarding our margin profile, we do anticipate modest headwinds to gross margin given the increased compute expenses to support these workloads. However, we expect this to be more than offset by the tailwinds to our operating expenses as we leverage AI to drive internal efficiencies and scale across all functions.

Ultimately, the convergence of durable growth and an optimized cost structure reinforces our conviction that AI will be a powerful tailwind to free cash flow per share, creating a highly efficient engine for long-term shareholder vacuum.

With that, let's move on to our outlook. For the second quarter of 2026, we expect revenue between $364 million and $366 million, representing year-over-year growth of 13% at the high end. Q2 non-GAAP operating margin is expected to be between 17.5% and 18.5%. For the full year fiscal '26, we are raising our revenue guide to a range of $1.499 billion to $1.53 billion, representing total year-over-year growth of 13.6% at the high end. We are also raising our non-GAAP operating margin guidance for the year by 50 basis points to be between 18% and 18.5%, which implies year-over-year margin expansion of 390 to 440 basis points.

Finally, we are maintaining our free cash flow margin guidance of 19%, which implies year-over-year free cash flow margin expansion of approximately 280 basis points. To wrap up, we are pleased with the quarter and are excited about the momentum we have created for the remainder of the year. We are confident that we can continue to provide durable growth, margin expansion, limited share count growth and compound free cash flow per share. With that, let me ask the operator to open it up for questions.

[Operator Instructions] Your first question from the line of Joe Vruwink with Baird.

[indiscernible] congratulate Rachel on your appointment. I wanted to start with a few things on financials. One is good to see the upside, but the magnitude of upside in revenue and CRPO is, I suppose, a bit less than the prevailing experience where you've been beating by 3% to 4% anything to read into that? And then the second is just on the outlook. You're bringing up the full year by more than the 1Q upside but it looks like that overage or upside remainder is weighted to the second half. Maybe what's informing your expectation there?

Thanks, Joe. I appreciate the question. Excited to be here. First, what I would say about our overall financial deal, we were really pleased with the results. If I think about we had strong pipeline, we had strong new logos. So just overall excited about the performance. In terms of the revenue upside that you saw, that was really consistent with what you saw in Q4 in terms of a beat so nothing really different there. And then if you think about our guide, Q2 at the high end is consistent with the Street estimates. No change in our guidance philosophy. We're still going to give you guidance that we feel a high level of conviction in.

Great. And then I wanted to ask on broker scheduling and maybe a bit more feedback since general availability. I remember -- there is discussion at ground break, just spotlighting this particular area is one that's really differentiated in terms of pulling in the full Procore platform capability and AI to the extent that this gets adopted or maybe see as a landing point, does it open richer cross-sell opportunities or maybe give customers more obvious and explicit exposure to what Procore AI can do?

Yes. I mean absolutely, Joe, thanks for the question. Look, we're excited about broker scheduling. Firstly, we were able to get the product out and we were able to see very quick adoption because it's essentially natively connected into the platform, and that gives customers tremendous benefits when they take advantage of the product. And obviously, we're in a position to, as part of our strategy, continue to add more AI capabilities, and that will obviously reflect in the flagship products as well.

Our next question comes from Saket Kaila with Barclays.

Welcome, Rachel. Ajei, maybe for you, maybe just to zoom out a little bit. I'd love to get your views on kind of where we are in this construction cycle. There are tons of factors, of course, to consider. But I know you spend a lot of time with customers, what are they saying to you right now just about project starts this year and how they're thinking about the environment?

Saket, thanks for the question. So I would say that the construction environment has been pretty stable, certainly from the -- in the time that I've been with the company now with -- in the conversations that I've had with customers, it's been pretty stable over the last couple of quarters. What I would say, though, is that there's different levels of excitement about certain portions of the business. In fact, last time I talked about data centers, and even though data centers represent a relatively small amount of the overall construction volume, there's a lot of excitement about data centers.

And certainly, there we are in the center of the conversations I mentioned in the script in the prepared remarks, I mentioned our relationship with NVIDIA, where we are working with them on a blueprint to accelerate the building of AI factories and other infrastructure. So those kinds of activities create a lot of excitement because there's those data centers are front and center right now. But otherwise, it's a pretty stable demand environment. And obviously, I'm excited about those conversations with customers because it does reflect their trust in Procore and their perspective on how we can help them as we move forward together.

Got it. That makes a ton of sense. Rachel, maybe for you. It was great to see CRPO growth kind of continue at 20%. And of course, you noted the duration benefit there as well. Maybe the question is, how do you think about the glide path for maybe that growth rate starting to converge with revenue growth?

Yes, thanks, Saket. That's a great question. So CRPO has remained strong. We are starting to see that average contract duration start to normalize. So between Q4 and Q1, duration stay kind of roughly flat quarter-over-quarter. If you look forward kind of once that duration does stabilize, it will probably take around 3 to 4 quarters following that stabilization before you see the CRPO and the revenue growth kind of comes together.

Our next question comes from Dylan Becker with William Baird.

Maybe, Ajei, for you to start. It sounds like kind of platform consolidation remains a key theme in kind of the customer conversations and expanding volume. And I think that makes sense, right, in the context of leveraging your agents, utilizing more of the platform to deliver more of that -- realize maybe more of that value. I guess to what extent is that AI conversation playing a role in kind of catalyzing adoption from an industry perspective? And maybe validating the perception or buy-in into Procore AI strategy to help those customers solve for productivity, if that makes sense.

Yes. So if I understand the question, let me just -- let me sort of address it, and then if I miss the point, please ask more. But when I've had a number of conversations with customers about the overall platform and about AI, in general, certainly in the context of construction. When you talk to customers, many of them I mean, they don't really have the time or the inclination to become experts for AI and construction. They look to us as being their technology partner. They've worked with us for years. They trust us. And their objective is they just want to be able to build better projects, that's their business.

And they want to make sure that their vendors, their tech vendors and their tech partners are in a position to do their job, which is to bring them the best and the latest technologies, including, of course, AI to be able to help them perform what they need to do. And so the fact that we are able to provide Agentic AI capabilities that have such compelling value. The fact that we're able to provide Agentic AI capabilities from within the context within security within the framework of their system of record, of their system of collaboration where they store their data, with the area where they rely on to participate with all of their partners and our projects, I think that gives them a lot of comfort as we are making these investments.

So we can have those conversations with them. They see what we're able to do. And and that's been very positive for us. And I'll give you an example of customer engagement. We just had one of our largest customers here in Austin for hackathon last week. And they brought together about 85 of their employees, and it was a multi-day event. And we were able to, in the context of the platform, we were able to post their creation of agents and they've built something like 300 custom automation agents that they were able to pull together for their particular use case. So that just gives you an example of how customers are able to take advantage of our genetic capabilities under the overall umbrella of the Procore platform.

Very helpful. And maybe to kind of stick with you or Rachel, love your kind of perspectives here. But as kind of an extension of that, you called out kind of some of the commercial learnings and how you're kind of deploying agents maybe being deployed a bit more broadly in the go-to-market muscle in the third quarter. I guess maybe kind of any learnings in receptivity around what the monetization strategy is going to look like. And then I think -- you also called out the internal efficiency leverage is kind of be felt more into 2027 and beyond. But maybe just kind of reconciling or how we should think about the timing between 2026 and 2027 for some of these benefits to layer in?

So in terms of the go-to-market, it's pretty much what I said in the script, which is we wanted to make sure that we completed the -- or we made significant progress on the technical integration between the projects. And as you know, we did the acquisition of Datagrid earlier this year that the data grid platform with the data capabilities were integrated into the Helix work that we've done earlier. So there was a lot of good positive energy there from that integration work.

Coming out of that, we have obviously an updated product capability where we're now with a small overlay sales force, as I described, of a very small number of people talking to customers in conjunction with the sales force, but really as an overlay so that we can get the value proposition, the ROI down. And then the expectation, of course, is in Q3 that we'll be in a position to roll it out to the larger sales force. Our expectation is for our genic solutions that we'd be in a position to be able to monetize that and some capacity-based consumption-based licensing structures. In contrast with our ACV-based pricing licensing structures for our flagship offerings. And so that's the path going forward. As far as the -- I'll let Rachel address the rest of the question.

Yes, absolutely. So Ajei, I think highlighted a lot of the top line benefits that we're expecting from AI and from the token-based model we rolled this out across the sales force and engage our customers. So I'll speak a little bit more about kind of the margin impact. So I think that as we see more agents deployed, we're going to start to see some gross margin headwinds that come from that. Now I think over time, those will really be managed in 2 ways. So first, I'm optimistic that those overall costs themselves will come down kind of over the long term. Similar to, I think, about a little bit like cloud computing, when cloud computing, everyone moved to the cloud, costs were up, but then over time, those came down and optimistic that will happen here.

But even more importantly, on our side, the benefits that we expect from deploying AI within our own workflows across all parts of our organization, I expect will more than offset any headwinds that we see from the gross margin. So I'm really excited about that opportunity and it gives me even more conviction about our margin expansion kind of over the long term.

Ultimately, is this more of a fine tune? Or should we expect major changes going forward again? I'm just trying to kind of gauge the approach.

Great question. Thanks. So as I've been looking at the company, look, my core takeaway is that we have a really strong foundation. We certainly have great relationships with customers. We have built a great platform on which to be able to build our products and we've built a great platform in which to be able to sell and support our products. And so I think we're in a good place, of course, where we are today. But the reality is that the world that we're in continues to change the market conditions continue to change.

Technology continues to evolve. And I believe that every company needs to be in a position to change to reflect market circumstances and the need to continue to move faster. And so what I felt was important as we go to this next stage was to make sure that I could bring on a couple of executives who I know well, who would allow us to be able to move really fast in a complex business environment, we stand what it means to run a global business. And certainly, you have that with Walt and Rachel I've worked as well for a number of years. given where we are with the opportunity, we need to continue to be able to move fast.

And I expect Walt to provide leadership along the different dimensions of growth our organization as he has in the past working together with me. So I'm excited about his participation with the company. I'm excited about the foundation that we have and I'm excited about our ability to continue to evolve our business to take advantage of the optionality in front of us.

And just a quick follow-on with Rachel saying the guidance at hasn't changed, but you're seeing decelerating growth at least in your guide. So many are asking, are you embedding the potential disruption of more changes in this guy in the front half of the year. Is that why it's so conservative on the total year deceleration?

So if I think about just coming back to our guidance philosophy, we consistently have a beaten raise methodology, and that's what you're seeing us do here. So really nothing different than what we've done historically.

So our expectation is to continue to execute as we improve our business. And so there isn't any subliminal message here.

Our next question comes from DJ Hynes with Canaccord.

Ajei, do you think the network effects of the business model get any stronger as AI is increasingly embedded into workflows and collaborators get insight into those capabilities. In other words, like is it only the payer that will realize the benefits of Helix and your AI agents? Or does the whole ecosystem equally benefit, which could be a good thing for generating broader demand?

Well, when you think about Procore, Procore is intrinsically a system of collaboration, right? Because if think about the nature of construction. Construction is essentially multiple parties getting together on a project of one and with strong commercial relationships between the parties with an ongoing sequence of changes and modifications, et cetera, based upon the realities of the day-to-day activities that are taking place on the construction side. And so it is intrinsically a system of all parties collaborating in a very safe and secure manner where changes are -- have financial consequences and therefore, need to be audited and managed effectively.

That is a -- that is kind of a very unique -- it's a very unique environment. It's not just a sort of a system of record that's available to just a single party. And as such, when we're in a position to take advantage of and create a genetic workflows the benefit accrues to all of the people who are collaborating on the project because, obviously, as we create digital coworkers, for example, which is one way to think about agents. If you think about digital cowork is helping that allows people to be able to make decisions faster more effectively, that creates more speed that creates more accuracy in the overall collaborative effort on the construction side.

Yes. Yes. Okay. Makes sense. And then, Rachel, I'm not sure if I missed it, but can you give us a sense for how much data grid and FX impacted both revenue and CRPO in the quarter. I think investors are trying to wrap their arms around inorganic ex FX growth rate in the quarter. So anything on that front would be helpful.

Yes, absolutely. So first with FX, FX on our overall consolidated business was immaterial. If you think about where you see FX it comes through in our international business, there was about a 2 percentage point impact in that business. But from a consolidated perspective, it was de minimis. On the Datagrid side as well, data grid, as Ajei said, we're just finishing the integration and going into GA shortly those capabilities. So Datagrid was really immaterial to the overall results. Our organic business continues to grow 15% to 16%.

Our next question comes from Adam Borg with Stifel.

Maybe, Ajei, just on the macro going back to that, we talked about it being stable over the last 6 or so months. I'd love to talk a little bit more about the government vertical, in particular, especially following the FedRAMP modern authorization earlier this year.

Yes. Yes. Sorry, you said you want to talk about the government vertical and then I lost you [indiscernible] ask the question.

Apologies. Yes, just the government vertical, especially following the FedRAMP Moderate authorization earlier this year.

Okay. Yes. So look, I think the FedRAMP thing, we were very excited about the FedRAMP authorization that we got earlier it is fundamentally a longer-term play for us because it allows us to participate in some of these government contracts. There is inherently some latency in government contracts, but it is in order to allow us to participate with them, we need to have that authorization. So government agencies require the authorization, the GCs that build on their behalf required authorization. We're certainly able to have these conversations with customers but the impact takes a little bit of time before from the time of announcement to the time that you can actually see it as well.

Super clear. And maybe as my quick follow-up. Earlier this year, Procore began offering 4 bundled packages each with 3 tiers. Just curious how that new package and pricing is -- really new packaging has been receptivity from the customer base.

Yes. So we had a chance to roll that out earlier, and the feedback from customers has been positive. I think it gives us an opportunity from a proper perspective to really position the right capability for the customer, depending on what they're looking for. And it certainly gives us an opportunity to generate incremental monetization as our customers move up that packaging stack. So it's still early days, but we're pleased with the capabilities that we have. And frankly, I guess the other point is that the intent behind the packaging was to really streamline the sales cycle.

So it provides an ability for customers to be able to digest kind of a bundled value price as opposed to wondering about multiple a la carte items. And that gives customers a very clear path to being able to add an adoptable products. And so that combination, I think, is something that I think works so well for the customer and frankly, works out well for us as well.

Our next question comes from Matthew Martino with Goldman Sachs.

Ajei, I wanted to touch on international for a moment. With Walt now in the seed, where do you see the most meaningful opportunities to strengthen the international franchise from your here? And how do you think about the trajectory of that part of the business over time? I know you announced some new products as well to capture the upmarket in Europe. So if you could tie all that together.

Yes. So on the new products, just to slide together, we announced a CDE in Europe. And in fact, last week, I believe, we had an innovation conference in London, where customer feedback on the CDE was very positive. I think we had something like 170 regional customers and prospects. We had strategic partners and I think that continues to help reinforce our central role in the construction type system because, certainly, in that geography, the CDE is an important aspect of the tech ecosystem. And so that's one of the reasons why we're very pleased with that.

I would say that, overall, if I were to Think about our go-to-market. I mean, obviously, international has been a relatively smaller part of our business relative to the opportunity. And it's obviously an area where we will spend some more time. I think the U.K., Ireland is where we're spending some initial momentum, but we do see opportunities in EMEA and with Walt in seat, I think we'll have an opportunity to continue to accelerate that part of the business, and we're looking forward to seeing that.

Got it. And then, Rachel, for you, you laid out a capital allocation framework across organic investments, targeted M&A and opportunistic share repurchases. So as the new CFO stepping in, how are you thinking about the relative priority of those 3 buckets in the current environment?

Yes, absolutely. Thanks for the question. As I think about it, I really do them in that order. So first, focusing on organic growth and making the right investments there. And then to the extent that we the M&A becomes available that helps us accelerate our strategic road map, we will definitely pursue that. I think about those 2 things kind of one and then the other M&A, you can't always predict when it's going to happen and when it's going to be available. But certainly, we'll look to pursue those opportunities. And then finally, third would be the strategic opportunistic share repurchases.

Our next question comes from Daniel Jester with BMO Capital Markets.

Maybe, Rach, just starting with you on the seasonality of margin performance this year. I think last quarter, it was suggested that maybe the fourth quarter exit rate of margin expansion this year might be a little bit lower from sort of typical events and things like that. Any updated color on how we should be thinking about the margin trajectory this year.

Yes, absolutely. Thanks for the question. So we're confident in kind of our overall margin profile. As you imagine all expenses are linear. And so margin does move around in the quarters. But from an overall perspective, you're very confident in our full year margin expansion numbers.

Okay. And then, Ajei, just on the comments about specialty contractors that you made. It's great to hear about that. And I think in the past, I think there's a lot of focus on owners and as great opportunities for Procore. Maybe can you just double-click on the specialty contractor opportunity and how you can maybe see that additive to growth this year?

Well, we certainly -- with respect to specialty contractors, I think we've had, from a product perspective, incremental releases that we talked about. I talked about materials management on the call. And obviously, I talked about equipping telematics. Both of those are areas of products that I think will help with our specialty contractors. I mean we give them essentially a place to manage documents to attract labor to track equipment to coordinate the DCs to get paid faster. So there's a lot of value that we're in a position to provide 2 specialty contractors. I'm excited about the area, and this is this is obviously one of the areas of focus for us as we go forward.

Our next question comes from Jason Celino with KeyBanc Capital Markets.

So maybe my first question is kind of the incremental operating leverage comment that you expect to see in 2027 from AI. When we think about this internal AI adoption, I guess where is Procore on that journey today? Or said another way to drive that incremental leverage next year. are those AI efficiencies that you've already implemented? Or is that based on a road map of AI adoption you look to take on?

So let me just jump in here a little bit to talk about kind of where we are today in terms of our use of AI. Look, when you think about -- and I mentioned this in the script, but I'm excited that within our R&D organization, we're in the middle of transforming our operating model using AI. And my expectation is that as we go through that transformation, the rest of the organization will be in a position to follow the lead the R&D organization has -- is driving.

And to be honest, we are already seeing the benefits of that and the part of the R&D organization that has adopted a very different model from a more traditional model, taking advantage of Agentic capabilities. We're starting to see increased speed in terms of product delivery, increased capabilities. So that value and benefit is something they're excited about. We're in the middle of that taking place. And obviously, the rest of the organization will follow. And we expect, obviously, the speed and the efficiencies from those changes are the basis of some of the financial leverage that we talked about for the next year.

To kind of add on to what Ajei said, he mentioned R&D is going first and then the capabilities out to the rest of the organization. But I would also note that we do have AI capabilities in other parts of the organization and our employees have access those tools, although not quite as advanced as on the R&D side. As we go into '27, I'm excited about seeing that all come together and seeing the efficiencies really across all parts of the organization. So I don't -- you're not going to see the leverage coming just from one place. It will really be coming from all lines across the P&L.

Okay. Great. And then in prior questions, you've talked about seeing a stabilized macro, but maybe going a step deeper in your conversations with customers, how are they managing the increase in oil prices. Obviously, it adds to the project cost, and it doesn't sound like it's affecting near-term project starts, but curious how conversations are going in more recent discussions.

I mean I think the important thing to recognize is the projects that we are involved in working with customers on all long-term projects. And so there it's not about what happens that's perhaps contained to one quarter or another. So no customers have really, in my conversations have really talked about this as being a long-term consideration. And so we continue to see a stable demand environment for the products and from our customers.

Our next question comes from Ken Wong with Oppenheimer.

When looking at the shape of the guidance, it does seem to imply second half acceleration from 2Q. Should we think of that as just purely mechanical? Or are you guys -- as you think about the business, as you look at what's in the pipeline that there is some business momentum, there is some improvement and an inflection coming in that back half? .

Thanks, Ken. It's really mechanical. So consistent with what you've seen us do in the past, we did a beat and raise this quarter. Again, that no change in our guidance last year. We're continuing to give you guidance that we feel a high level of conviction in.

Got it. And then Ajei, I think it was someone alluded to earlier, but again, great to see you pair up with Walt again. As you and Walt look at the current go-to-market, any additional changes you think that needs to be made whether it's in terms of the organization or just the approach to selling. Any thoughts there that you can share with us?

Well, Walt has been officially in the seat for a little over a month, April 1. So he's still evaluating the organization, the team, et cetera. But look, Walt understands the vertical software motion, he spent years in vertical software. Obviously, we work together in a vertical company -- vertical software company. So he understands the motion. He understands the customers and how to have those conversations. And he was, frankly, with me working -- we were working very closely together on the journey that we went through in our last company to be in a position to take the sales organization and continue to scale it both internationally as well as across multiple customer segments and continue to expand the business.

So I'm excited about Walt's capabilities but certainly, what I can tell you is that even as we make changes, and obviously, every sales leader will find areas of ongoing improvement as we make changes we will -- my expectation is that we will continue to execute as we improve, and I'm excited about that.

We have reached the end of the Q&A session, and this concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon. Thank you for attending today's Procore Technologies, Inc. FY '25 Q4 Earnings Call. My name is Tamia, 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 IR.

Good afternoon, and welcome to Procore's 2025 Fourth Quarter Earnings Call. I'm Alexandra Geller, Head of Investor Relations. With me today are Ajay 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. 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 Ajay.

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 of scale for peak efficiency. These initial months have reinforced my belief that Procore assesses the hallmarks of a best-in-class vertical software leader and is building 1 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 life cycle. 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 4 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'm particularly pleased with these results given the ongoing headwinds from a challenging construction environment, with the U.S. Census reporting negative growth for the combined nonresidential 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 3 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 manage processes and Procore resource management for their growing fleet of capital assets for their self-perform 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 USGC opportunity goes well beyond the ENR. To illustrate this market depth, we signed more than 30 100,000-plus 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 leading 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 6-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 lead, this win back reaffirms the simple truth. The value of Procore creates an advantage that price alone cannot match. These wins illustrate the clear value on GC customers realize from using Procore. Our newer products, including Pay, Resource management, preconstruction and analytics or compelling value drivers. We see these products as notable expansion opportunities for our global GC customers to drive incremental growth.

Beyond US 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, health care and real estate. Our business continues to scale with Q4 marking another quarter of consistent growth in this segment.

To meet their evolving needs, we are 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 government achieved FedRAMP Moderate authorization this quarter and is now available in the FedRAMP marketplace. This milestone validates our commitment to some of the more stringent data security standards and 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 investments.

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 as 7 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 full 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 1 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 mounded 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 all and we have evolved into a system of collaboration as we hit scale across the globe. Over time, we earn the right to turn trusted dynamic data interaction. Today, Procore is a digital window into the build 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 a agenetic AI feel inevitable rather than opportunistic. And our recent tuck-in acquisition of Data Grid leverages its leadership position to accelerate our AI strategy.

We believe that the combination of Procore Helix and data grid will generate notable product synergies due to our highly complementary capabilities and road maps 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 the superintendent and a joint Procore and data grade 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 agents didn't just watch the video. It understood, by simultaneously analyzing the audio and video Qs, the agent identified the exact column and utilized reasoning to know where to go in Procore to pull the growing, specifications and documents related to that column.

The agent concluded that the column has been incorrectly coded, determined the required rework automatically created the work order and notified the relevant stakeholders. The agents also triggered related downstream workflows in Procore, halting further work in that area and scheduling the rework. Historically, these tasks would have demanded several hours of manual efforts and individual expertise to navigate across project specifications. This is not just a hypothetic possibility. This is a real-world example of Procore AI, turning a standard job site walk through into an autonomous resolution. This illustrates the true power of Procore AI's construction aware multimodal reason.

This scenario occurs thousands of times across the job site. This is true special purpose AI built for construction. It has a 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 of the field delivered through the tool they use every day. This seamless integration of intelligence and utility direct result of 4 foundational points that will enable us to lead in the AI era.

First, as construction's mission-critical system of record with nearly 3 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. We map the complex dynamic interactions between people, workflows and the physical job site, capturing and continuously updating every document allocation and day-to-day change. This dynamic relevance is exactly what's needed to power high-stakes agentic AI.

My second point is trust, a fundamental prerequisite for AI adoption. It's crucial that construction stakeholders trust how the technology provider will use their data. And that's why we've built a scalable, enterprise-grade infrastructure to ensure that every AI action is secure, compliant and contextually relevant. It's only through this combination of contextual data and trust that a platform can provide the industry with needed productivity gains. The third point is our network effect. For AI to automate and complete tasks, it must work where the users work. On a typical project, a customer often connects with dozens of different companies, all collaborating on the platform every day to get their jobs done.

So for serves as a central hub where everyone in construction comes to connect and collaborate, making the platform not just a system of record, but a true system of collaboration accelerating the flywheel of our network effect. The fourth point is Procore agentic solutions perform critical actions, not just provide insights. As the critical orchestration layer for every stakeholder in construction, we believe our platform is capable of delivering a true digital coworker to help construction workers get more done with less. This is paramount for an industry facing chronic labor shortages of nearly 350,000 workers in the U.S. alone according to associated builders and contractors.

Today, Procore delivers agentic AI directly to the crews in the field as well as to the teams in the office, embedding intelligence directly into the natural workflow. By supporting each of our nearly 3 million active users with digital coworkers, we can provide a scalable solution to the industry's labor shortage. Long time Procore customer [ Casco ] is already benefiting from digital coworkers. By deploying Procore AI on a single project, their initial ROI was immediate, saving superintendence hours per day on mundane tasks. Within just 6 months, they went from 0 AI usage to expanding to several projects with the intent to deploy across their portfolio. The productivity gains were so impactful that [indiscernible] is now looking to empower everyone on their construction teams with digital coworkers from Procore.

One way to conceptualize the value of these productivity gains can be seen in comparison to the cost of labor, which is significant within construction. For every dollar of construction volume, a contractor spends a material portion of labor. With digital coworkers from Procore, we believe customers will materially increase their output without corresponding labor growth, leading to meaningful savings. Capturing just a small fraction of that ROI represents an incremental market opportunity for Procore expanding beyond our traditional solutions. The economic value of our traditional solutions is supported by our construction volume-based pricing model. Because we price on project scale rather than see count, our traditional revenue remains insulated from head count fluctuations as AI drives industry efficiency.

There is a profound sense of magic when software stops being a tool you manage and starts becoming an expert that manages the project for you, anticipating hurdles and clearing them in the background. The benefits of Procore AI extends far beyond efficiency gains. By reclaiming thousands of labor hours, we are freeing up valuable resources for our customers to deploy on more projects. Procore forward is defined by a powerful economic duality of upside opportunity and downside protection. We will monetize the value and ROI of Procore AI agents even as our volume-based model provides a structural economic foundation for our core business.

I believe Procore will unlock unprecedented value as a definitive winner in the genic AI era. In summary, Q4 was another excellent quarter and closed on a strong year for Procore. My first quarter as CEO exceeded my expectations. And while there is a lot of work ahead, I am incredibly excited about the future of Procore. Procore is a rare company. We have scale past $1 billion in revenue, defined an entire category, delivered a best-in-class platform and establish a deeply loyal customer base. What Procore built is truly impressive. And this is just the beginning. I joined because I believe our brightest days are ahead of us. We are well positioned for durable growth and margin expansion. As we continue to innovate for our customers and execute towards our goals, I am confident in our ability to deliver substantial shareholder value.

Before I turn the call over to Howard, I want to thank all of the Procore employees. None of the opportunities Procore has would be possible without the incredible culture you've built over the years. Thank you for making me being welcomed, and thank you for your commitment to our customers and to our company. Howard.

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 2016.

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 up market is reflected in the number of 6- and 7-figure deals which grew 20% year-over-year on top of a very strong performance in last Q4. The total number of $100,000-plus ARR customers now totals more than 2,700.

within our strength up market, 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-plus 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-plus 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 '26 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 onetime charge of invested 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 onetime 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. And 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 '25, 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. And 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% to 14%. Q1 non-GAAP operating margin is expected to be between 14% and 15%. For the full year of fiscal '26, we expect revenue between $1.489 billion, and $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% and and 18%, which implies year-over-year margin expansion between 340 and 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.

[Operator Instructions]

The first question comes from Saket Kalia with Barclays.

Okay. Great. a nice finish to the year. Ajei, maybe to start with you. I appreciate your prepared remarks, particularly around AI. But I was wondering if we could just dig a little deeper on what your customer conversations have been like on the topic of AI? And maybe specifically, do you see customers trying to maybe build Procore like tools themselves someday? .

So Saket, the example that I gave you in the script. Frankly, that gave me goosebumps, and I hope it gave you guns well because it's so compelling. It shows how different the construction use cases from the general horizontal office application or the commercial use case -- a general consumer use case of AI. And that's why this laser focus that we've had on construction is so important to our customers. And so to your point, I mean, thinking about it from a customer perspective, our customers, they neither have the time nor the inclination to become AI experts. They're in the business of construction, and they just want to build better. And that's their business. .

And they want to make sure though that their tech vendor is taking advantage of the best and the latest technologies including, of course, AI, and that's the conversations that I have with my customers. And I'm excited that we have the structural advantages and that we have also taken the operational actions to emerge as an AI winner. Now as far as Procore AI is concerned, we're seeing pure customer adoption. So we have something like 66,000 unique active users who are using Procore AI. We've got something like 700 customers nearly who have created thousands of agents on Procore. And these customers, they skew up market.

And obviously, we expect this momentum to continue to increase with the breadth and the depth of the capabilities that we have now that we've concluded the data grid acquisition. And at the risk of sort of repeating some of the comments from the script, I think it's important to recognize that we rode the wave when mobile became mobile and broadband became ubiquitous, we rode that wave to deliver digitization to the construction industry. And we were able to bring technology to the frontline work is in a manner that was appropriate to how they work and where they work. And obviously, we built up a tremendous amount of trust with the industry at that time, and we have the same opportunity for AI today. And if you think about what I discussed, there's sort of structural and operational aspects. And so let me just sort of talk a little bit about the structural.

Our solutions are at the interface between the physical and the digital world. I mean we're the ones who are digitizing activities and we're the ones where action is taking place to affect the physical world. And as I mentioned in my script, we are the system of record [Audio Gap]

And maybe just as a quick follow-up to Ajei's point about international and great to see the continued go-to-market changes taking hold. So as you think about kind of these go-to-market changes continuing and Ajei, now that you've got a little bit more time in the seat, as you think about the international footprint, what kind of gets you most excited about that opportunity? And any thoughts on how a channel could help kind of build the feet on the street, so to speak, in coming years?

Yes. I mean I think, obviously, I've been in seat for about a quarter, but everything that you point to in terms of channel, in terms of international, all of these things are opportunities that we are continuing to look at and evaluate from my perspective there. My experience, obviously, has been with businesses which have had channel with significant channel presence -- and that's obviously an opportunity for us as well as significant international presence. So that's something that I continue to look at as we look at future evolution of our business.

Adam, this is Howard again. I'll just tell you, we would have liked to have been further along on the international side in terms of top line. International is still facing the same types of macroeconomic challenges that is impacting the progress there. But having said that, the model that we put in place, we still believe is the absolute right model. We are seeing the good results internationally as well as domestically in terms of that model being put in place with respect to folks like the technical specialists, and we continue to see progress. We believe in the opportunities we have product market fit, and continue to build towards more product market fit. So longer term, it is still absolutely an opportunity for us. And so we're excited about it. We would like to be further along. It is something that we think over the long term will still continue to contribute to our growth. .

The following comes from DJ Hynes with Canaccord. .

I'm going to go reverse order and start with you, Howard. I'm curious what you saw in terms of trends of volume commitments during the Q4 renewal cycle. And maybe you could compare that to kind of how it was a year ago and I don't know if as part of that, what kind of price you're taking on like-for-like renewals? Any color there would be helpful. .

Yes. In general, we're not going to disclose the specific number. But last quarter, we talked about ACV commitments on the platform crossing $1 trillion, and that continues to grow in Q4. So we continue to see strength there. And that also exemplifies and is evidence that we continue to gain share as well. And so it's grown off of that $1 trillion.

Okay. And then, Ajei, maybe we could go a little bit deeper on data grade. I'm curious where the data that's not inside of Procore resides where data grid will help you. Is it in other construction point solutions? Is it in other systems of record, like what is that data that needs to come into the system that will help kind of power your AI efforts?

Well, I think it's important to understand, Ben, what our architectural construct is as we put together the whole solution. As you -- as we announced at groundbreak, our strategy at the baseline is to have essentially well-thought through APIs, which are appropriate for agnetic workflows to have a platform for agenetic applications and AgenticAI solutions and then to build out AI agents themselves. So it's a 3-layer structure, I platform and the platform includes the ability to do things like advanced reasoning, multimodal reasoning that's construction aware as well as, of course, to be able to monetize activity.

So there's sort of that -- those 3 layers. We announced our strategy and obviously, we were building towards that. We saw with Data Grid the opportunity to be able to accelerate that growth because they had focused a lot on areas that we hadn't focused and we had a complementary way of approaching the market. Now they have -- between us, we have connectors in to a large number, I think, of third-party systems, including ERP systems and others, which allow us to collect information and bring it together. What's really important as far as data is concerned, when you think about the volume of our data, we've got something like 3 million active users in our system. We've got all kinds of information in our systems, including what's really important things like annotations and changes, which are sort of unique data elements as well as the dynamic view of how that data has changed.

So there's a lot of resources that we have been in a position to bring to bear in terms of the information that's within Procore, the ability to be able to oxtrate activities and have data grade is essentially accelerated the strategy that we had in place, bringing some really interesting reasoning capabilities as well as some interesting connectivity capabilities that they had built into the overall Procore AI story.

Moving forward, the next question comes from Matthew Martino with Goldman Sachs.

Ajei, maybe sticking with the Procore AI for a moment. Like can you elaborate on the specific monetization strategy for this? Should investors expect a new premium SKU sort of platform-wide price uplift or consumption model tied to the ROA -- ROI that you intend to generate for your customers here?

And if I could just slip in a quick 1 for you, Howard. What looks like head count grew about 5% total for the year, even with the go-to-market changes. Looking forward, Procore's guiding to around 400 basis points of margin expansion. Do you feel that the business is sufficiently resourced from a go-to-market perspective, especially if we were to see kind of the construction cycle turn over the next several quarters?

So let me just answer your question about monetization of AI and then I'll turn it over to you to Howard. Look, as in any business and new business opportunity, the first thing you've got to do is to establish a compelling ROI and we believe that we're doing that. We know that we're doing that. Our customers are seeing benefit and value from the technology, as I described in the example, where they're saving time and are able to do things that they wouldn't have otherwise been able to do given the shortage of labor and given the limited amount of hours in the day that they have. .

And so the first thing you have to do is to make manifest that ROI. And obviously, from our perspective, the labor cost elements that our customers are facing, that is 1 of the significant and most important line items for our customers. And having digital coworkers do the work, we think generates that significant ROI and even if we can monetize a small fraction of that, we have a significant and incremental upside opportunity that we believe will drive upside to our business at the same time that we support our customers. And we are likely to be including some of those AI offerings within upcoming bundles that are part of some new packaging we're also likely to be including component based -- some consumption-based components.

Now this is obviously relatively new to the market. So we're likely to experiment, and we're likely to evolve our approach. But look, I'm excited about our path forward. I'm excited about our ability to monetize AI, and we'll be sure to keep you posted as we proceed.

Matt, this is Howard. Let me just answer your question around capacity and leverage and so forth. So the first thing is we -- the short answer is yes. We have enough capacity. We have planned for enough capacity going into fiscal '26 to be able to sufficiently invest in the business. Let me go through a couple of more details here.

One is, remember what we talked about from a go-to-market perspective, fiscal '25 was an investment year. We are going into fiscal '26 with largely the capacity that we already need on the go-to-market side and then the focus is really on productivity increases. And so that's the first thing. With respect to the places where we are adding more resources and more headcount, it's largely focused on the R&D side of things, and those are largely going to be added in lower-cost geos for the most part. And in addition to that, we continue to see leverage across all parts of the OpEx lines as we did last year, as we're doing this year as we will do continuing going forward, and also keep in mind, although we are using internally AI, and that is having a benefit, a lot of those improvements that we have done last year and this year is largely just getting better at the foundational ways that we operate.

And as we think about leverage going forward and the resources that we need, the AI piece is actually going to be an additional tailwind to our ability to find scale and leverage in the business going forward.

The next question comes from Ken Wong with Abenheimer.

Fantastic, Howard, I wanted to ask about the guidance. Previously, you guys had this growth profit dynamic where it was it was somewhat inversely correlated. Should we think about elevated margins coming at a lower growth rate? Or is that no longer the case? And then just any philosophical changes in terms of incremental conservatism as you guys embed some some of the [indiscernible] and some of his learnings over the coming quarters?

Ken. So the first thing is there is no change to our guidance philosophy. You can expect the same type of cadence that we did in fiscal '25 for what we're going to do in fiscal '26.

The first question I want to make sure I address, though, we've talked about this before. It's not really a trade-off between top line versus bottom line. What we optimize for is still our North Star metric around free cash flow per share and that's what we're going to optimize for both the numerator and the denominator of that equation so that we provide the best return to our shareholders.

The next question comes from Dylan Becker with William Blair.

Gentlemen, I appreciate it. Maybe, Ajay, for you kind of stepping back, if we double-click on the owner segment, maybe it ties into kind of the enterprise momentum and some of the larger players being more insulated here. But could you give us a sense on what you're hearing from those owners as it pertains to kind of CapEx deployment in 2026, maybe the network dynamics of their opportunity to kind of mandate proforma taken throughout the platform. And maybe, if anything, where Fed RAMP? And I know you guys have a good data center business as well here, but what that can kind of unlocking for in fully as more dollars are allocated to that trail. .

So from an owner's perspective, 1 of the nice things about the owners segment, as I said, is that the owners represent customers from multiple verticals. And obviously, I talked about data center deployments where there is a massive amount of increase in expenses as people start to build out in data centers. So you see incremental spending in certain areas -- but because it's owners -- essentially any enterprise customer as an owner, you see the natural fluctuations of those end markets being reflected in the way owners think about their own real estate investments. So -- but our value proposition to owners goes beyond the value proposition that we have to general contractors.

As I said, our value proposition to owners is around portfolio management, it's about being able to manage the complexity of all of the activities that they have going potentially working across multiple GCs and multiple locations. And you're absolutely right. There is -- the network effect that I talked about earlier is a really important aspect of our business. We talked about -- I mentioned that in the context of -- but it's certainly very important in the context in just the broader context of owners mandating a particular solution, resulting in the GCs taking advantage of that solution, resulting in the subtaking advantage of that solution.

And that we've been seeing essentially since we began as a company. So that allows us to create this deep well of users who are tied to Procore in a much more intimate way than perhaps with other solutions might have. The other thing, you mentioned FedRAMP. FedRAMP represents -- for us, obviously, the federal government represents an incremental opportunity as we start to look out. The fact that we have FedRAMP certification allows us to support opportunities that we were not able to, before we achieved that certification.

The final question comes from Jason Celino with KeyBanc.

Maybe just for Howard. If I kind of adjust for the duration, it looks like you've had the biggest bookings quarter ever. So big congratulations there. Just wanted to ask if there was any deals that might have been pulled forward, not pulled forward, but closed earlier than you would have anticipated. And then when we think about kind of that normalized CRPO, if it is consistent with revenue growth, would that suggest that it did uptick versus the prior quarter as well.

So first of all, yes, Q4 was a fantastic quarter. And it was the biggest quarter that we had from a bookings perspective. So the answer is yes there. And in terms of where that came from, it actually didn't come from any 1 specific deal or even a couple of deals. The strength was actually more broad-based across both large deals as well as the broader commercial segment. And what we saw was really the engine starting to really gain momentum building again on 4 quarters of really strong and consistent execution. And so that gives us a tremendous amount of confidence and momentum going into fiscal '26.

In terms of normalized CRPO, the only thing that we'll continue to disclose and tell you it is still consistent with Q4 revenue growth and ending ARR growth. I think that gives plenty of information about where we expect things to go in the near term .n

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.

All right. Well, good afternoon, everyone. Welcome to day 1 of the Barclays Tech Conference. My name is Saket Kalia. I cover software here. I am honored to have with us the team from Procore. We've got Howard Fu, Chief Financial Officer; also got Alexandra Geller, Head of Investor Relations in the audience. We've got about 30 minutes together. Let's take the first 20 or 25 minutes just to do some fireside chat here with Howard, which I know is going to be fun. And then in the last few minutes, I'd love to make it interactive. So if anyone's got any questions, just pop up your hand and we can just get a mic around to you.

So with that, Howard, thanks so much for being with us.

Thanks for having us.

Yes. Absolutely. Absolutely. There's a lot to talk about at Procore. But maybe just to start, could you just talk through some of the points that you and the team are most proud of coming out of the last quarter?

Yes. I can rattle off statistics, but I think the biggest thing that we are proud of is Q3 is going to mark 3, 4 quarters of really strong consistent execution and results. And that level of consistency, I think, sometimes gets lost in the quarterly numbers and some of those metrics. And we're really proud that we've been able to sustain that and get to a place where that is really durable over the last 3 or 4 quarters. And that gives us a tremendous amount of confidence going into Q4, but not only that, but going into fiscal '26 and beyond. And so we're definitely very proud of that. Look, some of the stats, I could rattle off stats on the 6- and 7-figure customer growth, which has been fantastic and consistently strong, and it's much more reflective of where our business is going.

We've got $1 trillion of ACV that's committed on our platform now. Previously, when we talked about this in prior Investor Days, that was closer to $900 billion. Now we're at $1 trillion. Just the progress on all those components of the business and our place in the industry has us really excited, and we're really proud of that. So those are a few things.

What a way we've come, right, from last year. What we were talking about and we're talking about now. Boy, it's great to see -- very helpful level set. I want to dig into a few of those things. But I want to hit the CEO transition here upfront. And it's funny, we were saying this before the mics turned on, but I'll say it again, I think we're -- all of us are happy to see that Tooey is still going to be very involved in the business going forward. It's been about a month since Ajei started. A lot of us worked with Ajei who he was at Ansys, thought it was a great hire. But maybe you could share with us some high level, what are some of the things that he's thinking about or is going to be focusing on in these first few months on the job?

Yes, sure. Well, first of all, like you said, this is literally week 4 of Ajei being [indiscernible]. So let's just set that context here. The other thing that I'll say is you mentioned Tooey is still actively involved. He is actively involved in the company. We had a Board meeting yesterday. Tooey is involved, and he's staying involved, and he's doing the things that he loves, engaging customers, talking about product. And when you think about that in the context of the stage that Ajei is in ramping and learning and in this discovery mode about the business, putting those 2 pieces along with the operational mindset that Ajei has, has just been a really good interaction to see even at this early stage. And obviously, that's going to continue to evolve.

In terms of where Ajei is going to focus, we did an intro call last week. It's now posted on the website. If you all haven't seen that, we can go and take a look at that. In that discussion, he goes through how he's going through that discovery phase and how he's learning about the business and meeting with customers. It's going to be too early to talk about specific focus areas. But one thing that is consistent with what we've been talking about even before Ajei joined is whatever fingerprints that he's going to put on the business from a strategic or operational standpoint, all of that is still going to be in service of continuing to improve free cash flow per share. That does not change. But it's too early to say the specific areas. And when he attends his first official Q4 earnings call, we can have more insights and he'll say more about that. But I can say the interactions have been really fantastic. He's got the buy-in from the executive team, from the Board and everything, and it's been really great to see.

That's really, really great to hear. And it was a very helpful call last Friday, by the way, in case you could tune in on the website. So maybe with all that out of the way, I want to shift to the business. And maybe a good place to start is with the health of your customers, right? And I think what we said last quarter was that U.S. nonresidential construction was down something like 2% year-over-year. Can you maybe talk about what you're hearing on the health of the construction market kind of going into next year into 2026?

Yes. Look, the overall construction market and the macroeconomic environment and how our customers are pursuing that is stable but still challenged, right? And that hasn't changed, and that is what we're going to assume going forward until we see some evidence of that changing. And so even in that environment, we've continued to gain share. When you layer in our growth rate, Procore's growth rate on top of that negative 2% growth that we've seen in nonresi over the last 3 quarters, our growth has had a pretty significant premium on top end. So we continue to gain share. And so our customer sentiment is that, one, it's the same. It's stable, but it's still challenging. And I think the premium that we've been able to achieve in that environment really speaks to 2 things. One is the consistency in our execution, inclusive of the transition that we made in our go-to-market, which has been paying off really well. And it also speaks to the partnership and the relationship that we have with our customers that they continue to trust us to be their partner as they go on their journey. So that's what we're seeing.

Yes, absolutely. I mean, I thought that was a super interesting point, just the idea of Procore outgrowing that nonresi market by, I think, 10 to 20 points is what we called out, implying clear market share gains. I'd love to dig a little bit deeper into that just in terms of the market, I want to ask about competition as well. But how much of some of that outperformance versus underlying construction is coming from greenfield opportunities versus maybe replacing legacy processes or systems?

Yes. So I think it's important to answer that question to step back just a little bit. Even though we've now crossed $1 trillion of contracted ACV on our platform, even though we've continued to maintain this durable growth, even though we've continued to do that and continue to increase margins, you got to remember, the overall digitization of the industry is still very, very low. And so when you put it in that context, these gains and where those are coming from is going to largely mimic what we've talked about before and the way that we've executed before. And a big portion of that is still coming from greenfield, right? A big portion of that is going to come from point solutions. And so it's still the same mix in terms of where we're getting those share gains, again, in that context of the overall industry and more specifically the way that we've executed over the last several quarters and the last several years. It's been really great to see.

Yes. Yes. Absolutely. My view, what I tell investors in this space is this is a rising tide that's lifting all boats in my view, right? So it's natural to see competitors like Autodesk, right, for example, call out their growth in their construction offering also. But maybe just to make sure the question is asked, can we just talk a little bit about competitive win rates and how those are trending?

Yes. We feel really great about our competitive runway. We feel really great about our competitive position. I can't speak to what Autodesk or any of the competitors are talking about. We can only speak to our numbers. And we feel like from a product standpoint, from a go-to-market standpoint, we are in a really, really good position. We're happy with the sustained and high win rates. The other thing that I'll say is, I think there's a misconception out there that this space that we operate in is more competitive than it actually is, right? And sure, we keep -- we obviously look at competition and things like that. But we control what we control, and we are fully bought into the value that we're bringing to our customers. And the win rates and the competitive positioning and our position in the industry and what customers tell us prove that out to us. And so those are the things that we can continue to go by. And so that's how we're going to continue to execute.

Well, it's an interesting point because I think it was Tooey's last call where he said -- and correct me here on the stat, but something like 5 of the top 10 deals or something like that didn't even have sort of additive bake-off. So to your point around overestimating kind of the competitive intensity of the market, that's maybe a data point that's worth remembering here.

Yes. So half of our large new logo wins in the quarter didn't have a competitor in there. And so that's a perfect data point that exemplifies this.

Understood. I want to move to some of the go-to-market changes that Procore made last year, particularly the focus on the ENR 400 and really increasing the cross-sell into that base. We're about a year into when we announced that transition, right? What a year it's been. Maybe the question is, what are some data points you can share that show that, that strategy is paying off? And what are the metrics that you think are going to show that going forward as maybe a corollary?

Yes, sure. So the first thing is it's interesting you're talking about this in the context of the ENR 400. I just want to make it clear, these changes that we made on the go-to-market side was not specifically for any part of the business. So it wasn't specifically for ENR. It wasn't specifically for one stakeholder. It wasn't specific to any geo. It was really more broad-based in the way that we approach the go-to-market globally across all 3 stakeholders and across all the different markets.

And to that end, we've made a tremendous amount of progress across all those dimensions. Some of the metrics that we look at internally, we've talked about before, we're seeing record pipeline generation. We're seeing that the quality of that pipeline improved. And we know that because the conversion rates are trending much higher than what we've seen over the last several quarters. And we are now seeing the productivity on a per rep basis start to improve as we go to the back part of this year, and that will continue on and the expectation will continue on into the next fiscal year where we get leverage.

And then just from a subjective and anecdotal basis, the amount of unsolicited feedback that we get from customers about how positive that experience has been with the engagements with our technical specialists is just another proof point that this is the right model. And that's not just U.S., it's globally, right? And so that gives us a tremendous amount of confidence. And those are the things that we'll continue to track as we go into fiscal '26.

Got it. Got it. Historically, ever since the IPO, I mean, we've always thought about Procore as a leading vendor for the GCs, the general contractors. But that's not necessarily the case or that's not necessarily the direction of travel for the business. So maybe could we just talk about the growing owners business that we have? What products are they buying? And how that's impacting the model, if at all?

Yes. So we obviously started in U.S. mid-market general contractors. But remember, our mission is to connect everyone in construction on a global platform. And you can't do that unless you have solutions and bring that value, not just to GCs, but to the owners and the subcontractors, right? So every dollar -- every project is going to have an owner, a general contractor and a bunch of subcontractors. And so our intent has always been to expand beyond general contractors into subcontractors and owners. Specifically for owners, remember that owners are very diverse. A lot of times, investors will think about owners as a real estate developer, but they could be your big box retailers, right? They could be a trucking company. They could be a farm egg producer. They could be anybody that has a large CapEx budget. And not only that...

Someone building a data center?

Somebody building a data center? Yes. Of course, right? And then you have owners that are then going to act more like builders and you're going to have owners that are more operators. And in terms of the opportunity there, remember, about 25% of our ARR is from owners, right? And that is just the beginning because the penetration in the owners market is extremely low. So there's a tremendous amount of opportunity there. And when you think about some of the things that we talked about at groundbreak and some of the product things that we are making inroads on, things like portfolio management, things like asset management, things like capital planning. Those are all meant specific to make sure that the product that we're putting out there and the value that we bring are directly addressing some of the needs of the different types of owners. And so we see a tremendous amount of opportunity there, both in terms of the additional value that we can add to that stakeholder, but also the penetration is so low that there's a huge opportunity there. But it's not just owners, right? There's -- I feel like Steve Jobs, but -- one more thing. There's the subcontractors as well. When you think about the progress that we're making and what we're focusing on from a product standpoint, resource management is a big deal. And when you think about resource management, it's labor, equipment and materials. That's the lifeblood of a subcontractor, and that's the lifeblood of a general contractor who's a self-perform general contractor. And when you think about that from that context and the chessboard that we're building out, we're not just DCs, we're building out the chessboard for the owners, building out the chessboard for the SC so that the entire construction life cycle is run on a Procore platform. And that's really exciting for us.

Right. Yes. Absolutely. I deliberately kind of put in that data center joke in there just purposely just to maybe set up for this next question. I mean, I think on that, we all see the headlines around large data center builds that are taking place are expected to take place -- could we talk about how much of the business comes from that vertical and how that might evolve?

Yes. Look, there is no doubt that our customers and we are benefiting from the strength in data centers. But remember, Procore doesn't contract on a project basis. We are ACV agnostic. And so it's actually going to be really difficult to parse out the specific parts of the ACV that are dedicated to data centers. But look, there is no doubt that data centers have benefited us. But I think that speaks much more to the diversification of the construction market overall. You've got data centers that are super strong. You may have other areas that are weaker, but that is a dampening effect that as long as there's construction going on, given the low level of digitization and construction in general, that's how we've been continuing to be able to gain a market share even in a down construction market. I have to say -- keep in mind in the context of that diversification, data centers is 2% of the construction market. We were talking to folks today, and it's growing at 100%. So it could grow at 300% and data centers would be 6% of the overall construction market, absolutely a benefit to us. But put it in context, right, don't over-index on that.

That's a great framing actually, right? So very helpful. Before we jump into some financial questions, I want to hit on a product that I'm actually really excited about. I've asked Tooey about it over multiple quarters, and that's on Procore Pay, right? And I think that's a really exciting product just within your already popular financial management portfolio. Can we just talk a little bit about where that product is today? And what helps drive that adoption in '26 and beyond?

We are extremely happy with the number of customers that are continuing to buy Procore Pay and get on Procore Pay. We are very happy with the progression of the adoption of that once customers buy Procore Pay. It is still a small proportion of our overall revenue in terms of the direct contribution of revenue. But remember, Procore Pay, the value of Procore Pay is way more than the direct revenue contribution from that specific part of the functionality of not just overall our financials product, but the overall functionality of the platform. The value is the halo effect of Procore Pay being a part of the platform and to really compete -- further complete the workflows in the ecosystem and the flows that our customers are going through with pay being that last component where the money is getting transferred without that being connected to the other parts of our financials product into the platform, the value is not as much. We're excited about it. And even though there is a tremendous opportunity for the direct contribution of the revenue, the value of that really is the fact that it's a part of the platform, right? We're really happy about those works.

Yes. Absolutely. It makes it very much end-to-end in, right? Yes, for sure. I want to shift to some financial questions and maybe hit on another topic that's been a focus this year, I would argue, that's pooled contracts. Maybe just to start, could you just provide the audience a little bit of an overview of the mechanics around a pooled contract? What are they? How popular they are within the customer base? And also maybe start to touch on some of the dynamics of how they impact RPO, CRPO, NRRs for those funds [indiscernible] .

Sure, sure. So I'll start -- let's talk about the mechanics of this, first of all. In a normal ramped contract, let's say it's a 3-year contract, let's say it's a $300 million ACV contract. In a normal ramp contract, the customer might contract for $50 million of ACV in year 1, $100 million of ACV in year 2 and $150 million of ACV in year 3. But in a normal ramped contract, the customer has to then consume that amount of ACV in those particular years of the contract. Now that is limiting for the customer. They have to be really good at predicting how their volume is going to grow. And the way that it impacts NRR is actually really good for NRR because there's a natural built-in NRR from going from $50 million to $100 million to $150 million, but that reduces the flexibility for the customer. The pool contract, though, they can sign up for the same TCV, which is $300 million, but they're not locked into consuming that $300 million in any particular year. That's a tremendous value to the customer because they have that flexibility to consume it all in year 1, all in year 2 or all in year 3. And the tricky part though, then is that NRR is 100%. And so even though it's a good thing for the customer, it's actually a good thing for Procore, it's actually a headwind to NRR. So there's going to be a nuance on that piece. In terms of how these things impact CRPO, the fact that there is a ramped or a pooled contract doesn't necessarily -- it actually doesn't impact CRPO. What impacts CRPO is when you go from a customer that signs up for a 1-year deal to a 3-year deal. And so this is what we talked about in terms of the divergence of CRPO growth from out-quarter revenue growth, right? If a customer signs up for a 1-year deal and they run through that first year, you don't refill CRPO until the renewal at that 1-year mark. But if you sign up for a 3-year deal, it automatically keeps on getting refilled, right. So essentially, you're kind of pulling forward the refilling of that CRPO. And so that's why you're seeing that divergence in terms of CRPO growth and the revenue growth -- out quarter revenue growth. And to the extent that, that continues, we'll continue to provide commentary to make sure that folks have the transparency and the insight of what the business is actually doing. So those are the mechanics of kind of what's going on.

Yes, absolutely. Super helpful explanation, by the way, right? So maybe just to kind of put a bow on that point, if I look back, I think where pooled contracts really started to impact the model was in Q4 of '24. And you correct me there if I'm wrong-- I'm sorry, the duration, right, the longer durations. And I think that this quarter here in Q4 of '25, we're going to lap that. And right, we talked about that divergence between underlying, let's call it, mid-teens CRPO growth, as reported RPO growth, which is kind of high teens, 20% level. Maybe the question is, should we see that divergence end this quarter? Or will there be a scenario where underlying and as reported CRPO could gradually converge?

It will not converge in 1 quarter. It's going to be multiple quarters as that continues to converge. When we started to see this dynamic in Q4 of last year, even if that stayed at those levels from that Q4 all the way through now, you're still going to see convergence over 4 quarters. What we saw in Q3 was an additional increase in terms of that contract duration. And our average contract duration has now reached about 23 months. And so you're going to see a gradual convergence. And the more that the contract duration continues to get longer, it's going to extend the time of that convergence. And so we'll continue to provide commentary to make sure everyone has visibility into the normalized rate, which is what we did with a onetime commentary about the ending ARR growth and how that is more consistent with our Q3 revenue growth, and that's to provide that normalized growth rate.

Absolutely. Well, I mean, it's -- maybe one question I want to ask, just zooming out from the accounting of it is what percentage of your customer base has adopted the pooled -- and I understand longer duration pooled contracts are somewhat separate, but I want to go back to pooled contracts. It's so much more flexible for the customer, right, in terms of flexibility around how much they consume in a given year. What inning are we in, in terms of how much of the customer base has moved to a pooled contract structure?

I'm going to answer that in a little bit different way. I don't know how much on pool contracts, but in terms of longer duration contracts, it's about half that's on those longer duration contracts. I think there's give or take a few percentage points. What inning are we in terms of folks moving to that? That's a little tough to say, right, because there's a lot of factors that go into that, upmarket versus downmarket. They're going to have very different dynamics. We're definitely going to move upmarket. So those dynamics, we'll have to see how that plays out. But regardless of how those play out, we'll provide visibility and commentary to make sure folks understand what's actually happening [indiscernible].

Understood. Understood. Maybe one more before we shift to profitability because I really want to talk about profitability. That's been a really fun story to see. Should we continue to view sort of exit rate CRPO as kind of the best future revenue indicator of -- future revenue growth indicator of the business? I mean maybe the question -- the broader question is what are some of the puts and takes that we should keep in mind as we think about that revenue growth going forward vis-a-vis the CRPO growth that we have. And sorry to get into the weeds on that one [indiscernible] about that.

Perfectly reasonable. The short answer is yes, on a normalized basis, right? Outside of actually on a regular basis, disclosing specifically the ending ARR growth, a specific number, I think CRPO is still going to be the best indicator, the normalized CRPO. And for the foreseeable future, that is still what we are going to be anchoring on. Now in terms of what we disclosed, hey, if you haven't noticed, we have a new CEO. So he may come in and decide he wants to provide different disclosures and talk about the business in a different way. We have to leave room for that. But I think at least in the foreseeable future for the short term, normalized CRPO is going to still be that best indicator.

Got it. Absolutely. Actually, before we hit on profitability, one other point that I want to touch on before we go there, just going back to the go-to-market transition was -- I want to talk about the international business, right? So I think we hired a bunch of GMs or we hired general managers to kind of manage different international -- major international markets. Maybe the question is, what are you seeing there in terms of pipeline generation, demand outside of the U.S., particularly since construction internationally, I think is thought to be growing faster. Maybe that's not completely true, but talk about the international business here.

We haven't seen that data. But international outside of the U.S. is still facing the same level of economic headwinds that we see in the U.S. In fact, in Australia, it's actually even more acute, okay? And so those headwinds are still there. Now to be fully candid, I wanted to make faster progress on our non-U.S. markets in terms of growth. And I still think we have the opportunity there. I still think that the model that we are going to from -- we went to from a go-to-market standpoint is the right one. I also think that we have product market fit that will continue to allow us to expand and grow faster in the future for international. We've certainly had a lot of learnings, both from the go-to-market and the product standpoint, and we're in a better position now than we were when all these -- the focus first started to continue to expand and take advantage of that opportunity. I would have loved to go faster, but we still see some of those headwinds. Some of the things that are happening on the international side, we talked about pipeline and how that is getting bigger, getting healthier. We're starting to see that actually in a few spots on the international side, which is great. Now ultimately, there's going to be some time before that then flows into then our bookings and then CRPO and revenue, but we're starting to see some of that pick up, which is a good sign for us.

That's a good sign. Absolutely. I'm going to wrap up here just on profitability because I think Procore has done a great job expanding margins over the past few years. And this past quarter, I think the team talked about how we might be able to expect a similar amount of margin expansion in fiscal '26 as we saw in '25, which is just a great result, right? And there were things that we were talking about this time last year that are setting up for that, and I'd love for you to touch on it. But maybe broadly, where is that leverage coming from? And where can we go from there?

A big part of where this leverage is coming from is it's going to come from sales and marketing, a big part of that, right? Well, first of all, it's going to come from sustained revenue growth, but it's going to then come from largely a sales and marketing organization. Remember, we pulled in and pulled forward a lot of those resources into the beginning part of this year. And actually, we started that towards the back part of last year. And so you're going to see a couple of things going into next year. You're going to see that natural bow wave effect of those -- that capacity having a full year capacity versus having a partial year capacity. That's the first thing. So that bow wave is going to increase the capacity and you're going to get leverage.

The second piece of that is on a per rep basis, the productivity is starting to improve going into the back half of this year, and that's also going to continue on going into next year. And so you're going to see that leverage. We don't need to add a bunch of folks, okay? And so you're going to see that leverage there. And in addition to that, we've talked about on the R&D side and the product side, continuing to add capacity in lower-cost geos. So you're still increasing the capacity and the delivery from that capacity, but you're adding it at a cost that allows us to really start to trend down our percentage of revenue from an R&D standpoint, similarly with G&A. So gross margins will largely stay where they are in that mid-80s range, but you're going to see leverage across all 3 aspects of the OpEx line.

Really front-loaded those investments, right, that we talked about last year.

Yes. And we did, and we're getting the benefits of why we did that. And so those things are coming together going into fiscal '26 and beyond. And that's exactly what we orchestrated.

I actually don't think we could have thought about a better way to end this session on that point. So with that, Howard, thank you so much for taking the time.

Of course, thank you for having me.

Absolutely.

So first and foremost, we want to thank all of you for joining. I know that many of you have been incredibly eager to meet with Ajei. And so we really wanted to give you this time so that you can hear directly from Ajei, ask him all the pressing questions that you've been asking myself and the team. For that reason, the format of this call is really going to be for your questions. Ajei is going to start with some brief prepared remarks, but we really do want this time to be for you so that, again, you can ask Ajei your questions.

Now just please keep in mind that while we did announce the appointment of Ajei in September, he did not officially start in his capacity until November 10. So today actually marks the official third week of his time in the seat. So I say that just to remind you all that it's still very early. The bulk of this call is really going to focus on Ajei's early observations and his high-level thinking, much more so than any specifics or any type of financial updates. So please just keep that in mind as you frame your questions for Ajei. With that, Ajei, why don't we get started?

Well, thanks, Alex, and good afternoon or I guess, good morning for some of you. So for those of you who don't know me, my name is Ajei Gopal. I see some familiar faces on the call. So to my old friends, it's great to see you guys again. Look, as Alex said, I've been here for -- in the capacity as CEO for less than a month, it's been 3 weeks. So obviously, my remarks are going to be limited to early observations. I think it's too soon to get into specifics.

I know when I was a Groundbreak, several of you had asked me why I took on a role so soon. And as a reminder, I was the CEO of ANSYS until July of this year. And when the ANSYS transaction closed, it was very clear to me that I wasn't ready to retire, and I intended to work more. Obviously, I had options. I could have worked. I could have taken on more Boards. I could have joined a PE firm, I could have joined a venture firm or run a company. And the fact is that I am an operator, I do like to run things, and it was pretty obvious to me that I wanted to run a company.

When it came choice, when it came time to think about what company, Procore really stood out to me for a number of reasons. First and foremost is -- Well, firstly, I like the mission orientation of Procore. The fact that it's focused on transforming a particular industry that there is -- that employees and customers work together to achieve this broader objective. I think that's fantastic. So I love the mission orientation of Procore, Again, very similar to my previous experience.

I also very -- I'm excited about this connection between the physical and the digital world. I think that computer technology is obviously changing. This is trite as obviously changing the world. But in physical vertical industries, the opportunity to apply digital technologies to really change those physical vertical industries, I think, is exciting. And I saw that in my previous company, and I certainly see that at Procore.

And then I'm very comfortable running an organization of this size when, again, pattern matching against my time at ANSYS, when I took over as CEO of ANSYS, ANSYS was a little bit smaller, both in terms of revenue as well as employee headcount. And obviously, in the decade or so that I was with ANSYS, we were in a position to grow to being much larger, both in terms of revenue as well as headcount than Procore is today. So I'm very familiar with this journey. I'm excited about this journey of taking a company at this stage and being able to grow it to the next level.

And obviously, I had an opportunity during the process to meet with Tooey and get to know Tooey. And for those of you who know him, I would imagine all of you do, he's extremely passionate about the industry, and we were able to really connect on the customer possibilities and the outcome. What is -- it's also important to say that Procore is not ANSYS. Even though there are lots of similarities, Procore does serve a unique market. There are some unique characteristics. But what I can take away from my time at ANSYS is there is a similar playbook. The playbook is not sort of blindly repeating things that I've done at ANSYS, but it's really the methodology that I use is ANSYS, learning as much as possible, being able to formulate a strategy.

And my objective here is to take the time to be thoughtful to create and make sure that we have the building blocks set aside and put in place for both midterm as well as long-term objectives. And so that ability or the methodology is something, obviously, that I think I can bring and bring to bear and it's certainly the basis of some of the early work that we're doing here. As far as the path forward, I think it would be too early at this point, as I said, to share financial updates. But I think at a very high level, I am very confident that Procore can deliver durable revenue growth with margin expansion and free cash flow per share improvements. So I'm excited about this -- the journey ahead. I think I bring a lot of capabilities and skills that will help me in this journey. And -- but Procore intrinsically has a lot of strong and deep assets, which will also help in this journey.

So with that, let me turn it over to you guys for questions. Alex, I'll turn it over to you, and maybe you can moderate that.

Yes. So I'm going to call on each one of you. I see there's a lot of hands that are already raised. If you guys don't know how to do it, it's just in the react button, and then there should be an option for you to raise your hand. So Saket, please ask our first question.

Okay. Great. Excellent. And Ajei, it's great to see you again, and congrats on taking the helm at Procore. It's going to be great to work together again.

It's great to see you again, Saket.

Same here. Same here. A lot of us remember your time at ANSYS and the changes that you and the team made there so successfully. One of them that really stood out, though, was the change in -- were some of the changes in go-to-market. You and the team went deeper into big accounts, drove more value, sold more of the -- more of a broad platform. Maybe the question is, can the playbook here from a go-to-market perspective be similar at Procore? And what are some of the early differences, right, between that go-to-market strategy at ANSYS and Procore that are kind of becoming evident as you take a look?

Well, I think, Saket, as I said earlier, it's important to recognize that there are similarities between the 2 companies, and there are also differences between the 2 companies. So it isn't about just simply blindly applying what worked at ANSYS. It is about using the methodology that I think helped us be successful at ANSYS. And one of the things that I tried to make sure that I did early at ANSYS, which I'm trying to do here as well, is to get an outside-in point of view to spend as much time with customers and really understand the market to figure out what areas the company needs to focus on.

In the time that I've been with Procore, I would have -- I guess I've met with some individuals from maybe 50 or so customers. And some of that has been fleeting quick meetings, for example, at Groundbreak. Some of them have been -- many have been detailed conversations with customers. And what I will tell you, which is giving me enormous amounts of confidence is the customer relationship and the level of connection between Procore and some of the leading players in our industry is really compelling. It's really deep. I'll give you an example. I was in a meeting with a large GC earlier this week in Manhattan, one of the largest in the country. And we were in a meeting, a conference room in their facility.

And one of the senior executives who was not in the meeting, who had recently been promoted walked into the meeting and he said, "Listen, I really wanted to take this opportunity to meet with you because we started working with Procore over a decade ago, and we made a bet on Procore and Procore came through and has really helped us drive our industry forward and drive our business forward. And that was -- there was a lot more of the conversation, but that's just one example of those deep customer relationships. So I think having depth of customer relationship is important. If you look at it from a platform technology perspective, I'm really excited about what I've seen in terms of the core tech, the core platform, the work that's been done over the last several years of being able to integrate and create this platform that allows us to deliver new technology to customers.

And so when you put that together, that's an excellent foundation from which to build. So the playbook is really understand the market, go through a strategy process to really understand the market, understand how the technology supports the market and then understand how the go-to-market supports that. Go-to-market doesn't happen in isolation. Go-to-market is done in the context of what we're trying to accomplish. And that's sort of the -- that's the way to think about it, Saket. I hope that answers your question.

Ken from Oppenheimer. And I'll just -- if I know where you're from, I'll announce it for Ajei's benefit.

Fantastic. Like Saket said, great to see you again, Ajei. Looking forward to working with you.

Thanks, Ken.

My question, and I know the financial stuff will kind of sort that down the line. But when we think about your early days at ANSYS, I think the initial trade-off was you recognize that the business should be growing faster than it was and you kind of sacrifice some near-term margin to create a durable double-digit grower at ANSYS. When you look at Procore, how should we think about what the kind of the balance of growth and profitability will be? Do you kind of tilt towards one side or the other as you're kind of thinking through kind of what this business should be?

Well, I think with ANSYS, as you remember, the company was at a very different stage in terms of its financial profile. And obviously, the outcome that we needed to drive or what we needed to do there was different. But I think the choice that you kind of laid out here between sort of growth or margin in some sense is it's not necessarily -- it's -- I think of that as being sort of a false choice right now, Ken. I think it's possible to drive both. I mean we are committed, and I believe I can see a way forward to driving durable growth, but doing so in a responsible manner. In other words, driving durable growth, but also being focused on the margin expansion and the compounding free cash flow per share that I talked about earlier. And I believe that both of those -- or all of those objectives are possible at the same time.

Josh from Wolfe.

Can you hear me?

Yes.

Ajei, congrats. I'm sure you're going to get it over and over again today, but well deserved. I don't want to twist words or read into words, but in the last answer, you basically said you see a path forward to durable growth. And I guess my question is, is Procore not in a position today to drive that durable growth? If so, why not? And like how are you going to make that change maybe? And just outside of growth maybe more broadly, like where do you see the 3 biggest places that you can make an improvement at Procore as the new CEO?

Well, I think, Josh, I think that's a -- I think you're reading too much into the words. I wasn't suggesting that -- I wasn't suggesting at all that the company is not in a position to execute. So we're very much on the path of durable growth, and it's something that I'm excited to participate in and join that discussion. So -- and to help as I can. So that's not what I was suggesting at all. So forgive me if my words suggested that, that is absolutely not the case. The second part of your question was what are the 3 areas that I would see as areas of opportunity. Is that right?

Yes.

What I -- the way I would think about this, Josh, is the following. And I think this was also the case at ANSYS. Any company has -- when you're building a company and certainly when you're a CEO coming on board a new company, you have to understand the levers to be able to create an organization that continues to change. Like companies are not static things, right? The market circumstances you're dealing with continues to change. Technology continues to change. And what you have to do is to build and make the investments that allow you to create an organization that continues to grow and that continues to evolve as the market conditions change.

And so that's really -- that's my focus is to really -- as I said earlier in my response to Saket, I want to understand the end markets. I want to understand the strategy. I want to make sure that I understand the product road map. I want to connect that to the go-to-market. And I want to create an organizational structure that allows us to be nimble, agile and responsive to market needs so that we can continue to deliver the value that we -- that I know and I'm confident that we'll be in a position to deliver in the marketplace going forward.

Jason with KeyBanc.

Nice to see you again. Can you hear me okay?

I can. Nice to see you again.

Perfect. So my question has to do with competition. I think you know Autodesk quite well, and you're familiar with Andrew since you were partners with him at ANSYS. Like what was your perception of like the competitive landscape before you joined Procore? And how has that shifted now that you've been there for a few weeks?

Well, I think perhaps the right way to answer that question, Jason, is to talk about what I've been able to see in terms of customer relationships and how I think about the way in which customers are responding to our technology. And that's highly positive. I gave you a couple of -- I gave an example of one of the customers that I've met. But generally speaking, that's consistent with the conversations that I've been having. There is -- there are deep customer relationships. And those deep customer relationships tell us the -- give us confidence in our ability to work with those customers. I'll give you one -- I'll give you sort of another anecdote.

When I was talking to Tooey about joining the company, and this was a few months ago, Tooey invited me out to a job site to work -- to visit a job site and see how customers were actually using Procore in the field. And so I wore my hard hat and I was out there on the job site. And what I will say is it was an amazing experience because I got to talk to people who are actually using the product. This wasn't a theoretical understanding of what the product could do, but these were people whose jobs dependent on Procore working for them.

And it was remarkable the level of support or the level of confidence that they had in the product. And that's obviously one of the reasons why I was so excited about joining and which is one of the reasons why I'm excited about our technology and our customer relationships. So I think it's less an issue about the market dynamics. I recognize that competition is always the case. But having spoken with these customers and having had the interactions that I have, I'm very excited about our category leadership that we've been able to bring to bear over the last multiple years.

Steve with Macquarie.

Welcome, Ajei. Great to be working with you again. Looking forward to it.

Thanks, Steve.

Yes. So Ken asked exactly what I wanted to ask. So I want to bridge from there. And I want to just repeat, I'm going to paraphrase and apologies to Alex, if I kind of mangle things the company has said. But before you joined in the recent past, the company has said Rule of 40 expansion next year is going to happen. It's going to come from profitability rather than revenue. And I think the word acceleration should be in there, but I don't know if it was in there.

And then they've also said the company has talked about taking a more conservative approach to guidance over this last I don't know, 9 months, 12 months with tariff policy creating uncertainty. And it's also said if the macro were to materialize in terms of a big headwind, then Procore could delay maybe the timing of the benefit from the go-to-market model. And so the question out of all of this is, let's suppose the macro doesn't slow down and construction activity is great, could -- are there things you could do to actually accelerate revenue? Is that in the opportunity set? And then on the flip side, if we really do get a big headwind on the macro, like what might you do differently at Procore? So maybe some scenario thoughts there basically is the question.

I think, Steve, I think it's a little bit too soon for me to go through what you're effectively asking, which is sort of guidance philosophy. And to a certain extent, you're asking me to foreshadow a guide for next year. I don't think I could do that at this point. I think obviously, we'll be in a position to talk much more when we talk about our Q4 earnings and give you guide for the upcoming year. So I would punt on that question. But -- and I also can't really comment about exactly what was said before or the nuance that you might have picked up from the previous conversation. So with respect, I don't think that I can really shed any light on those comments. But what I can assure you is that when we are in a position to talk in -- when we announce our results, we'll be in a position to have a fulsome conversation about this.

Andrew from TD Cowen.

Congrats. From your 50 customer conversations so far, that's great. You've done all that. What pain points do they have that you can solve? What are they asking you to do more of? What new products of yours are they interested in because cross-sell is a big opportunity for you?

Well, I think the -- much of the conversation focuses -- at least when I talk to customers, much of the conversation focuses not only on the future opportunity, but also on how we've been doing so far and the traditional strength of the company because obviously, I'm trying to understand why they use the technology and what they believe in. And that's been extraordinarily positive. Obviously, many of them -- most of them start with field tools and our project management solutions. And obviously, those are big ticket items. So that when they make a commitment to Procore at that point, they're making a long-term commitment. And obviously, there's a lot -- there's work that goes into making sure that we can continue to support those customers.

We've also talked about -- and I've had an opportunity to talk to sort of other customers as well who represent owners and general contractors as well as subs. And they're all excited about the road maps that we've been able to articulate for them where we're in a position to support them in ways that give them the benefit and the value of the platform, but in a way that's unique for their personas and their capabilities. I would say more broadly, there is -- if you step back and you talk to the customers, more broadly, there is a general recognition that we are able to deliver an end-to-end digitized platform, which helps them to think about the applicability of new technologies for their industry. So a great example is AI. I mean, with AI, this is -- as you know, construction is a less digitized industry than perhaps others.

And there really isn't that end-to-end digital workflow where you have digital artifacts sort of flowing seamlessly end-to-end. Procore is a platform or is the platform to enable that workflow. And so a lot of the conversations, they're turning to us to ask us how we see the applicability of AI, given that we're enabling that digital workflow for them and allowing them to think about the digital transformation of the industry, how can we bring AI to help them be successful. That's also one of the conversations that's taking place.

And obviously, for those of you who are at Groundbreak, we had an opportunity to talk about Helix and a number of the technologies that we've been building over the last quarters and years that -- and we just had a big conversation Groundbreak. So there is -- I think there is excitement not just about our product capability, but there's excitement about the connected platform and the opportunities that it can bring, not just incrementally from a product perspective, but in terms of technology transformation for these industries.

Matt from Goldman Sachs.

Ajei, great to meet you virtually, and I'll echo my congrats. I wanted to touch on the international piece. So Procore is still quite underpenetrated internationally, and it's always been positioned as a big opportunity. I guess from your perspective, like what are the early observations you've formed about the international go-to-market model? And where do you see the biggest unlock to accelerate adoption over the next few years?

Well, I think if I go back to my prior experience in my former company, we had a significantly larger international business as a percentage of our business than Procore does today. So obviously, I'm aware of the opportunity that exists outside of the United States within the vertical space and certainly within Procore. And I agree with you. It is an opportunity, and it is something that we've looked at as a company. It's something that we're pursuing as a company. Some of the go-to-market reorganization or the go-to-market restructuring was -- the go-to-market strategy that was discussed was around that ability to address the needs of these other markets. So it's still early days for me to do the diagnostic to figure out what else needs to be done or if we're doing what we need to do. But that's something that's obviously an area of focus for me.

Dan from BMO.

So I want to go back to maybe 2 questions ago when you were talking about sort of the workflow. And over the years, Procore has built itself at the center of a very complicated workflow in the construction industry. And so I guess my question is, philosophically, how do you manage sort of the broad ecosystem of stakeholders that are going to be engaging with Procore today and in the future? How are there opportunities for you in these early days to think about sort of maximizing the growth opportunity there from the partner ecosystem?

Well, I think perhaps the question, Dan, that you're asking is who benefits from the digitization of the industry. And if you look at any other industry or if you look at other industries, the creation of an end-to-end digital chain essentially allows for individual roles within that end-to-end chain in the industry to be able to optimize what they're doing to be much more effective in terms of service delivery on their portion of the chain. Because essentially, there is an unlock that happens when you create that end-to-end digital artifact. And that's been our strategy all along.

And so we're trying to create that end-to-end platform, recognizing that, that end-to-end workflow allows for different stakeholders to interact in different ways. So if you're a GC, you'll interact with that in one way. If you're an owner, another way, if you're a specialty contractor in a different way. And this is, I think, central to the thesis that the company has been pursuing for a long time, and I absolutely buy into it. The whole idea, the whole raison d'être for the company, which is to create this global digital platform to connect -- to create this digital chain is that unlock that we're looking for.

And I think that that's what we're building today. That's what we will continue to focus on. The example that I gave on AI is sort of a change that's possible because we've created this end-to-end digital platform. So I'm excited. It's still early days in this industry from a digitization perspective. It is one of the least digitized industries, as you know. But with every day, with every quarter, with every year, there's more and more digitization on board and there's more and more -- and as a result of that, I feel that there's more and more opportunity that gets unlocked for us.

Sean with Cantor Global.

Ajei, great to meet you, and thanks for doing the call here. I'd be curious, and Matt asked one of my questions on international, so I'll skip that. What are the 3 things that you're most excited about when you think about the value creation plan over the next 5 years? I'm thinking low-hanging fruit or big step changes in value. And if margins is one of them, like what is the low-hanging fruit there, but I'll leave it open-ended for you.

Well, I mean, look, I think that -- and maybe I've sort of touched on this, and I feel like you guys are looking for -- it's sort of a level of detail that I can't give you. So maybe I'll take a slightly different approach here that perhaps might give you a sense of the philosophy of how I think about what success looks like in 5 years. So perhaps -- I mean every company has stakeholders, right? And who are the stakeholders perhaps who are the ones that stand out, and it would be employees, customers and shareholders, right? So it's the people who are working in the company, it's the people who are taking advantage of the products and services of the company and of course, the people who are making the investments in the company. And I think they all have potentially different points of view, but they all want to make sure that the company is successful at the end.

And so from an employee perspective, I think culture is really important. I want to make sure that for the Procore employees, they feel like this is the best company that they've worked for. Because I think that if you can focus on culture and if you can create the right environment, you can foster the right set of talent, you can create the capabilities that will drive the organization forward. And you want to get the best and the brightest in the industry that are available who are committed to the cause because that's what allows you to create ultimately the magic that enables everyone else to be successful. So I think employee success and creating an environment for employee success is really important.

The second is, of course, customers. And as I've said and at the risk of repeating myself, we've built an amazing platform with technology that's purpose-built for this end-to-end digital chain for construction. It's purpose-built for construction. We really understand how people are using our technology, and we're excited about the capabilities. I gave you -- I mean, I've talked to customers. I have a sense of what that -- of the positivity from customers. And I want to make sure that we can maintain that depth and breadth of relationship that we have with our customers today, build on that and also expand that to other stakeholders around the globe. So it's taking what we have, expanding it and expanding to the other stakeholders as we've already discussed.

And then finally, from a shareholder perspective, I see tremendous value and opportunity to being able to drive that shareholder value that we've all been talking about for Procore in a manner perhaps similar to what we did at ANSYS. Now the path is different or maybe different from what we did at ANSYS, but I really am excited about the opportunity ahead.

And clarifying question. When you say new stakeholders, are there TAM unlocks, geographies, selling products to new customers?

It's the stakeholders, for example, being -- owners being subs between GCs across geographies. So I don't -- I mean, it's all of the above, right? It's things that we've already discussed, it's all of the above.

DJ From Canaccord.

I appreciate all the time. Probably not a fair question to ask with 1 month and 50 customer conversations under your belt, but I'll ask...

3 weeks to be clear, DJ.

Yes, yes. Do you think Procore has the right pricing model? And then the second part of that question is, is some of the feedback we hear is when you go further down the customer size spectrum, we hear that the software is expensive for those folks. So I'd love your thoughts on any of that.

Look, I think the pricing model is -- from everything that I've seen, I think the pricing model makes sense. And I think that the ACV pricing model makes sense for the majority of our customers. So I'm not sort of starting off by saying, let's go look at pricing and change pricing. That's not my starting point here. From a perspective of price and value, at the end of the day, Procore adds enormous amounts of value to our customers. And the conversation is -- with customers is around the value that we provide. I've never been in an industry where customers are going to say, "Hey, you don't charge me enough for your software." It's never the case.

Customers are always looking at areas to be able to improve their business. And this is no -- this industry is no different. But the reality is you have to compare the value -- you have to look at the value that we provide. And we provide significant value to our customers, and they're betting their business on us when it comes to being able to operate their business at lower risk, more efficiency, all of the things that are necessary for an industry that's as mission-critical as this.

Adam with Stifel.

Ajei, great to see you again and do look forward to working with you. Great to see you. So when I think about the pattern recognition comment you made earlier from ANSYS, one of the things that ANSYS has talked a lot about was this idea of democratizing simulation upstream and downstream. And I think there's some nice parallels to Procore around democratizing the construction life cycle as well. And so when I think about the completeness of the portfolio today, any thoughts on moving further upstream perhaps into BIM design more directly or further downstream perhaps into operations or fintech more aggressively? Any color there would be super interesting.

Well, certainly, Adam, we have solutions in the BIM space, which obviously you guys are aware of, and that's clearly an area that we're excited about. The business right now, when you look at the breadth and the depth of the business, to your point about upstream and downstream, one of the points of differentiation for Procore was taking an approach that was field-centric. It was really looking at the existing workflow and taking a field-centric approach to saying how can you drive decision-making down to the stakeholders who actually are trying to make the decision as opposed to sitting somewhere else in the back office and making a decision, can you actually give -- enable people with field tools so that they can get their job done.

And I think that's the philosophy that we have within the company, which is understand what the problem is, understand exactly what you need to solve the problem and then solve the problem accordingly. So it's really about trying to get and enable a solution that allows for that end-to-end digitization. That's been the philosophy of the company, and that's obviously something that we'll be excited to continue.

Dylan from William Blair.

Great to see you again. I guess you hinted at different businesses with similar playbooks. Wondering if you could kind of maybe dive deeper on to -- or into the parallels around kind of change management, right? If we think about kind of the evolution of generative design and manufacturing and simulation playing into construction and underdigitized space and embedding kind of intelligence across the platform, how you kind of maybe help think about driving conviction in making this change, just given the value proposition similar, right, of completing projects faster on time, on budget, et cetera.

So Dylan, just to clarify the question, you're asking what would -- you're asking what's the level of conviction that you can drive change with the kind of technologies that we provide in an industry of...

Yes, sorry, more like the applicability kind of pattern recognition parallels, right, of driving change management with what you did around kind of the evolution of simulation and generative design, driving intelligence for productivity in an industry in construction, which we've talked about, that's been a technology laggard kind of helping them get over that hurdle of here's where efficiency can be valuable and how you solve that pain point.

Yes. No, I get the question. That makes sense. So I think the -- one of the -- so again, I'll go back to simulation and Procore is not a simulation company. ANSYS was a simulation company. And with simulation, the real unlock was when the customers understood that the simulation results were consistent with real-life performance, right? And so they could rely on the simulation to give them a -- to understand what the performance of a physical object would look like. And that allowed us to take that same value proposition and move forward. And of course, ANSYS was a tool provider and not a platform provider. In construction, I believe that the real unlock is to be able to provide that end-to-end digital workflow.

And because once you're in a position to manage the digital artifacts and create that end-to-end workflow, you take essentially an industry which has a lot of risk associated with. You're dealing with multiple stakeholders, multiple players, you're dealing with the vicissitudes of the physical world that you're dealing with in a very different way than you are with other industries. And helping the digital thread helps to minimize or helps them to -- help our customers to manage risk. And so they have to trust that we're in a position to make that happen. And that's what I see taking place.

So the change management, as you rightly point to, comes from showing up every day and proving to them that they can trust the integrity of that end-to-end workflow and they could trust the data that they're making decisions on. If you have someone who's historically made decisions one way to persuade them to change requires them to feel like they can trust you, both from a company perspective as well as trust the platform that you're delivering. And we have many customers. I mean we have so many customers, like the individual I mentioned from the large GC earlier this week, we have so many customers who will talk about how Procore is made that happen for them, how it helped them change their industry, how it move things forward, change their company or how they allow them to do things they wouldn't have otherwise been able to do.

So the fact that we have that end-to-end platform gives us the ability to have that conversation of high trust with our customers, which -- and gives us the right to have a conversation with them about how we can help them introduce new technologies into the Lexicon. And so that's why I mentioned the comment about AI. We have the right to have that discussion because we are enabling the end-to-end digital workflow. We're creating those end-to-end digital artifacts for them to be able to work with AI. So we have the right to have that conversation. And there is an implicit trust built up as a result of the work that we're doing with them.

Taylor from UBS.

Ajei, really appreciate and look forward to working with you going forward. Maybe just Procore has undertaken a number of changes over the last year plus, particularly on the go-to-market side. So what's been your impression with the changes so far and how they've been progressing based on the customer conversations that you've had? And I know it's early, but just in terms of the strategy that you think would put Procore up to be most successful, do you believe that they were already on that right path? Do you see opportunities for bigger and more material changes to be made? So I guess it's a question of, is this more potentially tinkering going forward? Or are there opportunities for greater strategic changes?

Well, Taylor, I think the -- I mean, it's a great question. I mean, unfortunately, it's a little bit early for me to respond, I think, at the level of detail that you're looking for. I'm excited by what I've seen. I'm excited by the work the team has done. There's been a lot of great thinking. There's been some great execution. But I'm 3 weeks in as CEO, I still need to be in a position to do the work that I want to do, which is I want to look at the strategy, I want to look at the go-to-market, I want to look at products. And I want to be thoughtful about following a sort of a methodology, which allows me to be confident in whatever decisions get made as opposed to jumping to conclusions on one way or the other. But I'm excited about what I've seen so far, and I'm excited to continue to learn more.

Joe from Baird.

Great. I wanted to go back to pricing, and I hear you on ACV making the most sense. But do you think we could see creativity with pricing or maybe reformulation around the ACV? And I just think back to ANSYS and like I always considered ANSYS pretty creative with its licensing approach, like there was the ability to monetize compute that led the HPC licenses that was obviously very successful. Not saying that really matters here, but the creativity point, could we end up maybe seeing some new methods around commercial arrangements?

Yes. I think, again, the -- I think it's, again, too soon to say, Joe. But I think the sort of philosophically coming into it, my view is you've got to be flexible to meet customers where they are. I mean it's got to make sense for people, and it's got to make sense for the company. And companies are successful because they can be flexible as market changes, as market needs change and as customer needs change. So obviously, I want to make sure that we approach this conversation from a point of -- I want to approach from a point of understanding what the strategy looks like. But as you noted, at ANSYS, we were able to be quite flexible in the way that we thought about pricing, and that, I think, helped us from a business perspective.

Andrew from Baron.

Ajei, great to see you. Baron team is excited to work with you again.

Thank you.

As you -- so I realize that 3 weeks in, it's kind of hard to get definitive answers on a lot of these questions. So mine is more on your information gathering process since you started. As you sort of take the data, whether inside of Procore or external that you use to make day-to-day or month-to-month decisions, what are some of the types of metrics or analyses that you're looking for to kind of help you inform your strategy? So like we're financial analysts, we look at outcome metrics like RPO and revenue and cash flow, but they're all byproducts of things like, I don't know, like project volume per customer or like the go-to-market pipeline. If we just had a picture of the dashboard that you're looking at every morning or that you're building to help you inform these decisions, what are some of the metrics that you think are kind of important to focus on?

I think, Andrew, you're asking a great question. There are sort of a different set of metrics now perhaps that are important to me than would be important to me sort of on a day-to-day operational basis. Obviously, when you're running the business, things -- as you say, revenue is a trailing indicator of activity. And you can look at many other things, you can look at customer conversations, you can look at pipeline building. You can look at rate and pace of innovation in the R&D organization. There are many, many different things. You can even look at customer escalations. There's lots of different internal metrics that you can look at, some of which I've looked at in different companies in my previous company, some of which might be unique for us to look at, at Procore.

But that's a dashboard that I'll continue to work my way through as I get comfortable with what I want to see, what are the leading indicators for success in the quarter, what are the leading indicators for success in the year. So I think that's one set of questions. The other where I thought you were going to go was how do I think about the analysis that -- I'm sort of in the analysis phase right now. It's like what do I think about -- what do I think is important from a -- to understand. And I think, obviously, -- and there are many elements that you would look at it, but at a high level, what I'm really trying to understand is where is the maximum market opportunity for the company, right?

And it is looking externally at the market where people are spending money, what they're spending money on, how they're thinking about this particular industry, who are the different stakeholders who are involved in investing in this industry and then connecting that to our products, right? And then mapping that into where we have a set of offerings and where we need to make investments and where we have complete sets of offerings and then connecting that to our go-to-market to make sure that when there is a market opportunity and we do have product capability that we've actually built out a go-to-market to be able to take advantage of that and monetize it.

I mean the worst situation is to have a market opportunity, you have great product and not have a go-to-market. And an equally bad situation is if you have a market opportunity and you have -- you build a go-to-market and you don't have product. So it's all kind of got to come together. And obviously, you've built a product and you have the go-to-market opportunity, but you don't have a market. I mean that seems like a dull thing to do as well. So there's a lot of -- it's really about connecting the different pieces. I will tell you that another area to think about, and I mentioned this when I talk about employees is culture, right?

I think culture is very important in an organization. You need to have -- you want to have a strong culture of commitment to the success of the business. And that's also something that I really care about. And I'm looking at things like the employee engagement surveys and feedback from one-on-ones and roundtables and group meetings and things of that nature to understand what the employees see. Because at this point, there's a lot of wisdom in the company, right? It's not about just looking at external metrics or looking at numbers. You can talk to people and people will tell you things that they feel passionately about. And if you extrapolate from enough numbers of conversations, you can extract a lot of wisdom from the crowd, if you will. And so those conversations with employees are also really important.

And so you start to put all of these different vectors together. They may not be sort of long-term dashboard like things, but these are continual activities. Every company needs to continue to have a strategy cadence. That's something that we will continue to have. Every company needs to focus on employees and culture. That's something that we will continue to do. Every company needs to focus on its own internal systems to make sure that you take the friction out of doing business within your own company. That's obviously something that I'm looking at as well.

So there's a number of different elements here. But at the end of the day, I think it all comes together. And that's what ultimately translates into the big set of things that you want to do. And then you have to then allocate from a prioritization perspective, what goes into the next operating plan and what goes into the operating plan afterwards and then you create that, and that leads to the dashboards that Andrew spoke of. So hopefully, this was -- hopefully, this answered the question.

Mark from Loop.

I recognize that M&A is likely not among your top priorities, at least over the near term here, which, if you recall, is kind of a similar situation to when you first joined ANSYS. However, during your tenure there, you oversaw several significant acquisitions, Livermore, AGI, they both come to mind. Could you just maybe share your thoughts on how you plan to approach M&A at Procore, particularly when it comes to potentially meaningful transactions?

So Mark, my philosophy on M&A hasn't really changed for many, many, many years, which is that M&A is not a strategy unto itself. M&A is in support of a strategy. You really need to have a clear understanding of what your strategy is. And then you can think about what acquisitions, what you build organically, what you develop organically, where you build partnerships and what acquisitions you might need to do in order to be able to execute your strategy. And so ultimately, the decision about M&A and what that M&A footprint and profile is going to look like will depend on ultimately how I think about the strategy. But with all of that being said, I want to make sure that we can deliver the best solutions that are available for our customers.

And so I want to make sure that those -- that conversation about the build partner buy, which is an important aspect of any company's operating rhythm that those customers -- those conversations are -- had within the organization. And if we are doing M&A, I want to make sure that we are successful at being able to do M&A. I think many companies love to do M&A, but then it's unclear what the success is. And I want to make sure that if we do M&A, our M&A is successful. And certainly, from my own experience, we've seen how to do that.

Greg from Praesidium.

On the margin structure. I mean when you were running ANSYS circa 2018, kind of similar scale to Procore, growing similar growth rates, you're operating with kind of mid-40s operating margins versus Procore here at 14% today. I mean as you look at kind of comparing these 2 companies in kind of similar stages, what are the obvious differences to you that kind of enabled ANSYS to be at such higher margin levels at a kind of similar stage versus Procore? Or another way to ask, are there any kind of easy low-hanging fruit kind of you see at Procore to kind of maybe kind of adjust the margin structure higher?

Well, I think just to correct one point that you made, when I joined ANSYS in 2016, the growth was not in the teens. The growth was in single digits. And the growth had not been -- and the company was much more -- had been at -- the growth rates had sort of asymptoted down to a much lower level and it was sort of a declining growth business at a different level of its maturity. It was a much older company. So there were some differences between where ANSYS was and where Procore is today. When I got to ANSYS, the -- and if you look back a few years, what it happened was as growth had been declining, margins had just gone up. And so we had a situation where we had very high margins, but relatively low growth on the top line.

And part of that was -- and I think someone alluded to earlier, part of that was taking -- coming to the street and basically asking for permission to take some of the margins -- take some of the margin down and spend more money to reignite growth. And so it was a different -- the financials there were different and the circumstances were different. The other thing that is important to note was ANSYS was a tool company. And a tool company is much more subject to changing circumstances because -- at least at the time, and we had to build out a simulation platform. So at the time when we got there, it was much more about individual tools, and we had to build out a simulation platform, which is -- now Procore is a platform already.

That work doesn't have to be done. It's already been done. That's intrinsic to where Procore is. And so creating the tech investment and creating that end-to-end platform, is -- I think it's great. And so from my perspective, I see -- in fact, I started with this. I see a path for us to continue to drive durable growth and to be able to do so while we're improving margins and where we're seeing this free cash flow per share expansion that we've talked about. So that's the direction that I see. And the similarities are not quite the same with ANSYS when you get down to that level of detail. But from a Procore perspective, that's what I'm excited about. Does that help?

I think we're going to have time for one more question. So Brent with Jefferies.

I know you were asked about international, but I go back to the IPO when Tooey highlighted 90% of the TAM is outside North America. And if you look at the last 2 years, the international business as a percent of revenue has been in a pretty tight range. There's been really no breakout play. And I'm just curious how you think about this. And I know you gave an answer earlier, but it just seems like such a big opportunity that you guys could do a lot more. And so maybe if you can go a little level deeper or maybe we're going to have to wait for you to go through your listening tour in international, but just curious if you could comment on that.

I think with international, I think it's obvious when you look at the numbers that there is opportunity international. I don't think anyone is confused about the potential international opportunity. The question ultimately becomes what's the most effective way to address that opportunity? And how does that compare with all of the other priorities that the company has. And that ultimately goes to a discussion about strategy. It also goes to a discussion about product market fit, how does that work in the specifics of the market? Are there local regulation? Is there localization that needs to be done.

So there's a lot of complexity in the answer, the sort of the level of detail -- the next level of detail of the answer. So it's not a high level, is international good? I mean, absolutely, it is good, no question. It's how you get from here to there. What needs to be done? What is the level of investment? What is the level of completion? And what is the ultimate opportunity that we need to pursue. And so that's how I'm -- I want to be thoughtful in terms of how we're thinking about it as opposed to just a blanket statement about international being good.

Okay. So I think we're actually going to close out on that note. Thank you all so much for coming. This really was Ajei's very first investor touch point in the CEO seat. So certainly, there's going to be a lot more to come as time progresses. We're very, very excited to have him on board. And if there are any other questions, feel free to reach out. We are going to be entering our quiet period shortly, but we're looking forward to connecting with a bunch of you in the coming days.

And I want to thank all of you for taking the time out of your schedules to spend with us. It means a lot to us that you're willing to do that. And I look forward to conversations over the coming quarters and years with all of you. So thank you very much.

Hello, and welcome to the Procore Technologies, Inc. Q3 2025 Earnings Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand over to Alexandra Geller, Head of IR to begin. Please go ahead.

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 onetime 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 5, 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.

And 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 6- and 7-figure deals accelerating to 31% year-over-year growth and the number of $100,000-plus ARR customers now totals more than 2,600. And our go-to-market model is yielding benefits, positioning Procore for efficient growth.

Another very important highlight from the quarter was our announcement that Ajei Gopal would join Procore as our next CEO. Ajei officially steps into the role on November 10, 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.

Ajei has more than 35 years of proven experience, including leading a multibillion-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 has shaped him into a versatile leader who knows how to scale innovation, navigate complexity and deliver lasting impact.

Ajai'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. So you'll hear directly from Ajei 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. nonresidential and multifamily construction has gone from growing 25% year-over-year in Q1 2023 to negative growth of 2% for the last 2 quarters as reported by the U.S. census. That represents a staggering 27-point reduction in growth over 2 years. And yet in that same 2-year period, Procore has continued to grow faster than this end market by approximately 10 to 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. And 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 life cycle. 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 road map 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. So I think this long-time customer quote for Brasfield & 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. And of course, 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 ENR general contractor, Valvoline Inc., one of Canada's largest electricity transmission companies, the Department of Transportation for a Mid-Atlantic state and Horowitz Mechanical. This quarter, E2Optics, a leading technology infrastructure contractor, also became a large new Procore customer. While they initially approached us for help with preconstruction, the conversation quickly shifted from software replacement for a specific pain point to full operational transformation.

E2Optics chose Procore's unified platform to gain visibility and control across the entire project life cycle, 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, E2Optics will use Procore to build hyperscale data centers, health care, 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, ENR 23 Brasfield & Gorrie, a top 5 ENR 600 specialty contractor, Goodman Australia and a Fortune 200 natural gas company. One of our largest expansions in the quarter was a 7-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 life cycle. 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 lean waiver and compliance tracking.

You may recall that resource management is a comprehensive offering of labor, equipment and materials, the most critical management areas for subcontractors and self-perform GCs, and it's an area that we have made significant investments in over the past years, beginning with labor, then adding equipment last year and closing the loop with materials set to launch next year. Another 7-figure expansion win was with related companies, one of the largest privately held real estate development and management firms in the U.S. Related had been using Procore on a few regional agreements. And in Q3, they displaced a host of incumbent vendors to expand enterprise-wide on Procore, adding volume and new products.

With a large and growing pipeline of development, Related needed a scalable unified platform to connect teams, standardize workflows and deliver real-time visibility into project performance. Moving forward, Related will use Procore to execute on their expansive pipeline of large-scale commercial real estate developments as well as data centers and renewable energy projects. As you can see from these wins, our competitive positioning remains as strong as ever. We have a broad market opportunity that encompasses global general contractors, owners and subcontractors, and the landscape remains largely greenfield.

And it's important to note that many of our largest deals are uncontested. In fact, half of our top 10 new logo deals this quarter, which included all stakeholders involved no other vendor in the prospects evaluation. While investors often assume that large upmarket transactions are competitive in nature, the reality is that our clear category leadership frequently positions us as the only viable platform that can digitize the construction industry.

As you can hear from my remarks today, I have deep conviction in Procore's future. As Procore's founder, I am transitioning the company from a position of strength, ensuring that Ajei inherits a strong foundation for our next stage of growth. I believe that with Ajei leveraging his proven operational expertise as a CEO and my continued commitment to our mission and our vision as the Chair of the Board, we have an unbeatable combination. But more than that, and the time that we spent together, Ajei and I have grown close over a shared passion and appreciation for empowering the builders of the world with technology.

We already met with several of our largest customers, and I have been impressed at how quickly Ajei has picked up on the nuances of the construction industry and how he's begun to build a rapport with industry leaders. And I am very confident he's going to continue to strengthen those relationships. I'm handing over the reins with complete confidence that Procore is in the right hands and has the opportunity to deliver substantial shareholder value. The road ahead for this company and for our industry has never looked more promising, and I fully intend to remain a shareholder.

I just want to say thank you all for your support, and thank you, Ajei, and a big thank you to all Procore customers, partners, employees and shareholders who have helped us get to this point. We never could have done it without you. With that, I'm going to turn it over to Matt to walk you through our financial performance.

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 3 ways in which Q3 specifically improved this are: one, durable growth; two, margin expansion; and three, modest share count growth. But 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 1 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 cross-sell 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. nonresidential 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 could 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 onetime 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 2 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 1-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. And 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% to 13%. Q4 non-GAAP operating margin is expected to be 14.4%. For the full year fiscal '25, we are raising our revenue guide to a range of $1.312 billion to $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 '26, 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 Ajei is starting as CEO next week, we want to provide them sufficient time to onboard and ramp before providing formal guidance.

And 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. So from 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.

And with that, let's turn it over to the operator for Q&A.

[Operator Instructions] Our first question for today comes from DJ Hynes of Canaccord.

First, Tooey, congrats on all that you've accomplished. I know this isn't goodbye, but wishing you the best of luck in the new role. Maybe we can start -- I think you said in the past that perhaps the signal of a turning point in end market demand would start with the owners. So I guess the question is, is that still a reasonable way to think about things? And what are you seeing in that segment of the business?

Well, let me start with what I'm seeing, and then I'll talk about the owners in particular. The headline is that what we're seeing in the macro environment is pretty much what we saw last quarter and the quarter before that and the quarter before that. So there really has not been a big change in the macro headwinds that are out there. But as I've told you in the past, I do believe that owners are -- that's where projects begin, right? And so the more owners get excited about building projects, the better it is for Procore because we sell to owners, GCs and subs.

So in general, it is a good place to look for it. And as I said in my opening remarks, we do believe that this is going to -- this headwind will eventually turn, and we will have a tailwind. And -- but I do want to also caution you that when that happens, it takes time for projects to get green lit and to get permitted and to get put into construction volume before it hits Procore's revenue. But it is -- it will turn, and we're excited about that.

Perfect. And then, Matt, maybe a follow-up for you. I mean the comment that stood out in your prepared remarks was that net new ARR growth came in notably faster than revenue growth. And I just want to unpack kind of what you're trying to convey there? And does that portend revenue growth acceleration here in the future?

Sure. This was a very common question we got 90 days ago as well when we reported Q2. And so I'll just reiterate, we had another strong quarter. We're on pace for a strong year. And all of our commentary we made 90 days ago around our base case of growth, I would reiterate that today. If anything, the third quarter just increased our confidence in this topic. Obviously, there is an upside case, there's a downside case. We can talk about those if you're interesting. But right now, we're operating well within the base case, and we feel really good about that. Our optimism is high. Our confidence is high. And yes, we're looking forward to delivering a Q4 when we report in February.

Our next question comes from Matthew Martino of Goldman Sachs.

First of all, Tooey, I'd echo the congratulations on your last earnings call on retirement. Excited to see your impact as you continue to work behind the scenes with customers. For the first question I have here for Tooey. Tooey, I'd love to hear your perspective on how you think about the data center opportunity. I appreciate that this is a kind of 2%, 3% share of nonres historically, but there's been a flurry of major announcements in the past 3 months. Procore itself signed a large expansion in the quarter. Wondering if your thinking here has evolved on how impactful the data center build-out can be for Procore, especially with a few of your larger customers directly tied to the theme. And I have a follow-up.

Yes. So Matt, first and foremost, I would have corrected you, but you've said it for me, which is data centers as exciting as they are, do not make up a very large portion of the overall construction economy. But I think that being said, first, I also want to say Procore has done very, very well in the data center world. We're everywhere, and it's something that we're very proud of. I mean it is a strength. But as you know, the construction economy is made up of many different sectors. And when one wanes, one waxes. And so we have a -- that is one example of an area in the market, which is doing particularly well. But you can also look at things like multifamily, which have been struggling for the last few years as a downward trend. So data centers are exciting. Everybody is talking about it, but it is a small portion of our business.

Got it. And then, Matt, for you, nice to see cRPO hanging in there in the mid-teens. Could you maybe peel that back a little bit and give us a sense of how renewals trended in the quarter, whether you're seeing a higher proportion of stable or growing ACV commitments relative to the past few quarters?

Yes. It was -- the 2 dynamics influencing the reported number were all of the strength Tooey talked about in the strong quarter. And I would include renewals in that category. It was very healthy in that regard. The other dynamic, obviously, is what we also called out in my prepared remarks around the contract duration ticking up. But the underlying health of the business, I would describe as stable to positive and trending in the right direction. So we feel pretty good about that.

Yes. Matt, one thing that just jumped out at me, and that's why I put it in the prepared remarks is the fact that Procore now has $1 trillion of committed construction volume annually on our platform. And when I set out to start this business many, many years ago, I could have never imagined having that amount of impact on an industry, and it's just a testament to how we're doing with the new acquisition of customers as well as our expansion of our existing.

And Matt, you might remember last November at the Investor Day, that number was roughly $900 billion. So it gives you another sense of how customers are feeling about their renewal activity with us.

Our next question comes from Brent Thill of Jefferies.

Tooey, the cRPO, I think, is the highest growth you've seen in 7 quarters. And I'm just curious if there's anything to consider? Is that just a sign of, hey, ongoing continued good execution, macro may be opening up a bit or any other factors on that side? And I had a quick follow-up.

I'm going to let Matt start, and I'm going to come in over the top.

Yes. Brent, so the 2 drivers of the cRPO performance are: one, strong quarter. We can talk about our category leadership. I'll let Tooey cover that. And then obviously, the second dynamic is the increasing contract duration that we've been having. When you -- normalizing for all of that, the underlying cRPO growth rate is very consistent with the revenue growth rate in the quarter. But I'll let Tooey explain like thematically what's been happening in the business.

Well, so as you hear me say all the time, Brent, that first and foremost, the opportunity is just -- is so large. The TAM is so big. And also the fact that we are the system of choice for the industry when it comes to construction management, primarily because we're the best platform that's out there. And I think the other contributing factor is our go-to-market motion has been very strong, and it's driven by an extremely good brand presence in the markets that we serve. So all of that just reflects the strength of us and how we're feeling -- how our customers feel about us.

Okay. And just on the go-to-market too, you mentioned it's yielding benefits. I know many of the changes are in the rearview mirror. But where have you started to see kind of the biggest improvements in the field? What has been maybe your and Larry's proudest moment of what the changes? Is there 1 or 2 areas that you're -- you can point to and highlight that this has been a great outcome?

Yes. So I would say, primarily, the customer intimacy that we have generated through providing additional resources to our customers to make them more successful is something that really is driving a lot of goodwill, which leads to both revenue expansion on dollars committed as well as additional products being sold. So that has that downstream impact, which is really, really powerful. And so we have been kind of excited about that. And I don't know if you want to add anything.

Yes. So I would talk about there's some pretty tangible benefits we've seen. Overall, improved execution, which is great. We've now had a few quarters in a row, really began in Q4 of last year and it's continued in Q3 of this year. We've got higher pipe conversion, which is a great sign, improving expansion rates. We've actually had lower voluntary headcount attrition in sales and go-to-market, which is great. That keeps productivity online for a longer period of time. And then clearly, the big one is when you hear directly from customers themselves and Tooey touched upon that. So in aggregate, we feel like we're operating quite well. We think we are where we thought we would be. At the same time, there's no mission accomplished banner being hung up in the Procore offices here. We want to get better. We see opportunities to get better, and we will. But we're pleased where we are right now.

Our next question comes from Saket Kalia of Barclays.

Tooey, really nice way to cap off your term as CEO. So kudos. Tooey, maybe on that topic for you. I don't know if it's been said yet, but just congrats on hiring Ajei. I mean he did a great job at ANSYS. So great to see. Understanding that he hasn't started yet, what are some of his ideas about the business that maybe intrigued you during the search process? I'm curious. And I don't want to preannounce anything that he's planning, but I'm just kind of curious what was intriguing about some of his thoughts on the business?

Yes. Well, so it was remarkable because early on in the conversations that Ajei and I were having, we kept honing in on our passions around serving the people who build the world around us. And his experience prior to his new role at Procore really, really -- is a good analog to what we're trying to do here. So first and foremost, that was kind of the moment where I think we both saw like, wow, this is something that could be great. And I've had the great privilege of getting to know Ajei over the last couple of months and even more in the last few weeks. But it just turned out that he is not only a great operator, but he's also just a great person. And I was driving into work this morning, thinking to myself like I am more confident now than I've ever been because I have so much faith in him, and he's such an inspirational leader. So that's a comforting place to be in this moment in my life.

Yes. That's great. Matt, maybe a few for you for my follow-up. I know we don't talk about net revenue retention rates expressly, but it sounds like they're trending up. I was wondering if you could confirm that. And maybe more specifically, what products specifically are sort of driving what sounds like an improving NRR and whether we can -- we think it can continue into next year?

Sure. So there's some puts and we disclose that metric every Q4. And when we report in February, we'll definitely quantify it. So I'll keep my answer qualitative to your point. But there are puts and takes going on in there. I would describe churn year-to-date as stable, which is good. I would describe expansion as improving. So those 2 things would be the tailwind going into NRR. The headwind would actually be the same dynamic that's happening in cRPO with the longer contract duration. One of the reasons why customers are electing to take longer-term contracts is the option to pool your construction volume. You may have heard us talk about this before, pooled models. Pooled models are a great option for customers. It's a win-win. We get a longer commitment. They get a lot more flexibility. We're quite happy about that.

But those contracts do come with an NRR of 100% throughout that contract term. So that's the headwind. So I wouldn't be surprised we end up in a very similar place where we were last Q4. This is why it's not the best metric for us. You can see the financials may look good, but NRR may look unchanged for all the reasons I described. And then on the product front, if I had to single one, I would probably pick financials. But as you may have recalled, what we talked about at Groundbreak, we're pretty optimistic about what's going on in resource management. And there's -- those are things there that are going to be quite beneficial to us in the long term.

I would drill in analytics as well. Our customers love our analytics product.

Our next question comes from Jason Celino of KeyBanc Capital Markets.

Tooey, it's been a pleasure, and we'll still see you at Groundbreak. So you're not -- you won't disappear from our lives completely. But like taking a step back a little bit, I think when you guys went public 4 years ago, you had that chart showing that construction was second underdigitized industries. I know the industry has made a lot of progress over the last few years but...

Agriculture and hunting, Jason, yes.

Yes. Yes. Good memory. When we think about what the next 5 years might look like, like where do you think the industry digitizes the most? Open-ended question, but thought I'd ask. Yes.

Yes. By the way, this is one of the things that I just am so grateful for because we do have this corpus of proprietary construction data that is unprecedented. In this era of AI, I believe that we are extremely well positioned to drive tremendous productivity into the entire industry, from the owners to the GCs all the way to the subs. And it's because we have this data that we can share with the industry. So they don't have to make the same mistakes over and over again, and they can optimize their business. And the industry has been plagued for decades with a labor shortage. The more we can do to drive productivity into the organizations that we're serving, the better they perform as companies and the more grateful they are and the more they want to buy at Procore. So I'm really excited about our opportunity to leverage the data on the platform to enable this industry to get off the bottom of that list and move up.

Okay. Great. And then I think you're still beta testing some different pricing and packaging adjustments. Just curious how that testing is going and when we might hear more concrete details of when these changes will be rolled out across the board?

Sure. I can take that one. So what Jason is referring to, if you don't know, is historically, our products have been sold a la carte. And we are in a pilot right now with a cohort of current customers and new logo prospects where we are offering our solutions in a kind of a good, better, best bundles and packages that are tailored to the stakeholder. So, so far, Jason, it's going quite well. I would say the feedback from customers has been positive in terms of the simplicity of the menu of options. If you want to land with a modest amount of solutions, you can and you have a very clear graduation path to adopting a bit more, and that was the downside to our prior, I should say, our current model right now. We're not really expecting this offering to really change the financial trajectory of the business. It's really just more about simplicity and having something very digestible for customers to kind of consume, so we can digitize them on their own journey path.

And Jason, we've been hearing this for years from our customers that there's a certain subset of our prospects that would much prefer a simpler pricing model, so they don't have to go through the a la carte process. So this is just another example of Procore meeting our customers where they want us to meet them. And I am very excited that it is showing such positive results.

Our next question comes from Joe Vruwink of Baird.

Congrats, Tooey. The large deal activity is good to see. There's nothing that strikes me about the seasonality in 2Q and 3Q that's naturally conducive to large deals or surfacing large deals. I would think that 4Q is probably when more large deals tend to happen. So I just wanted to confirm that point that you're not pulling anything out of the pipeline early, that sort of thing. But more specifically, just asking about how the 4Q large deal opportunity is shaping up. And if the conversion rates you noted earlier stay at pretty good levels, could that maybe be an upside driver as you think about how you're going to exit this year?

Yes, it's a great question. I'll start and Tooey can kind of come in over the top. So you're right, typically in software and certainly at Procore's history, you do not see the large deal activity in the middle of the year. You typically see it in Q4. It's difficult for us to discern if this is a new pattern given it's a small sample size. But I do think the one large change from our past to today is we are in a little bit of a different operating model. So we are giving the team credit for that. I would say our Q4 pipeline is healthy. I like the breadth of it. We have a large quantity of different stakeholders, different geos, different deal sizes, frankly. So whether the large deal activity continues in Q4 or not remains to be seen, but our optimism is quite positive in Q4.

I guess the only thing I'll add is, I said this in the opening remarks, and Matt just alluded to it, but the success in the quarter was based on a broad set of stakeholders, right? So we're no longer a company that relies super heavily on GCs. We have a very strong owners business and a subcontractor business as well. And so going into Q4, it's nice to see that mix across all stakeholders.

Okay. That's great. And then I wanted to ask, I know you kind of addressed 2026 with where Street estimates are. I guess, leaving that aside for a moment, I think in the past, another way you typically addressed forward revenue potential is to steer folks back to your cRPO growth. And so if that's growing very near revenue today, I would normally think about that type of growth rate as maybe a starting point for what next year's revenue can be. Without getting super explicit on the exact number, is that relationship still applicable here? Or has something changed about cRPO where it's not going to have that relationship anymore?

I would say that relationship would still exist, but I do think we have to remember, we are getting a new boss on Monday. And when we want to provide our formal guide for next year, we'll do that in February. And then I think that's probably the best point in time to talk about next year more specifically than we have done this year. But we can't speak about Q3. We can talk a little bit about our confidence level in this current quarter. That remains. And I would use that information as you wish.

Our next question comes from Joshua Tilton of Wolfe Research.

Congrats Tooey on a great run. And congrats, Matt, on tonight, you did a great job. Two questions for me. Maybe the first one, kind of a follow-up to Saket's question, but a little bit more direct. Tooey, you're messaging how you feel you're leaving the company from a position of strength. So as you transition the leadership role from a position of strength to somebody who we also agree with you is going to be a great leader, where do you just see the -- where do you see the place that Ajei can maybe make the biggest positive improvement to the business over the next few years?

Well, as I mentioned, Josh, when I went out searching for the next leader of Procore, the primary driver I was looking for is somebody who's actually seen this before. They've taken a business from $1 billion to $3 billion to $5 billion and that they actually know and have the pattern recognition to do so and to do so successfully. The other piece was across the fact that Ajei has so much experience building a global business, building out partner ecosystems, all the things that are kind of the next phase needed for Procore. So I think he brings a toolbox with him that is filled with the tools that are required to build the future of Procore.

Helpful. And then maybe just a follow-up for Matt. Also maybe I acknowledge it's a little too early here. But I guess when we think about Ajai's ability to make all those changes that you just mentioned 5 seconds ago, you're very clear on the call that you guys are committed to expanding margins going forward. Do you feel like you can remain committed to that margin expansion while also giving Ajei the room that he needs to improve the growth profile of the business if he believes that that's the right path for Procore going forward?

Short answer is yes. I think the range of magnitude and the exact quantification of that needs to be determined, which I think your question is very spot on and fair and quite frankly, something we'll be talking about a lot internally over the quarter before we lock this plan. But we have been spending some time with him already before his formal start date. And I'd just echo the comments Tooey made. This is a very credible operator. He has really asked a lot of excellent questions to us. And I'm speaking -- I'm filling in for hour tonight, but I think it's very safe to speak on his behalf by saying our job is to give him as many options and paths and flexibility as possible.

And we are guiding for 400 bps of non-GAAP EBIT expansion this year. I think that's a very doable number next year. And I think it's likely we go a little bit higher than that. But beyond that, I think it's appropriate for him to get into the seat and then we can actually deliver something next year.

Super helpful. Congrats again, and we're very excited to see what Ajei can do. We agree on everything you said about it.

Our next question comes from Ken Wong of Oppenheimer.

Since we're coming off of Groundbreak, Tooey, would love to get some feedback from you in terms of kind of how customers were talking about the competitive landscape? What were you hearing in terms of your product versus one of your larger peers out there? Any kind of changes out there that you were picking up on?

Great question, Ken. I have to be totally honest with you. I didn't talk to one customer who brought up a competitor once at Groundbreak. So that didn't happen. But let me focus on the feedback that we got. The feedback is that our customers and our prospects that attended Groundbreak were yet again blown away by the achievements we've done over the last 12 months since the last one. And we are just getting very, very positive feedback. I want to tell you, too, they're very excited about AI, right? And as you know, this is going to change the world, and we're really bullish on it.

I received an e-mail yesterday from one of the -- the CEO and the Chairman of the Board of one of the largest construction companies in America talking about wanting to partner with me and partner with Procore on -- to get like a front row seat to Procore's AI strategy as well as getting access early to our tools. So there is a lot of excitement around the things that Procore can do. And yes, so that was no real talk to talk about competition at all.

But Ken, it's Matt. I would add, as far as actually what like the internal data shows, I'll just reiterate what Tooey had said in his prepared remarks, we feel like this dynamic is quite favorable to Procore, and we stand behind our past disclosures on this front. It's been very consistent, very positive. So we feel quite good about it. We respect our competitors quite a bit, but we are very confident in ourselves to continue our category leadership.

Got it. And then maybe just quickly, and I know you've touched a lot on the kind of the longer duration. I guess when you're looking at that data, any sense how much of that is maybe product driven in terms of kind of customers wanting to commit more because of product and therefore, it makes sense to maybe stretch things out. How much of that is the go-to-market, obviously, pushing up enterprise, you'll naturally see longer-term deals. Any context you can give us in terms of kind of some of the key components you think might be kind of pushing customers in this direction?

I think all the things you bring up are fair and are contributing. A couple of things to note. Our go-to-market folks, they're not incentivized to sell a 3-year contract over a 2-year contract. So the duration or the term is very much determined by the customers themselves. Now some may want a longer period of time to ramp into greater amount of products as you're bringing up. But if I had to pinpoint one specific cause or one specific driver, it probably has to do with these pooled contract models. And it's really about having more flexibility to deploy volume given there might be uncertainty into their project schedules. That would probably be the single biggest driver. But yes, as we move more upmarket, as we establish more strategic relationships with these customers, all of that's going to come with longer duration.

I'd also point out that I firmly believe that we are so mission-critical to the customers that we serve and that it only makes sense for them to make a longer-term investment in us. It's very difficult to rip and replace all of the things that Procore does. So when you make a commitment to Procore, you're making a commitment, and that's, I think, a testament to how mission-critical we are.

Our next question comes from Daniel Jester of BMO Capital Markets.

This is Will Hancock on for Dan Jester. So you guys touched a bit on the macro environment, but just wondering if you'd be able to share any additional color on the current demand environment, if you're seeing traction in international geos given your guidance and sales changes to give regions added layer of support?

Maybe I should just start by saying I'm going to reiterate, no change notably at all in the macro environment, still a challenging macro environment, both in the U.S. and abroad. And so not a lot to say there. I don't know if you want to.

No, I concur. It's been very consistent, not getting worse, not getting better. It's been quite stable, but it's been a steady headwind for us.

But I will say we're very, very optimistic about our performance facing these headwinds and it's something that we're proud of.

That's right. Yes. And when it does turn, we expect it will be a tailwind to the business. It's just difficult to determine when that will occur.

Great. That's helpful. And then a quick one here on the 4Q guide. How should we think about hitting that top end of the range? And what kind of assumptions did you guys factor in on the lower bound?

I would say regarding our guidance, the philosophy has not changed. And so you can kind of trace that back to what we have done in the past and what we've delivered, and we've applied that same mentality to the fourth quarter. So we continue to be confident and stand behind that guide.

At this time, we will take no further questions for today. So therefore, that concludes today's conference call. Thank you all for joining. You may now disconnect your lines.

Hi, everyone. My name is Alex Geller, and I'm the Head of IR, and we want to welcome you to the investor session at Groundbreak. Thank you so much to those of you who are joining us here in Houston today. And then I also want to extend a warm welcome to the folks who are joining us virtually.

So for today's agenda, given we are in the quiet period, this session is going to exclusively focus on product announcements. So you are going to first hear from Steve Davis, our President of Product and Technology, who is going to speak to how Procore is shaping the future of construction. He's going to touch on our architectural foundation that has enabled us to build a truly connected platform and how that, combined with Procore Helix our differentiated value props that also enable us to deliver incremental ROI to our customers.

Then you're going to hear from Geoff Lewis, SVP of Product Management, who's going to do a deep dive on some of the very exciting platform announcements that we spoke to yesterday to touch on our ability to continue to innovate across all of our stakeholders around the globe. And I'm very excited to announce that Ajei Gopal is going to be joining us on the stage as well. Now I will remind you that he doesn't officially start in the CEO role until November 10. So his remarks will be limited to a brief introduction, but I know many of you are very eager to hear from him. And then we're going to conclude with a Q&A session.

Again, it's going to be product questions only, so we're going to bring back. Steve and Geoff, you're also going to get to hear from Tooey. So I would ask that you hold all of your questions until the end. If you are joining us virtually, you can ask questions throughout. We will be monitoring that. And then on to our safe harbor. So today's presentation includes forward-looking statements, which are subject to risks and uncertainties. Such statements are based on management expectations as of today, October 16, and we undertake no obligation to update such statements unless required by law. Lastly, we will be sharing this presentation on our Investor Relations website later today.

And with that, let's get started. Please join me in welcoming Steve Davis to the stage.

Hey, good morning, everybody. I'm going to sit for a minute, if you don't mind. It's great to see some familiar faces from last year, and it was nice to meet some of you last night. I always look forward to this session because I don't have to read a teleprompter, although they've given me some slides to look at. For those of you who don't know me, I don't like teleprompters, and I don't like scripts. I like to just have open conversations, which is why I think talking to many of you is so special because you have just great, great questions. So I'm going to give you some kind of inside baseball on what's going on today. And hopefully, that will spawn some interesting discussion later. I'll speak more about the platform bets that we're making, and I think our special sauce and also what we're seeing a little bit in the industry. And then I'll hand it over to Geoff, who runs product and basically can talk about a lot of the unique things that we're delivering. So I first want to start out by just talking about the profound impact that AI is having on our customers inside the walls at Procore.

As I said on the stage yesterday, what we're seeing is just an unprecedented rate of innovation. You all are aware of this. You see it in the company as you cover. But that acceleration is directly impacting our customer base and how things are built. And I'll use this example. This is basically a hyperscaler project. By the way, it's one of our sample projects. The BIM is running in our BIM platform. And it basically represents the complexity of what we're seeing with our customers. Customers that used to build a vertical high-rise have shifted in some cases from 5% to 30% of their business, building hyperscalers, manufacturing fab plants, these are all facilities that require a high degree of orchestration configuration, design collaboration, logistics on materials, how do you handle with the delay of materials, the speed in which these things have to go up is imperative to the revenue that these platforms can generate.

And these are all things where we're seeing a huge advantage of the platform investments that we've made over the past 3 years come together.

I think the other thing is, when you -- when i stood in front of all of you, many of you were here 3 years ago, and I was invited to speak on stage about kind of where we're going with the platform investment. We took a very different path 3 years ago, and that was to start to lay the building blocks and the foundations that basically set us up to accelerate our AI journey. And I think that's what we're seeing right now. And it's also given us the ability to rapidly acquire and integrate this acquisitions that allowed us to fill in some of these gaps in the life cycle of construction.

All right. The next thing we're also seeing is the overall breakthroughs in just agentic and computer vision technology and how that's applying to our space right now. You saw the BIM model come together. Things that used to be really hard and I'll give you an example. This literally is just the BIM model. We ran it through literally Nano banana, Veo and a host of just orchestrating tools for agentic in literally less than a day, we're able to create dynamic visualizations, change materials on the wall, emulate the surroundings behind us.

These are things that would have taken an enormous amount of time to accomplish. And this is directly from Novorender the BIM platform. And so these are things that we'll start to pose a decision on -- or discussion on how do we actually do collaboration on design. How do we actually do it in real time, actually in the field? How does a clash actually impact what we need to do and what we need to change? How does it impact the materials or a delay in an HVAC unit or the cooling pipes that aren't available? How can you simulate that and understand what that will look like and the impact. All those things are possible. I think the other thing is that this is the first time in my career, I have shared this with people last night at Happy Hour. It's the first time in my career where I've seen the consumerization of technology impact the business at such a rapid rate. Things that are coming out last week are already now being applied in the business. That's unprecedented.

If you think about when the Internet came out, the mobile, then the iPhone, these are all things that took a long time to be introduced into the aspects of how we use software. We're now going from things that used to take months to weeks, weeks to days is what we're seeing applied to this technology, all right? And then I'd say the other thing that we're realizing is from a vertical standpoint, vertical SaaS is poised to capitalize on this. The uniqueness and these jobs to be done in construction requires a deep understanding of knowledge on every aspect of that life cycle of construction.

And so while these large foundational models can understand a lot of the basic concepts and actually understand intent and get you about 60% of the way there, the last mile, the 40% is where the magic happens. And as I said yesterday, it is the true difference between seeing an underwhelming response that you can't take action on to a wow factor that can actually complete the job to be done.

All right. So let's talk about just overall the size of construction and just the connected platform. So construction is projected to be over $15 trillion. You know this. It's one of the least digitized industries and basically underpenetrated in many of our markets. When you tie this to the 20 years of Procore's history and all the data that we have inside our platform, it provides us with a very, very unique opportunity that we're poised to capitalize on, especially as you see the energy and excitement coming out of Groundbreak yesterday with the agent platform and what can be built with those unique data sets. I was telling to you this morning that, it's not just the unique data sets that we have. It's actually the unique knowledge data sets that the customer may have on a specific way that they do construction or specific specifications and documents.

They're now able to attach that to our platform. and enrich those agentic agents for a benefit of their special sauce, how they actually do the job. And I think that's a pretty big pivot from a foundational language model. You can actually use the foundational model to get the 60% to 70%. And then you can start to apply the secret sauce with their data -- with our data all enrich together.

I'd say we also continue to see these breakthroughs in these foundational models, such as ChatGPT and Anthropic and a host of others. Obviously, you saw our partnership with AWS and Bedrock. That will open up a host of models that are available to our platform. Think about Helix Assist as a reasoning engine with a model router under the hood. So we can route between different foundational models, we can understand reasoning, we can understand what default agents are fired. This is all the benefit of this connected platform.

When I snap an acquisition in, they immediately are able to consume all those core technologies, they're able to benefit from what we call the construction graph. For those of you that may not understand the graph strategy, there's 2 aspects of the graph. I'll give you the core one that we're focused on. And that is there's a lot of inferred relationships in construction. An example is let's just say I'm building a building, they have to acquire material. The material has to be shipped. It has to then be provisioned, installed, coordinated with the sub, inspected. There might be an issue with it. I might need to fire a submittal off on a package. Those are all inferred connections that only we know because all those solutions are all connected together. If you don't have that inferred connection in that graph, then when you go ask the question about risk or delays, you're not going to get back the response. And so this whole connected nature is extremely powerful and a massive unlock for basically agentic type solutions.

And as I said again yesterday, underwhelming versus the wow factor. And you're clearly seeing kind of the RAG graph model start to emerge as a way to really create that. Okay. Let's see. I talked about data unlock job to be done. All right. Let's go to the next. Yes, we've talked about computer vision. Yes, visual design, this is another one. Is this playing -- why isn't this video playing? Sorry, hold on. I'd say also to the lastly, the investments that we made in just governance, security, control transparency I talked -- after I do these keynotes in these sessions, my day is usually spent meeting with executive teams from our largest customers around the world. I can tell you about 90% all involved the conversation around security, governance, control and transparency. This is super important.

Each of these companies is focused on their secret sauce, their data, they're building some of the most sophisticated structures in the entire world. And so they treat that very seriously. The building blocks that we put in place has allowed us to accelerate things like FedRAMP at an unprecedented rate. Our path we took on FedRAMP, as you know, was very different. We literally installed our entire platform in that environment. We were able to do that because of those building blocks and those foundations already -- everything already ran on that stack. That's allowed us to open up a large number of opportunities for us in spaces that we, quite frankly, weren't able to go into before. because of that. And you'll see that start to expand outside the U.S. as well with additional regulatory and certifications that are required. So a huge leg up. The other thing I would say is that transparency.

We just rolled out our new AI transparency site. think it was on Monday. It provides full context into every single agent, what data is being shared, what's being trained on, the NIS standard, the certification you'll see that evolve very rapidly. You'll also see that evolve to our partner ecosystem. So if a customer is installing a partner connector in our ecosystem, we want to ensure that anybody that's connecting to that data set is adhering to the same standard and there's full transparency of data end-to-end. These are the things that our customers are asking us for. These are the things as a company that we're driving forward within our own walls. And so -- and it's a big part of our strategy going forward.

All right. Let's talk about the pace of innovation a bit. Probably if Ajei, when he came on board, he asked me how I felt about things. And I said, this is probably the year that feels the most special to me in my career because the pace that we're able to deliver on that what the team has delivered on this year was just something I hadn't seen before my career. It's very rare when I'm not limited by engineering. I'm limited more by customer collaboration and design and just how we incorporate the requirements and product. And I think part of that is our breakthroughs and how we're developing software and rethinking internally. I think it is our unique relationship that we've had with our customers and the programs we put in place like innovation labs and hackathons. 20,000 user voice votes knocked out is an incredible feat. It's 2x more than we did the year before.

Our customers clearly felt it. The sheer number of features -- by the way, these are the significant features. There's a long list of small things. The sheer number of our features. And then really, when you look at the number of products that we focused on, we still on stage last year and announced a lot of things. We delivered on pretty much everything we said. These were big areas. I mean assets, materials, BIM, schedule, resource management, safety and obviously, a huge agent strategy. So for us, I know the go-to-market team and all this felt overwhelming coming in because of just the sheer magnitude of packaging these up.

So as you know, we've been going through our go-to-market evolution. We're going through the same thing within the product org as far as we reorganized ourselves around our personas. We're very focused now on owners and builders in Europe. That allows us to be very mindful of the job to be done and the product experience for each one, which is very different than how we built before. And so we've been operating that for quite some time this year, and we're already seeing the fruits of that. So, anyway, great year, super proud of the teams. And yes, we're looking forward to accelerating either for even further as we go into next year.

Okay. Let's go to -- Next one here? And one thing I think Geoff talked about this yesterday, the customers have actually asked us to slow down. Not that they don't want the capabilities, it slowed down from a delivery standpoint and pushing into their environment. So we actually built some innovation here. We built our own kind of release management system that our customers can granularly control. And this isn't just a basic submit a form and you're now in a beta. This allows granular control as a site administrator or a Procore administrator to apply it to a user, a set of users, a project or the entire account. So this allows you to -- if you want to go fast and build with us, you can operate in the -- I call it the fast lane, so it's like jump in the fast lane, and you could build with us. If you want to operate in the slower lane, you can get the quarterly or themed release cycles through the year that are more packaged and managed and ready. So this is fantastic. We're super excited about it. The other thing we're pivoting to is we're moving away from iLabs to overall hackathons, we're shifting to understanding user requirements, doing deep user research and actually prototyping with our customers in real time, which I think has been a huge win.

Our hackathons have been a huge hit. I know Rajita said on stage. We had just a couple of workshops this week on the agent platform. I think there were about 120 created in each workshop. So about -- I know it's 360, 380. I won't give you exact numbers, IR will get upset with me. But yes, so it was a lot for just a small number of individuals. So we're super excited to see what that looks like. We actually built an event center in Austin on [indiscernible]. We call it kind of our innovation hub. It's going to allow customers to bring their teams in and actually build with us in real time. And so we're super excited. We're going to do a ribbon cutting on that in November, right, Tooey?

Yes.

Okay. Let's talk about Helix. This is where I want to spend the most time. This is a true story. We originally -- when we originally created the strategy, it was called Copilot, and I'll give some inside baseball. I made the call on the name. There was a lot of internal debate. And I made the call because 95% of our customers, all are Microsoft shops. And if you were to rewind the game tape for 2 years ago, nobody really knew what this ChatGPT thing was and what it did and Microsoft had just released Copilot and they were spending an enormous amount of money. And everybody that gave a demo regardless of what their product was, they would call it Copilot.

And so we said, well, let's just call it Copilot because then everybody will know what it is. Unfortunately, everybody thought we were reselling Microsoft's Copilot. And so it actually didn't help us. It actually created an enormous amount of confusion because our customers like, well, we already have Copilot and we're trialing it. I'm like, no, no, it's different. And so it created a lot of confusion. So we pivoted the name and we basically moved away from construction intelligence as an umbrella term and move to Helix as an overall umbrella term for everything that is intelligence layer of the Procore platform. And that includes things like Assist. It includes our agents, our 360 reporting, which, by the way, 360 reporting is now live across all of our tools. That includes our Analytics. It's Analytics 2.0.

That's built -- by the way, Analytics is built on Delta share technology by Databricks. I've been a Databricks user for ever since Ali founded that company. I know that platform well. It's one of the first foundational elements that we put in place when I came on board 3 years ago. Agent builder is part of that. Also our insights and benchmarks that are now lighting up across every tool. Customers love this because it lets you benchmark how you're doing compared to your peers or the area or the project type for specific jobs to be done, and that continues to grow. Our developer studio, which is big, I'll share more about that. Portfolio intelligence, which is advanced intelligence of your data and your projects. And then Cloud Connector. By the way, Cloud Connector, SAP just announced their cloud sync. Ours is the same thing. It's simply a delta share sync. So if a customer wants to synchronize their data, we can synchronize it directly into their cloud.

It can be on Microsoft Fabric. It could be an Azure. They can do it in their own data lake. And so that was my point on the stage yesterday. We want to give our customers complete access to all their data and do it in the most modern way and synchronized way so they can run their own AI against their own data. They can do their own analytics or if they want to use our tools on top of that data, we provide additional benefit as well. And then obviously, developer studio, which I'll get into a little bit more allows for a lot more orchestration.

Underneath here are just the foundations. I'm not going to go through the geeky stuff. I know many of you drilled me on this stuff last night. I would just tell you, we were hyper-focused on getting the foundational building blocks right, and that means governance, security, transparency, usage, instrumentation. When you're building these agents, there's a lot of reasoning routing that has to go on and which model to use what's the cost of this versus that. There's a lot of unit economics. There's a lot of security. If a user doesn't have access to specific things, you clearly don't want the agent to be able to have access to those things.

So I would say, just like FedRAMP, we took the hard path here and are literally laying down those building blocks. I would say 90% of all those are in place, and now we're focused on accelerating on top of that. So that's why you're really going to see some acceleration over the next 90 days or so. And then lastly, we talked a bit about the construction graph. We run a monthly product review, and I get to see demos from our large R&D team. Probably the coolest demo I saw the last month was from the construction graph because it gave a response from an agent that it would have been impossible to get and it did that because of those inferred relationships. So I think the customers are going to be blown away. I know I am when I see them on what's possible when you can make those connections under the hood that quite frankly, were just impossible before.

Okay. Let's get into agents. I won't give you the count because I think the count can be confusing and IR will slap my hand, but I'll give you some stats. We originally started building agents, very purpose-built agents for each tool, and we quickly realized that when we sat with customers, everybody wanted to change the agent because they did things a little bit differently. There was a secret sauce within their company that they wanted to basically put in place. And so we quickly made the pivot to the agent builder platform. But we are still focused on very specific jobs to be done that we could provide advanced intelligence on. So many of these are common agents out of the box that we will start rolling out every 30 days or so. Anything from -- I'll give you an example, a quality agent to a submittal agent to an invoice agent to a budget agent.

These are pretty generic things that we'll have out there. The customer will be able to take that agent and modify it or they can build one from scratch. There's also what we call kind of tool or foundational agents. These are things like a photo agent or a video agent or a form agent or a -- there's lots of agents that are just foundational and you can use those to basically attach that to a job to be done to build on what you're trying to accomplish. We actually see that as a massive unlock. There's quite a few that run. I'll give you an example. I think I might have the stats on here. Yes. Let me give you some stats. So the reporting agent, for instance, that's not an agent you modify. It's just if you go to assist and ask a question about anything around data, it's going to do the SQL for you, and it's going to turn the result. 60% of all the usage right now are people asking questions about data. So I believe you're probably going to see less and less individuals go to a reporting product.

If I was building reporting solutions, I'd be worried because you can literally just have a conversation with that data and do some pretty advanced intelligence and then charting is coming very soon or it might be in beta right now. So that's probably a big high usage one. Another one is photo agent that runs behind the scenes. So we process -- see if I have the number here, hold on. I apologize I'm going through slides. Yes, I don't have the number, but I'm going to give you a wild, crazy number, somewhere between 750,000 to 1.5 million photos a day, that's probably within reason. I'm looking at Alex. But every day, those photos get uploaded, that photo agent is automatically running against that and doing the Metadata extraction of what that photo is. Like, this is a wall, it's at sheetrock, it's not painted. There's a ladder, it's leaning against the wall. It's like there could be all kinds of unique things there. So those are happening in the background. So we're pretty excited about this, but the real unlock has really been agent builder.

I'm not going to go through it with you because I think many of you saw it yesterday, and I don't want to repeat that. It's very easy to use. It's pretty simple to walk through. And we are seeing agent creation rapid rate. I heard stories yesterday about individuals walking out of the keynote going back to their hotel room, creating an agent and then going to the floor and working with the dev teams to modify and help them use it. That's like real magic for us as software builders to hear that happening. So -- and again, we're seeing huge acceleration. We have -- when it comes to users, we have 2,000 customers that have been on this platform. So this isn't, hey, we're just going into beta, 2,000 customers have been using Helix assist throughout this year. We have well over 14,000 monthly active users. That was just from a couple of weeks ago with this announcement and now going into open beta, that number will -- that means all of our customers and the very large number.

Am I allowed to say our monthly active user number, Matt? No. He's shaking his head. He won't let me. And so it's a very large number. We'll now soon have access to that. So we will begin to see the pretty big spike here.

Okay. Let me tell you a little bit about the evolution. Again, I'm giving you a lot of inside baseball here on kind of how we thought through this. We started with assist. Think of assist as your conversational AI. And we're lighting up assist on every aspect of the product. So anywhere you're using the product, you will have assist capability. So there won't be anywhere in the product you won't find assist. The second piece is we are focused on agents, and these were job-specific agents. And this is when we start to make the pivot.

Now we are still working to on Helix enabled capabilities within every tool. And I'll give you an example, a drop-down box. So when you drop-down the form field, we can basically go do reasoning and understand what field you may want to auto select, when you go fill in the text box, we obviously can help you write the text. When you go to a grid, we're basically building that to be a smart grid. So Procore will soon become Helix enabled from a user experience perspective throughout the entire journey. It won't be just necessarily a conversation. You heard the announcement yesterday on hubs and cards.

Our experience is dramatically changing to incorporate Helix and the job to be done. So it feels more like I need to accomplish a task or a job versus I need to go find a tool. And so this is my belief that the adoption -- the adoption of agentic in our consumer, our day-to-day lives. I won't ask for a show of hands, but I can tell you I rarely go to Google to search for something now. I go to ChatGPT. It's more of a conversation or a voice interaction. Those same influences are happening at work. I'm using voice in a significant percentage of my time now versus hands on keyboard and that's accelerating at a rapid rate. One of our licenses we're buying right now at Procore is basically specific to voice interaction with our laptops. I never would have thought I'd be investing a lot of money in voice technology for our laptops. And so it shows you that pace of change. The same thing is going to be ripe for change on the job site.

If you're on the job site wearing gloves, the last thing you want to do is pull your phone out and tablet, have to interact with it. When at home, you're used to just having a conversation. So you're going to see the multi-modality aspect change pretty rapidly. We went to agent builder. You've seen that. And then the future for us is a big bet on developer studio, which I'll talk about that we're actively working on. I didn't go into this a lot of detail. I'll give you a lot more detail. And as I've talked to customers, this has been the second piece they've been most interested in. Many of these organizations have gone from $300 million in construction and maybe $3 billion. They're integrating with SAP or Oracle. They made big investments in technology within their own organization.

They have the very unique requirements on how to integrate and incorporate Procore into the entire ecosystem or they may have solutions that they've already built or data through other partners that they want to bring into Procore so they can benefit from the job to be done. The developer studio strategy is first time ever extending Procore for custom objects, so you can bring data in. In the past, that has not been possible. In the future, what we're working on, and I'll show you some examples you can now bring data in. An example of that would be, I might want to go to find a drone video object.

I might want to define IoT data or I might have another third-party solution. I want to define a schema. I can now bring that data in, no different than Salesforce or ServiceNow, and I can adjust that data. And I can incorporate it into workflow, I can incorporate into reporting or I can build an agent against it. That is a very unique capability that I think will open up a wide variety of use cases for Procore. Another piece that we're going to be focused on is both custom code and form builder and screen builder. And so over time, you'll see the ability to start to develop solutions within Procore for the job to be done. The hyperscaler is a great example. Traditionally, Procore had stopped where we got to the operate phase and the handover of assets. Some of these hyperscalers can go on for 2 or 3 years. They look like cities.

While they're going on, you need to have maintenance done on the HVAC and cooling units. You may need to have job to be done flows that, quite frankly, can be incorporated in Procore, and they're unique to each industry type. So you start to get into a phase where, well, now you need to operate those units for a period of time until there's full handover and you can go build and customize that solution right within the Procore platform. So it provides for an immense amount of extendability that just simply wasn't there before. The other thing is there's advanced workflow. So full BPM support, you can do the most advanced workflow orchestration that you can come up with. So literally, it supports BPM. So this is -- it's important to our partners.

If you're a Deloitte or Parsons or any of our implementation partners when they're walking in and implementing an owner that's building fab plants, they may have their own set of what we're calling blueprints that they can package up, which are predefined templates, predefined workflows and a predefined set of agents. They're already preconfigured and allows them to do full implementation capabilities. And our goal is to enable our partners to be able to go in and implement on behalf of Procore without assistance from Procore or the owner or the builder can have full customized integration capabilities. So there's a lot of excitement about this.

We've been actively building this. There's a lot of cool demos that we have internal inside the company. But I would say this is probably one of the most exciting pieces for me because as a software builder, I remember the early days of many of those platform players and that was one of the big bets they made was full extensibility and I believe it's where we need to go as well.

Okay. Let's go here. Let me give you an example. This is -- by the way, this is a true owner workflow. This is actually inside developer studio right now, so you're seeing a screenshot. What it is, is, let's say, an owner is an owner developer, they use Salesforce for their CRM and lead management. So they're going through their portfolio, they're making the decision on where to invest, what to build. They now have defined that as, okay, project ready -- we have an integration into Salesforce, it will auto create the sales Procore projects. So you're seeing -- I went from Salesforce to I auto created the Procore project.

Now the next thing to do is have to do risk assessment. So what's the risk assessment on that project? Well, you do that inside Procore, and by the way, that's an agent that they created. So the agent is now fired. I'm orchestrating this flow. Create the risk assessment. And based on the score, I need conditional logic to then create an observation or I need to just move forward to the project. I need to notify my team which use Microsoft Teams, which we have an integration with to actually the update. If it has risk and there's an observation.

I want to let the team know, hey, there's an observation that's been created and it's in Procore. Our soon to be agent platform will allow you to publish agents that actually work within Microsoft or within ChatGPT or any other agentic type solution. So you could see a world, and this is where OpenAI made their announcement last week is -- we're all moving to this world where agent to agent interoperability is going to be crucial. It's one of the questions I got yesterday, which is, well, I have my own agent platform, how does Procore work with that platform? We're providing full interoperability for our agents to be published, so you can run those outside of Procore. And vice versa, I want to give our partners and our customers the ability to run their agents in our platform and the job to be done.

Okay. Lastly, let's talk about Agent Marketplace. This is another big announcement, and this ties back to the publishing. This actually serves 2 purposes inside a company, let's just -- let's say there's a -- there's a supervisor named Bob. And Bob has been with the company for 25 years. And Bob has immense knowledge on a job to be done flow, and Bob has created this amazing agent. And that agent is about 3 pages of documentation on what it takes to do that job. Bob has referenced about 42 docs. He's tied it to an SOP manual. And everybody wants to use Bob's agent. Bob can publish that agent in the marketplace. And so now you have an employee sharing that agent for his company, and let's say that's a fictitious company. The Procore administrator could decide, is Bob's agent, a shareable agent that all the employees can benefit from. So that's one use of hey, there's an internal marketplace that we want to enable for employees to democratize what they've created. And we're seeing this emerge across other platforms as well, like Google Gemini.

Secondly, our partners are -- our partners really benefit us because they can come in and do a job to be done exceptionally well. They may have unique data sets. They may have invested heavily in a specific area. What they don't have is they don't have the context. They don't have the security. They don't have the permissions. They don't actually have all the data and they don't have the graph. When that agent runs in our platform, they actually have all those things. So we want to provide a way for our customers to create their own agents or leverage their own partners, and then they would actually run inside our platform. And so this allows the Procore administrator to go in here and select that maybe I want a compliance agent or the example we used yesterday was Document Crunch. Document Crunch is a good one because what they've done is they built a specialized agent that does construction contract review.

And so today, if you want to use that, there's only 1 or 2 specific places within Procore that you can actually link off and use Document Crunch. Tomorrow, I won't say tomorrow, a bad word to use. So in the future, Document Crunch agent will be inherent anywhere you are in Procore. And there's a lot of use cases where contract review or term review is very important when you're doing a job to be done flow. So this unlocks document crunch and other partners to operate anywhere within the context of Procore. And we do that with the reasoning engine. When you're in one of those jobs to be done flows, the reasoning engine says, I think that is something that we should actually validate through our contract. A weather delay is a great example. There's a weather delay, there's specific time that's required for you to submit the weather delay.

Another one we've used is -- you hit a water table. You've got a fixed amount of time to report that water table incident to file all the appropriate forms. It's a time-consuming process. A lot of times, it's not done, it's forgotten. It's missed, it's delayed. Nobody fills out all the forums, Nobody goes and looks up the contract. And so these are things that are automatically handled. And again, that's just one example. It's endless on the number of them that can come into play.

Video analyzer, this is another one. You might have 2 developers out there that are best in the world of building construction, video terminology. They can then go build their own agent, publish it on here, and our customers can then consume it. So we're really excited about where that's going. I'm going to speed up.

Lastly, I would say, I know many of you have asked me about monetization. Our focus right now is adoption. We want to get this adopted by our users. Our goal is to have Helix and Assist in the hands of all of our customers regardless of the tier they're on. We will focus then on the usage aspect. And whether it's tokens or credits, each of those tiers will have some type of credit bucket that will be available for them to consume and gain value from our platform. And as we work through the unit economics, we will then decide how much is in there. But that's probably how we'll monetize on that, just like it's pretty much the pattern that everybody has pivoted to. But again, our primary focus right now is really adoption.

Okay. I'll finish with this. We're obviously recognized as the leader out there, massive TAM. Our singular focus is a huge advantage for us. It's great when I come to these events, and I'm just talking construction. I'm not talking about a multitude of products or horizontal suite. So -- and I truly believe if somebody has been doing this for a long time and focused on AI, this is a unique advantage for us. And I'd say we're a trusted partner. The one thing I've learned, I said on the stage and I genuinely meant it is these customers, like trust is everything. They don't care about a contract. It's what you said you're going to do and they look for a partner that they can trust, and I believe that Procore has earned that partnership and relationship over the past 20 years. With Tooey at the helm, and I know we'll continue that with Ajei.

So with that, I'm going to turn it over to Geoff, and I hope I left him enough time. All right.

All right. Give me one quick second here. Okay. Great. Hey guys, Geoff Lewis, SVP of Product Management. The seat is very comfortable. Thank you, Steve. So I'll cover a few things today. One of the big announcements we made yesterday was sort of increased investment in owners, so I'll talk a little bit about that and how we're thinking about that. I'll walk through just a couple of platform innovations we launched. So our scheduling capabilities as well as some of the resource management tools, just to give you guys a little bit more context into why we're really excited about those and how those help us scale over time.

And then also spend a little bit of time talking about Europe and some of the things we're doing there, which we haven't touched on as much in this conference because Groundbreak tends to be a mostly U.S. audience, but I wanted to give you guys an update on where we're at with that.

Cool. All right. So I think maybe just to start, I think a lot of people think of Procore as a general contractor business. And obviously, we've been extremely successful there. But Procore is actually a really, really strong owners business today. So actually 1/4 of our ARR comes from owners already, right? And so I think we despite the fact that maybe in the market, we still have that Procore as a GC tool framing have been extremely successful in owners. And so one of the big things we're trying to do going forward is make owners an even bigger centerpiece of Procore, right? We think that is a really strong growth vector for us. We get really strong feedback from owners both on what we have today and where our road map is going. And we just see a lot of opportunity here.

A couple of other things I would just add. So we have over 3,000 owner customers today. It's a very diverse industry, right? So that's folks like hyperscaler data centers, which Steve was referencing before. It's renewable energy developers, it's folks building multi-family residential. It's commercial office developers. It's retailers, like think, I don't know, companies who -- big box retail things like that who are operating globally. Healthcare systems, schools, government entities. So basically every kind of building you can imagine is owned by somebody and a lot of those owners are really good fits for Procore. It's a very sort of diverse target market we're going after.

And the other thing is that it tends to skew pretty enterprise. So 34 owners currently pay us more than a $1 million a year, and that's about a 1/3 of our total $1 million-plus customers, right? So owners skew a little bit bigger than our other customer types. And 2 of our 5 biggest customers today are owners, right? So there's some really, really big deals out there in owners land as well.

So yes, I just wanted to kind of share, hey, we're at a good starting point with owners. But I would say we haven't been as purposeful addressing owners as I think we can be and will be going forward. And so we think while this is a good base for us, we can actually grow that pretty meaningfully over time. And one of the ways we intend to do that is when you think about a general contractor, their whole business is built around projects, right? They win a project, they build that project, they move on to the next project. Owners are different. Building projects is also important for owners, but they spend a lot of time in the planning phase before projects are ever built. And they'll also plan many projects that never get built, right?

So think about a big-box retailer. If they're going to open 1,000 stores next year, they might look at 5,000 sites. They might do geotech reports on 3,000 sites. They might do budgets on 2,500 sites. And then finally, they're actually going to go build 1,000 sites. All of that's in the plan phase. And Procore historically hasn't had really strong tools in the plant phase. And that's one of the -- some of the big announcements I talked about yesterday are extending Procore earlier into that life cycle. So that full project funnel can basically be tracked in Procore. Build phase, that's where Procore is awesome today, and that's why we have a successful owners business.

And obviously, one of the big advantages is these owners mostly are not general contractors themselves. They mostly hire general contractors to come in and do this work, big advantage that their general contractors already use Procore, right? So there's that network effect, and that's where Procore Connect comes in. And then the last piece is operate, right? So let's say it takes you a year to build the big box store, you're then going to have it for as a useful asset for a decade or more. And so operations is actually a really big deal for owners. We are doing -- we're basically extending Procore a teeny bit to make a seamless handover from the build phase into the operate phase. But over time, there could be cool opportunities inside the operate phase as well, right? If all of this data is coming out of the build phase, it then helps you operate it better going forward.

So not a place we're focused on today but could be interesting over time. So anyway, as you think about owners, they just have a slightly different lens on this versus the GC who's just focused on that build phase. So and when we think about the new innovations we're going to be launching next year, a lot of those portfolio management planning and funding are really built around this idea of how do I actually plan all those projects, how do I do that full project funnel. So that's what a lot of the planning tools and portfolio tools are about. The other thing is that big box retail example I described, if you're going to build 1,000 sites next year, you really -- you do care about individual projects and you want to be able to drill down into that level of detail. But a lot of what you want to be able to do is say, show me the East region, show me all the projects in there, show me which ones are on track, off-track. Looking at portfolio level roll-ups rather than project level roll-ups.

So some of the foundations that Steve was describing around analytics, reporting, cards, hubs, those help us build these portfolio management capabilities and then sort of provide a better, more tailored offering for owners to manage during that phase. Another thing that I'll mention is funding. And so I mentioned public sector entities. We've seen a ton of growth there, right? I mean, Steve and his keynote yesterday I mentioned FedRAMP. That's huge for us to be able to both target federal entities, but also like state and local entities who require a similar level of data security. One of the things that they tend to do is rely on third-party funding sources to actually get their projects built, right? So hey, I'm a department of transit or transportation, I'm going to build a road. Well, I get money from a bond, I get money from the infrastructure bill, I get money from my operating account, I need to have a way to manage where I'm getting all that funding and then assign it out to projects.

And so Procore is a really good system for managing finances at a project level, but we've never had this sort of like funding management piece, right? And so if we can deliver that we think that's going to be huge for allowing us to keep seeing great growth in public sector. So those are some of the ideas. And so basically, our perspective is we've done a ton of work with owners over the past year to basically like, okay, use Procore for build. What's it going to take for you to use Procore for plan? What's it going to take for you to buy more Procore. We've done a lot of work with prospects who haven't been Procore customers. And our view is that portfolio management planning and funding should put us in a really, really strong competitive position in the market and allow us to grow pretty significantly in the owner's space. So that's the idea there. Asset management, I can talk a little bit more about this in the materials space.

But really, the idea there is that's all the data that comes out of the construction process. And just to maybe define some nomenclature, when we're saying asset management, we actually mean like physical assets that are installed inside buildings, right? So light fixtures, HVAC units, like doors, all of the fixed assets that are installed in buildings, owners need really good records on those things, so they can do preventive maintenance, they can do sort of just manage their operations around that asset going forward. There is no better way to get all that data than out of Procore in the first place, right? Like that's where the all the data that went into that door went into that light fixture comes from, right, some middles, inspections, warranties, so the ability to tie those things together during the build phase is also really helpful.

And then the last thing I'll talk about is Procore Connect. So when we've talked to owners, the main reason they end up buying Procore today is because their GCs use Procore, right? So there is this sort of viral loop there, whereas more GCs use Procore, obviously, we have really strong adoption there. Owners then leverage it. And one thing we've also seen is owners will also often mandate GCs to use Procore, right? So we've seen a lot of customers even come in like some of the new logo wins that we've announced this year. Come in because owners, let's say, like a data center owner, for example, is already using Procore, mandating that GC uses Procore, and then that GC says, hey, you know what, this is actually a better system for us? We should switch to Procore. So there's sort of this nice loop there. What Connect does is it makes it much easier when 2 customers both own Procore to collaborate across a single project.

So historically, Procore has been awesome for collaborating within a single account, and this is really about, hey, the owner has Procore, the GC has Procore, let each of them work out of their own account and sort of seamlessly shoot information back and forth. So that's the big idea on Connect. And we've launched a lot there over the last year and have a really big road map on that into 2026. That to me is really interesting because I think it creates a really unique network effect for Procore because nobody else has as many general contractors at least in the U.S. using their system as Procore does. And so to me, that's just a really exciting opportunity and like can create this sort of network effect between owner and general contractor. By the way, that's also extensible to a general contractor and sub. Procore Connect is sort of agnostic to that, but we're really focused on the owner GC loop today.

All right. Cool. So that's owners in a nutshell. We can obviously go way deeper into that in the Q&A. I'll talk about a couple of cool innovations we launched. So first is scheduling. So we've had a scheduling product. I think that was probably the first thing Tooey built back 2 decades ago. But what this scheduling product does is it really takes that to the next level, which is why we call it scheduling 2.0. So the thing to keep in mind is like you can create a construction schedule, but it's sort of that old adage like your plan is great until it actually meets the battlefield. That's where our scheduling tool comes in. It actually allows you to collaborate with all of the different people who need to contribute to the schedule. So if you're a general contractor, you might have 40 different trades you're working with and you have to really tightly sequence what all those trades are doing on site every day. And so this Procore schedule lets you basically do kind of collaborative daily site level scheduling and really keep people on track. And we're extending it to start to connect to the rest of Procore.

So for example, if, hey, for that particular task, before it's complete, I need an inspection and Procore to be run, you can link those things together and then manage that full process in Procore. So the way I sort of think about it is like, hey, if you're going to do -- if you're going to build a 70-storey building in Midtown Manhattan, that's extremely complex. You're likely going to use a very sophisticated scheduling software to produce that schedule in advance. But then you could bring that into Procore and really manage it on a day-to-day basis.

So we feel like the collaboration element and the connection to the rest of Procore element is really exciting. And we've gotten awesome feedback in the beta. So we've been in beta for the last 4 or 5 months with close to 100 customers, and the feedback has been outstanding. So now we're in what we call open beta, which means that anybody can using Procore Explore, log in and use the scheduling tool, and we're seeing a ton of great new user adoption in that.

Cool. I will also add that the capabilities to plug into the construction graph are really strong, right? So Steve mentioned, hey, we have this great graph technology under the hood where all the different things that are happening, you can start to basically correlate and understand or infer relationships between those. Scheduling is a very rich source of data for that, all the other things that are happening in Procore, daily reports, et cetera, are also rich sources of data for the schedule. So we're really excited about what AI can do in a scheduling first platform. All right. Let's see.

So the other area I wanted to spend a little bit of time talking about is resource management. So we, over the past few years, have been investing very heavily in resource management. And just to give you guys a little bit of the nomenclature there, resource management effectively refers to labor, equipment and materials, which are like the 3 core resources that you need to manage on site to get a job done.

And historically, Procore didn't need these tools because we were mostly selling into general contractors who would sub everything out to basically subcontractors. And then subcontractors were the ones who had to manage their own labor, their own equipment and their own materials to get the job done. Well, two things are happening that make it important for us to invest in resource management. One is we do have a pretty sizable and growing subcontractor business. And so one of the things they're really excited about is, hey, how do I manage labor, how do I manage equipment? How do I manage materials. So that's one component. But the other one is that general contractors are also doing a lot more self-perform.

So I'm sure if you guys were walking the floor and talking to customers, one of the things we hear over and over is, hey, I used to just be a GC who subbed everything out. I'm increasingly purchasing subcontractors. I now have an in-house concrete division. I now have an in-house structural steel division. I now have an in-house interiors division, and then they start to need labor equipment and materials. So those are the couple of sort of ideas behind it that are causing us to continue to invest here. So we've been in labor for a few years. We launched equipment last year, and we're going to be launching materials next year based on the acquisition of SiteSense.

The other thing I'll add is this also dovetails really nicely with a few things we already have. It dovetails really nicely with financials because if you're already capturing time in the field, you then want to be able to see how that impacts your budget and all of that connects natively in Procore, making -- giving the ability to basically do real-time budgets and it also connects really nice with the field app, right? So like you can't just use a general HR system to capture time sheets data in construction. A lot of the people in these crews like literally never go to an office, don't even have a laptop, right? They're just out on site every day, and you need to make it super easy for them to get their data in here and be able to track that. So those are a couple of the big advantages.

Last thing I'll say is that Steve also mentioned how big the TAM is for construction. A lot of that is in civil and infrastructure, and that's another group that tends to do a lot of self perform and they need these kinds of capabilities as well. All right. A couple of other quick things. I'll just add. In addition to like the tracking of labor equipment and materials, we also do a lot of planning. And the reason planning is excited is that one of the things that I think Procore has historically been is very project-centric, but planning starts to bring it up to a company level because what planning lets you do is let's say I have 200 field staff. I need to understand what jobs they're working on today. I need to understand what pursuit jobs I have and I need to understand when those field crews are going to roll off their current job and roll on to the next job. And it sort of becomes this like company-level system, and I think those are extremely helpful things that we're not selling just project by project. Also really exciting things around equipment.

Similarly, like there's all this heavy equipment out in the field, how do you make sure it's in the right place? How do you make sure it's safe? How do you manage your inspections? Procore makes that super easy. And then we're also able to connect in with some cool equipment rental providers. So for example, I announced yesterday, we now have heavy equipment telematics. So we can actually connect to data flowing from United Rentals that auto populates Procore, right? So hey, how much United Rentals equipment have I been renting? What's the rate for all that equipment and then it can basically auto populate your budget and your time sheets, which is extremely cool to see in action.

All right. And then last thing is materials. So materials is -- that can be things that show up on site and then get improved upon, think like conduit for the electrical. It could also be like long lead time materials that are ultimately going to become assets, so like an air handling unit or a chiller. So we're seeing a lot of success with this. We have some really, really large customers who leverage our materials management, and we're seeing a lot of demand there.

And one thing that -- one area that's pretty interesting and was unexpected for me is there's a lot of interest in materials from owners, actually, right? So Steve again mentioned hyperscalers, they're using Procore quite a bit. One of the things they're doing is buying switch gears and buying air handlers and buying all the things they need to build these buildings, long in advance and then like warehousing them because they just don't want to be limited by materials showing up on site. So we're actually seeing a lot of -- I was in a lot of customer conversations yesterday with owners who are very interested in materials. And the last thing I'll say is like the supply chain of how this stuff works is crazy, complicated, right?

Steve talked about the job to be done flow. This is like the most complicated job to be done I've ever seen because owners are kind of -- owners and architects are specifying the materials, general contractors are sort of managing the schedule dependent on when these materials show up. Subcontractors are then actually often signing the actual PO with the equipment provider. And then all of that has to show up on site at the right time or else the project is delayed, right, because you don't have the right material to be installed that day. So it's an insane supply chain. Many countries are involved. So we just think this is a huge area for opportunity and we're seeing a lot of really, really positive feedback from folks who are involved in the beta here. So a big opportunity over time.

All right. Last thing I will talk about is Europe. So Alex, do you want to do the video quickly? It will give you a little bit of context...

[Presentation]

All right. So that is our new BIM solution. So we acquired Novorender earlier this year. And the reason we did that is one that company has just incredible technology. And hopefully, you can see like some of the complexity that comes in with managing BIM models of that scale. And we -- that is very useful globally, and it is particularly useful as a capability in Europe, where they just tend to be somewhat ahead in terms of BIM adoption relative to the U.S. And the thing I'll say about BMIM is that Procore as a project management system has always been very drawings centric. So if you think about an RFI or an observation or a punch item, you can place those on the drawings in Procore. But that's sort of like the 2D version. And as BIM continues to come along, we're trying to basically turn that into the 3D version. So we're not trying to be like a BIM authoring solution or a BIM design solution.

But I mean you saw it there, the ground worker under the sea needs to actually be able to see what is happening in the model. And so that idea of field viewing and then being able to connect all the project management data to that is really, really critical. So when we talk about BIM, that's what we really mean. It's like, hey, how do you make it accessible to all the people who aren't working in the design firm, but actually need to go build the thing in real life. So that's the big idea there. So hopefully that kind of helps clarify because I know it can be a little confusing of how BIM relates to design.

But that -- and again, that's super relevant globally, but we're kind of really ensuring that we nail that for the use case in Europe where, again, they're somewhat ahead. And then as we think about our European strategy, generally, largely the product is similar to what they need in the U.S., but there is -- basically, the way they think about it in Europe is more around this idea of all common data environment, which is, okay, how do you connect all these things in one clear way and create a golden thread of information that flows throughout the entire project life cycle.

And so we're -- as we think about that, we're continuing to work on how we kind of bundle and package our offerings to deliver a really European focused solutions. So that basically includes project management and quality. Those are basically like the Procore products that we've had for many -- those are like the core Procore products that everybody uses. Those are really valuable there, and we have a great market opportunity. How do we then connect that to document control, and there are very specific ISO 19650 document control standards in Europe that we've worked really hard to meet and now have a good competitive offering in that area. And then how does that connect to a BIM model to do that, not only in 2D on documents, but in 3D on BIM. And then asset sort of becomes this connective tissue amongst all of that. And again, those are those like physical assets that are getting installed in the particular product.

So yes, that's sort of as we've done a lot more work with our European customers, we really centered in on like, hey, what's the right packaging, what is the right offering for that group and feel pretty strongly about our current competitive position in Europe. And as we fully integrate Novorender as we launch the asset capability, we feel like we're just going to continue to be in a stronger, more competitive position in Europe. And then similar to the U.S., we think that's our entry point, but that then allows us to start to cross-sell solutions like safety, solutions like financials, solutions like resource management, which, while they need some tweaks to work in the European environment, they broadly have the same core jobs to be done is in the U.S. So we're feeling fairly optimistic about the product fit that we're growing in Europe.

And the other thing I would add is while we're focused for international growth from a product perspective, primarily on Europe, we've also done a ton of validation that these -- the same product idea will work really well in MENA, Middle East and we'll also work really well in Australia. So we're feeling pretty good about the product development we're doing against the European requirements currently. So cool. So I think that's it for me. So I'll leave it there and then pass it over to Ajei.

One more slide. Perfect. Yes. Why Procore is so amazing. All right. So I will -- sorry, Alex. Yes, so just a couple of things to tie it all together. I mean one thing that I hear from customers over and over is it's extremely helpful that we are both the market leader in construction, but we're also focused specifically on construction, right? So like when folks come to our conference, we spend all of our time talking about things that they're interested in, and it makes it -- I think it creates like a much faster feedback loop between us and customers. We're singularly focused on this industry and allows us to really hone our R&D development against what those folks need. The connected platform, I mean, someone was asking me yesterday in an executive forum Q&A what I'm most excited about, and I am definitely most excited about the opportunities with Procore Connect, right?

The ability to connect owners and general contractors and subs is just good for them and obviously is really good for Procore because that allows us to monetize everybody who's working in construction, not just not just the general contractor. So really excited about that. And then the idea that Procore can really be this all-in-one platform that covers all of the different things that a customer needs to do in construction, whether it's safety or payments or materials or schedule, I think, especially in the AI era, that's going to be a huge advantage for us because being able to sort of infer and make inferences from all the different things that are occurring on a project is really powerful. And I -- we obviously want to be able to extend through developer platform to pull in data from third parties. But our view is that as Procore becomes the platform where all that project data lives, we're the natural place to be able to really win in the AI era.

And hopefully, that becomes -- that proposition has always been really powerful for Procore, but I think it becomes more powerful as we go forward and AI becomes more important.

So I'll leave you with that. And now I will introduce Ajei.

So thanks, Geoff. This is such a great time for me to join Procore. I hope all of you had a chance to walk around the show floor. Obviously, you had an opportunity to listen to the presentations. And it really crystallizes for me the opportunity that Procore has in front of it. If you look at the technology announcements, the discussion about Helix. If you participated in the customer conversations, certainly I had an opportunity to talk to lots of customers. And what really made -- brought back to me was the -- what brought home to me is the tremendous technology capability and the deep platform value that Procore banks to customers, and it also brought to me the deep relationships with customers. And those things, I think, are really important.

And certainly, this event continues to crystallize that for me. So I'm really excited about the opportunity. I have had the -- I've met many of you in years past or some of you in years past. But I thought I would take a moment to introduce myself. So I have a degree or have a background in engineering and computer science. I started my career in research. I've had the opportunity to work with large companies primarily on the product side. I've also run a start-up I've worked in private equity. And for the last decade or so, I've had the good fortune of running ANSYS, which is an engineering simulation software company which we recently concluded a sale to Synopsys and that transaction closed sometime in the middle of this year in July.

And certainly, when I looked at Procore I saw many similarities to where ANSYS was at the time when I joined the company. ANSYS was around $1 billion thereabouts of revenue Procore is similar in nature. When you look at the strength, as I said, of the platform, customer relationships, those were all very similar to what I saw at ANSYS back in the day. There's another thing that's very -- there's another aspect of similarity here. If you think about the nature of the industry that we serve, the vertical. With ANSYS, we were in a position to support different industries with software solutions. And so our customers were vertically oriented. They were building real things. And for me, I've had the good fortune over the years of working with these kinds of customers, and I really appreciate and enjoy that.

And certainly, here at Procore, it's a very similar opportunity. It's to support customers who are doing tangible things, building things and supporting them with software solutions so that they can actually deliver and do their work in a more effective way. So I'm excited about that. I'm excited about that. I'm excited about the size of the company. I'm excited about the opportunity, the customer relationships, the strength of the platform. And so my goal as I come on board within the next few weeks, taking over as CEO. My goal is to listen to learn to immerse myself and the company to get as much information as I can spend time with customers, learn about the technology, and of course, to be able to then once I am in the seat to have the opportunity to talk with all of you about plans and future and what we will be doing going forward over the next coming weeks, months and years. So thank you very much again, and I look forward to working with all of you.

Thank you so much, Ajei. So Steve, Geoff and Tooey, please come to the stage. And while we're waiting for them to come up here, I do want to remind all of you again, we are in the quiet period. Our Q3 earnings will take place in the next couple of weeks. So please do not ask any questions pertaining to our performance or financials as we're going to address those on the Q3 earnings call. Please keep these questions -- I'm sorry, limited to product questions only. Thank you, guys.

Jason Celino with KeyBanc Capital Markets. Tooey, there's a lot of announcements around AI and agents. The construction industry is not most sophisticated, right? But very digitally...

I might argue with you on that, but let's keep going.

I think the point -- my question is, do you think the construction industry is ready for AI? And how do you think about like the pace of adoption? And what's the feedback or the skepticism that you hear around that?

So when I first started walking into job site trailers trying to sell Procore 20 years ago, I would -- I'd run into some people that were doing things with Microsoft Excel in those trailers that, frankly, a lot of you all probably couldn't even do because they had to manage the complexity with the technology that they had to bear. So I think that's one of the reasons why Procore has been successful is that we've been enabling them to do more and more with technology. But now we're at a point where you basically have the answer machine as opposed to the logging machine. And it's just a -- it's a step-like function just increase and just the capabilities that we're going to be able to deliver to the industry. I haven't seen much reticence in the industry to adopt it at all.

I think like everyone else, everyone is trying to figure out how do I use it? How do I capture what the value of this. And I'd love to tell people this, which is I just will ask somebody like what is the most pedantic part of your daily work routine, right? I got to log into every single project and look at every daily log to make sure that they're filled out or whatever. Takes me an hour a day. And I'm like, well, you can create an agent for that. Let's just create an agent and save you an hour a day. And then you get the -- then the converts start to line up. So I'm not -- I'm optimistic about where we're going, but it is going to take time for people to get kind of used to this new paradigm of having the answer machine.

I mean this yesterday, if you're -- you get into construction because you love to build, no different than you get into software because you love to build. And I think software and construction have a lot of similarities. 80% of your day is doing stuff that's toil and friction that you frankly don't want to do. And so whether you call it AI, whatever you call it, there's something happening behind the scenes. It's -- we call it toil reduction at Procore, by the way. We have a thing called a toil meter. And so if you can eliminate the toil for them on the job site, their day just got a lot better. That's why we call it assist and don't call it AI. They actually don't know what's happening behind the scenes. All they know is, wow, you just made by day a lot better because you saved me a whole bunch of time.

Can I add one more thing to that, which is I think that Tooey is spot on that there are some people in construction who are actually extremely advanced. And then I think there's also other people who maybe are the ones you're kind of referring to in your question, who are more maybe not as digitally native. So I think one of the strategies we've been using, which has been very successful, is running a lot of these AI hackathons. And that, I think, allows people to kind of get their hands on keyboard and then start to build some familiarity with it. And that's been incredibly successful and people just rave around those.

But I do think like probably the hardest part is not actually the technology, but it is the cultural shift for these companies. And so one of the things we're trying to do is not just from a technology lens but also from a services perspective, from an education perspective from a letting people get hands on keyboard perspective. Gradually getting people up to speed on how these new technologies can work. And then some of those people who are really advanced inside a company can now build a ton of agents and agent builder and then publish them to everybody else. And hopefully, that starts to drive some of the usage we're seeing.

Adam Borg with Stifel. Maybe for Steve, you talked about some of the R&D maybe changes made over the past year, which have helped to really accelerate some of the innovation around the 3 focus areas you talked about, maybe to go a little bit deeper about what some of those changes are and how does that help you to really accelerate the pace of innovation?

Yes. One's pivot in Geoff's organization where we've got leaders that are owning our personas or what we call audiences end-to-end. So that's one. So a product org that's structured around owner versus builder versus we had a product org structure around SKUs and solutions. And so we've identified that, hey, these are very different audiences and have very different needs with how we -- how we talk to them, the capabilities we build, how we package those and how they experience the project end-to-end. So that's one. Secondly, as we've incorporated AI inside Procore, we are reimagining how we actually build software, and we've got various levels of maturity depending on team where we're doing prototyping first.

And so we're using tools like Vercel. We obviously use Cursor. We use Quadcode. We use Copilot within GitHub. This has all changed the paradigm of how we build software going from high-fidelity mockups to user research studies to now we're actually just prototyping with the customer or actually sitting in a hackathon and building and then taking those prototypes, and we see how easy it is now to take a prototype and use products like Atlassian's Rovo to break those prototypes down and actually turn those into what we would call L1s and L2s and start to code against.

And so my point was that it's -- we're entering an era where I'm not constrained by engineering effort, I'm constrained by my ability to collaborate rapidly with the customer and validate the job to be done or a problem to solve and really ideate through that.

Now we're not vibe creating solutions. What we're doing is using that to validate the design, the use case, the flow and then we're building rapidly on top of our platform. Now we're early days, and so we're investing heavily, and we're going through -- we've created a Procore Academy as well within R&D. So we have a full-blown academy program. We train you on prompt engineering. We train you on our platform, and that allows everybody to start to work up the maturity curve with regards to capability. So we see it as great unlock. I don't see our R&D organization growing substantially. I see us investing in more technology, more ways to streamline, more ways to collaborate, more event center type environments for hackathons. So I think you'll see R&D somewhat stay where it's at, from my standpoint and again, from people and really then invest in technology to enable the people we have to be more efficient and add more value to the customer.

Adam, let me add though that I've had the privilege over the last 3 years of watching -- he can't say this, but I can say this, watching him come in and basically reimagine how we build software Procore and has done so much to create so much efficiency in how we build software. The other thing is that Steve is a talent magnet, like everybody wants to work for Steve. So the talent density at Procore, especially in the engineering world, has increased dramatically over the last few years just because of his ability to bring people in. So it's just a different world. It's -- and that actually enables us to go fast, which is really exciting. So thank you.

DJ Hynes from Canaccord. Look, the big obvious takeaway is the amount and pace of innovation that's happening here. I mean we spend an hour talking about platform and new products. I want to, in a lightweight way kind of bridge that to go to market and ask you about kind of sales enablement processes and what you guys are doing there? And with the new go-to-market structure, does that get any easier. Also, how much of this distribution is able to be driven by kind of in-product prompts where the customers kind of take it on themselves? Any thoughts just kind of how you get the sales force there and how you get the product into folks' hands?

Well, let me -- I'll start. It is a very big area of focus for us. So enablement is everything. And much like the organization around his organization around the personas that we sell to, we enable around the persona now, which is -- before it was more just a general, here's how to use Procore. So we're very, very focused on the end user. And now that we have this new go-to-market motion with our customer success engineers that are there to ensure adoption and engagement by the customers, those folks have to be have to be up to speed. So we put a big, big investment into how we enable people to be able to drive the value.

And it's something I hadn't seen at Procore before, and I think we're doing it really well right now. I think some other inside baseball. We've as the go-to-market organizations evolved and aligning around these personas, we've been aligning around personas. Product marketing came into R&D organization. Brian Pain's actually in the back. Brian, you raise your hand. He's our VP of Product Marketing. He's basically built out a pretty large product marketing organization now that's aligned around personas around these jobs to be done. We're getting a lot better on the handoff between how we're building product, how it's being packaged, how then it goes to enablement and then enablement takes it to the field and then on to the sales team.

Like it takes a lot to get that orchestration right, especially when you're delivering across so many regions, so many different types of audiences with so many products. It's early days, but clearly, we're seeing the fruits of that over the last couple of quarters, and I only think it's going to get better from internally at Procore.

Can I add one more thing on that, which is I think one of your other questions was how much can be enabled in product versus not? I would say on that, there's a pretty broad spectrum of complexity of implementation of Procore solutions, right? So you think financials, Procore pay time sheets, like those are pretty resource-intensive implementations. And I think that's why Steve before mentioned partners -- Tooey mentioned partners in our -- in his remarks yesterday, I think that is one area where we're very focused is, hey, we have Procore Professional services, which does a great job with those things, but how can we scale, right?

Owners, as an example, tend to already bring their own systems integrators, right? Can we offload some of the complexity to them. And we're actually seeing really a lot of interest from that group. And then similarly, in Europe, it's not going to make sense for us to scale a professional services or in a different time zone, the same way we've done it in the U.S. So how can we start partner first. So it's maybe on the high complexity pieces. And then schedule, it's very easy to turn on. This Procore Explore allows folks to just come in, look at new capabilities, turn them on in their account. And so that has been a huge, I'd say, tailwind for us in terms of getting adoption and lift on maybe easier to implement solutions. So that's maybe like the framework I would think about for that.

Joe, I'm going to give you a question, but just so everyone knows, Ivy back there has a mic as well. So if anyone in the back of the room has questions, please raise your hand.

Joe at Baird. Everything we just saw, everything on the product road map, how much would you say is informed by data at your disposal. You talked about knowing the inferred connections and that probably spawns ideas for what you can offer versus related to the go-to-market change like you're now interfacing with the different stakeholders, the enterprise buyer in different ways. So that's probably generating feedback. Can you kind of just -- what's more important from a product strategy. And then it would seem like if it's data-driven in like an AI world, and now you're going to be seeing agent-to-agent interactions, and that will inform the road map seems like that's the moat that becomes stronger over time? Kind of what's your thought on that?

Yes, I can take that. So I think that in general, we instrument everything at Procore, right? So we know exactly how many users have turned on scheduling in the past 2 days. We know exactly how many agents have been created, how many times they've been invoked. So yes, we have a very extensive sort of internal data analytics framework. And then what we tend to say is like metrics are people, too. And so then we sort of say, well, hey, 150 users started using schedule yesterday, let's have our product managers go and reach out to them and understand how that experience is going. So we do, do a lot of I'd say, qualitative feedback from customers that really does help shape what we end up building.

And the other thing is because we're building a software that we don't -- I mean, we -- I know Tooey uses it on his personal projects. And when Procore is going to go build a new like the second floor event space, we use Procore in our projects. But we're a software company, not a construction company.

And so we do spend a lot of time with our customers, watching how they're using our product, and that does inform a ton of our product development. And then Steve mentioned the pivot toward having owners and Europe-focused product teams. One of the benefits and potential problems with being so customer-focused, is that you do get pulled toward what your existing customer base wants.

And I think that's been a really good thing for Procore but we need to also be hearing from owners about what they want as they become this giant growth vector for us. And we also need to be spending a lot of time in region with folks in Europe hearing what they want. So those are maybe the couple of different ways I would think about it. Related to AI, I would also say like without some of the really -- one of the things we've seen is our scheduling data, the usage of scheduling has been pretty low historically because we haven't had a lot of capability in that.

So a big part behind schedule 2.0 that should drive a lot more schedule adoption, which then makes Helix much more interesting. Materials as a data domain didn't exist inside Procore, but that's actually a really rich source of data. So I would also think about some of the capabilities we're launching also maybe build out the full construction data foundation that we need to have Helix be as strong as it ought to be.

Yes. I just -- I mean, you're thinking the other resource management was specifically driven by we saw that the job to bid on flows were ending and not completing because we didn't have those capabilities. And we turned on equipment. There's -- again, I'll get trouble for numbers. Let's just say there are several hundred thousand pieces of equipment in there. We'll easily have probably 500,000 to 1 million piece of equipment there probably in the next 12 months. So hanging numbers, but that's directly correlated to , we didn't know what was happening because we didn't know the piece of equipment. And as all these projects become more self-perform and you're handing it off to a sub, having those capabilities available has been huge.

As somebody that spent 15 years building and running one of the largest, most sophisticated travel platforms in the world, we had to instrument everything. And so a lot of the foundational building blocks are insuring the heck out of everything that is done on that platform. So we have more data than we know what to do with, but it definitely is helping us to decide where to go.

Dylan Becker with William Blair. Steve, you kind of hinted at the value proposition of vertical software and kind of being the platform and what that enables wondering if you could maybe kind of expand on that point as it relates to construction and what customers are doing with AI? How that kind of gives you a right to win as that strategic partner because instead of them trying to do it themselves, they say, hey, can you build this, that fuels obviously, this accelerated pace of innovation, probably ties into data gravity in the partner ecosystem, just kind of the interconnectivity of all of those workings around like tighter feedback loops facilitated by being that strategic partner.

I think what's happened, especially over the past 3 years for me, and I think it's now apparent to hopefully all of you that construction is not a system of workflows, filling out forms. It is a very complex orchestration of jobs to be done across the ecosystem of partners, complicated ERP, logistics. These are things that somebody can absolutely create a widget or a small solution, but when you watch the [indiscernible] video, and you look at the level of sophistication and the handoffs and the orchestration, what you're not seeing is the concrete, the rebar that has to be shipped, the coordination, the specifications of submittals, these are all extremely complicated. It's much more complicated than actually creating software. You're building something physical outside orchestrating a lot of logistics. And so I had this very conversation today with the customer. And so -- and we walked through -- I just asked like 3 basic questions.

And they're impossible to solve, whether it's in ChatGPT or a vibe coding solution or Salesforce or a point solution. And I think that's what we're realizing now. And I think that's where starting to nail every aspect of life cycle of construction and tying it together is just immense value. I also think we're entering a world where transparency, governance, security, access the modality of how you use the app, we're probably 12 months away from many of you are probably not going to be typing on your computer. You're going to be having a conversation. You're probably all going to be wearing glasses. It's going to know who I am, it's going to actually digest the slides, like they're going to expect that on the job side.

They're going to expect on the job side because that's what their kids use every day. That's what they use at home. So I think keeping up with that pace of acceleration, it's overwhelming for a company like us with almost 2,000 in R&D. You can imagine how are you going to accomplish that with a small team with some pretty basic tools that doesn't understand that end-to-end. So I think that's our right to win is to start to nail these piece parts and put them together and to keep up with the pace of unprecedented innovation that we're dealing with.

I will add that our customers look to us to help them understand how to leverage technology. And so we not only are a partner to them on the software front, but we really do help them with their strategies. And a very large general contractor yesterday said to me, I don't know why we built -- why we build, this is their company, software inside of the walls of our construction company. We're not good at it, and you guys do this for a living, and this is what you guys are -- this is what you're good at.

So why don't we do it this way, which is you build software and don't build buildings, and we'll build buildings, and we won't build software. So like the dividing line is very clear. Yes. So it's kind of nice to be the place where people go to get the answers.

I'll have one more thing, yesterday, I had a conversation with a very large customer. And many of our customers have multiple divisions. They've acquired lots of companies around them. And so each of those is now at different levels of maturity, and they're looking at, well, hey, why don't you snap into Procore. And of course, the decision on Procore that was not based on what we did today. It was actually based on what we're going to do tomorrow. And I think people are making on bets on companies on -- do they have the right vision and mindset and proof that they can deliver because they know things are changing rapidly. So I think a lot of the selection sometimes is where you're going, not where you've been and what you've done right now, which is a very different paradigm than what we're used to.

One thing I was just going to add is I was talking with the CIO of maybe like a $600 million annual revenue contractor, so kind of like a maybe more midsized, less enterprise or strategic. And he was saying that he only has one other person on his team in IT. They keep a super thin budget. And he's like, "I'm all in on whatever you guys can do because I don't have time to go look at anything else. I don't have time to go open up a generic solution and teach in all the things that we need to know about construction. And so I think that's pretty consistent. I mean, for example, we're launching a safety product. Why are we doing that? Because people are like, can you just have a safety product in Procore that does everything I need. I think there is this real pull from the market to be -- to have more and more things in Procore because it just makes their life significantly easier.

So I think just all of that comes together. And I think AI, there's a lot to think through to get it right, but I do think it probably ends up being the same fundamental force towards, hey, all in one is extremely good for us and the more we can have in Procore better.

I'll add one more thing. I mean that said, we have a lot of very sophisticated customers that have made massive investments in technology, and it's been an advantage for them in specific areas. And -- and that's why I think having the platform, the developer studio and our ability to have an open framework allows for us to interrupt into both examples. I don't think you're ever going to have a world where somebody is not investing in technology, maybe their own agentic platform to run their jobs to be done in their back office. And you've seen kind of the world of Procore now, you're going to need to interface with those back-office flows. And so we want to be able to do that regardless of where that lives.

And by the way, what Geoff was saying is true, they do want us -- there is a move away from point solutions towards more of a platform. And the beauty of our partner network is that you can have drone deploy or any one of our partners embedded in Procore. So even if it's not truly the solution we're delivering from our customers' vantage point, it's the Procore platform. And they -- that extends this capability of basically solving every problem in construction that we're never going to get to through our partner program.

Aaron with Citizens. My question is around the underlying data consent for the AI use cases you're rolling out. Can you help us think through the dynamic on analytics, where you're talking about creating industry benchmarks, which I think will be super helpful for your customers versus developer studio where you're telling customers, your data is your data, and we're a steward of that data. Is it correct that you have to use high level anonymized customer data to build out the benchmarks for analytics. And if so, is there a standard level of data consent you have? Is it an opt-out framework where you have to haggle potentially with some large customers to get access to that data?

Yes, I can answer that. On the -- yes, insights and benchmarks, the way we do that is that's at an aggregate level that's undetectable. And so -- that's how we do it. So it's basically am aggregate model that runs and basically produces those benchmarks. And so yes, you're getting insights, you're seeing it at a project type level or at a ZIP code level but not down to customer identifiable data. Yes.

And we have -- our MSA allows us to have access to the anonymized data. Yes, to answer your question.

Dan Jester, BMO Capital Markets. Maybe just on the acceleration on the owner side that you talked about this year. I think -- you've been talking about owners for a long time. And I think I'd just love for you to maybe double-click on what specifically now at this moment in time? Do you think that it's going to drive the acceleration of the adoption on the owner side? Is it product? Is it go-to market? Why today, maybe more so than in the past couple of years?

Yes. Well, I came into Procore in 2019 via the Honest Buildings acquisition, which was maybe like the first foray into owners. And basically, Procore had no owner's business at that time. And so now 25% of our billion-plus ARR as owners. So I mean, I think what I would say is it's been happening. It just -- we haven't probably been as purposeful about it as we ought to have been. And despite that, it's still been a really strong growth vector. So I think what gives us confidence that it can continue to be one. It's growing extremely well today. And I was talking with a few folks earlier today. And I don't think we've been as specific on go-to-market, on messaging or on product as we can, and we will be going forward.

So to us, it just feels like it's a really, really untapped area that has just a ton of upside. So as we look for growth vectors, I think that becomes extremely important. The other thing I would say is when I talk to general contractors, they're excited about the prospect of owners using Procore so long as we get Procore Connect right. And so I think that's the other thing, too. It's like, hey, I think that's an area where -- from a product perspective, we've probably been a little slow. And so, that's why we're accelerating to get that working correctly because we don't want any friction to be there. We don't want GCs to be non fans of our growth in owners. So as I've been getting more into that with general contractors, I think the fundamental idea of everyone being connected is actually extremely attractive and we just need to deliver some more technology bits to make that work really seamlessly.

I think, too, there's capabilities that these owners need Geoff went through them that were now -- it's -- I won't say it's easy. We can roll these capabilities out on a common platform to meet their needs where they've had to go use other solutions that weren't then connected back into the construction data set. So we see that as immense opportunity to basically strengthen the customers we have with expansion, but also expand into other customers that, that's table stakes, and it's a check box on an RFI that you weren't able to check in the past. If you couldn't do portfolio management, capital planning, these things were just required. So we're now checking that box is what's happening.

So we have some competitive related questions in the chat, and I'm going to boil it down to how does competition influence our product road map?

I can take that one. Well, actually, just circling back to the owner's question. I mean, one thing that is very true is that we see a different competitive set in owners, right? In Europe, we also see a different competitive set. In USGC we see a different competitive set. So that's one of the reason why starting to verticalize product management has been helpful because then we can then be more focused on what competitors were actually competing with in each market. And we want to be the best software in each market we compete with. So I would say that in general, we do not want to just watch the competition and deliver yesterday's technology tomorrow, like we want to outpace them and be in a much better spot. So we do think a lot about how we can compete and therefore, spend a lot of time just working directly with customers because we think that's how you figure out the core job to be done and you can solve it pretty directly.

But we have a competitive intelligence team. We work closely with our sales team on that stuff. And we want to, in general, be a premium solution, and that's going to require that we have an extremely competitive solution. So that's sort of what I would say. It's like it's a factor in what we do. And there's different competitors in each of these markets. So we have to factor those in. But it's not maybe like the driving force of our road map because we think that you can only get as good as a competitor if you're copying them. We think the best way to actually go figure out what the market really needs is to go ask them directly and spend a ton of time with them.

Yes, I'll give you my perspective. Geoff knows it really well, is that we make sure that product market fit is achieved and the competitive check boxes are checked. But we call it kind of what's our Sigma moment. We always focus on how would you rethink it and do it differently because we're kind of unconstrained on how we can build something. And when I say Sigma, Sigma obviously rethought how we did design, who would have thought somebody could disrupt how Adobe tools are used. We've used them for so long. So we actually have this term inside the company we use a lot is like, is that a Sigma moment. Scheduling is a Sigma moment for us.

We're rethinking how scheduling is done. What you didn't see is it's all real time. It's collaborative. It's like this is not how scheduled tools actually work. You can have micro schedules that inform the master schedule and that can then inform the subsequent master schedule. And so we essentially said, hey, we're unconstrained by what technology can do. So let's rethink actually how scheduling works. I didn't want to build a competitive solution to Microsoft project. We wanted to rethink it. And so I think we focus more on that, but I think people will be surprised it's not necessarily chasing competitors.

Thanks, DJ. Canaccord again. Maybe one just to double-click on FedRAMP, and I'm no expert in this process. So kind of where we are today, what still needs to happen. And then when we get to that ultimate end state, like where do you see the earliest unlock. What are those opportunities that you think you can capitalize on first?

Yes. We are at the final stage. So we're actually in process and now FedRAMP modern equivalent, which means we've met all the requirements for FedRAMP. And so we're in the final stage of just waiting for the approval. And so it's like now we're waiting for government. And so that could happen as soon as government opens or it could happen as soon as 90 days to a couple of months. So we're really close. I mean, we're at the goal line, so to speak. We are equivalent. So we can actually, for specific projects, you don't need to have FedRAMP in the marketplace approved. You just need to have equivalency. So -- and we have obtained that. So there's a lot we can go after right now, and we have been.

And it does unlock that TAM that we have not been able to go after before with the Department of Defense. So -- and a lot of our biggest customers actually do build for the government. So we're pretty optimistic about what this is going to mean for us.

Yes. And as I said in the keynote, I mean, we put a significant portion. In fact, I think the only major components that weren't in there were the ones we were working on and rolling out while at the time we're going through the process. So I think that's very different than other solutions that only have piece parts in there. If you're buying a solution, you need it end-to-end, not -- I just want document control. And so I think that's going to be an advantage to us as well, especially as we innovate even faster. Everybody that's in that, we call it, Procore Gov Zone, you'll just get those capabilities.

I also believe as we grow into the global markets, I know FedRAMP is the U.S. thing. But if we can walk into a market where we don't have as much brand presence, but we can say we are FedRAMP in the U.S. It just is -- it makes us look like real -- like that we're serious and that we take their governance of their data very, very seriously.

Yes. Cyber Essentials Plus is another one in the U.K. So we'll go after that. I mean there's a laundry list of them in each country. I think we've got a playbook and a foundation to move forward really quickly with those.

Zach Olson with Throughline Capital. So on the owners piece, the portfolio management and asset management solutions that you're launching. I'm just curious how you plan on monetizing that because obviously, that can exist outside of the actual project of a build. And then how much do you think this could, I guess, expand the wallet potential of owner customers that you are serving today?

Yes. A couple of things on that. We think of it primarily as expanding our win rate with new owners, right? So as Steve mentioned, there's a lot of owners who do RFPs for PMIS or project management information system software today that have real requirements around portfolio management and capital planning and asset management, and we don't check those boxes and can get kicked out of those RFPs. So our perspective is, hey, we can actually go win those now. And many of the people who manage those RFPs are like, gosh, we would love to have Procore, meet these requirements, so we can roll you guys out versus some of the other competitors who narrowly check those boxes, but miss on user experience and AI and a bunch of other connection to the general contractors, a bunch of other areas where we shine. So that's one area. So to me, it's like, hey, we're going to be able to get a probably similar price point, just with a significantly larger share of owners in market.

Additionally, we're also -- one of the things we've discovered as we've gone heavier into owners is that the ACV-based pricing model does not tend to work as well for owners. And so we are looking at alternatives, including like seat-based licensing for owners. So those are some different ways we're thinking about maybe optimizing monetization for owners. And then lastly, with Asset Management, I would not think of it as an O&M tool. That's not really what we're building. We're building a really great connector from the build phase to the operate phase. And so that really just is an extension of the build phase, but it makes building a Procore significantly more valuable and I think then creates a really, really seamless handover to an EAMS system that they might have in place. And then down the line, maybe that's a cool place for Procore to play, but no current plans to do that.

Yes, by the way, that handover process is really painful for the owner and the GC. So solving that alone is a huge win. I mean we do so well from planning all the way through hand in the queues to the owner. But you still have to also give all the data to the owner. And this is going to be big.

Yes. A ton of GCs will use assets for that reason because they need to hand it over to the owner in that way to drive on that collaborate.

And they literally, like in a lot of cases, they'll hand the owner a really dirty cardboard box with a bunch of stuff in it. Like that's how turnover has been done historically. So this is a step function forward.

Got this one in the chat. How do you architect and govern the Helix intelligence layer as a shared capability while preserving tool level autonomy and measurable adoption at the product module level.

Okay. That was a deep technical question. Yes. What I'd tell you is like the approach we took with Helix was very similar to the FedRAMP approach. We actually took the hard path. And so it can be frustrating sometimes because you want to just outpace innovation, build agents really quick. We spent a lot of time on the foundational building blocks, the governance, the transparency, the auditing. For instance, we just launched AI transparency site on Monday, it's fully wired and instrumented into every single model agent. It shows you every data element actually visually shows you how it flows. It shows you our NIST and security standards that we're adhering to and we'll show you if a partner is connecting to that, it will show you is data being trained on it. We have a lot of audit review in place.

The audit is available to the customer on how SS is being used. So we've really spent a lot of time on the foundational layers. This is not something you want to get wrong. And I think those are one of the things that are differentiating that probably aren't noticeable now when you go demo the wide variety of products out there.

All you have to do is ask the question of, well, how do you maintain access rights for specific documents, -- like that's a really hard thing to do. They're very complicated with some of these larger GCs. I had a conversation with a customer yesterday they're governed by the owner contracts. So these owner contracts actually mandate the tools they use and how they can use them and who has access to certain things. So it's very rare. I imagine you're running a business and then somebody else gives you -- I mean our legal departments here, imagine they're handing me a dock and they're saying, hey, Steve, for this type of customer, I want you to go change your access rules and controls in place and then audit that. That's what our customers have to deal with. And so big investment in those layers, and we'll continue to invest in that.

But yes, I wish it were as simple as just building agents because I think that's actually the fun of work. I don't know if that answered the question, but there's a lot of technology in place to do that. And I think that's part of the investment we made in those foundational building blocks. It's a set of LEGOs that allows us to snap other things into it pretty quickly and benefit from it.

There's a reason -- again, I'm giving you inside baseball here. When we acquired Novorender, Tore actually, he's a founder. He's here, by the way, probably the most brilliant individual in BIM on the planet right now. We flew him into Groundbreak last year. So we could see the excitement. But one of the reasons he wanted to be a part of Procore was he saw the foundational building blocks they knew would be very difficult to go build for that platform to be successful. So we had the best engine that was actually missing all the fundamental piece parts. And so to be able to snap that BIM platform onto our building blocks, he gets all those things out of the box, security, permissions, governance, data sharing, graph, analytics, experience layer, connectivity, construction graph, the list goes on.

And all those are just a little bit of work to snap those things in. I think Helix is a great example of that. We're surging ahead on what that platform is going to be.

So if there are no more questions from the room, there's one final question that I actually thought was a good close out one for you guys in the chat, which is, obviously, a lot of innovation announced over the past couple of days. Can each one of you speak to what you're most excited about and why?

Well, we'll go down the road. Let me start. I'm about to have a little more time on my hands. And my wife and I are actually starting a brand-new project. So I'm going to be bugging these guys a lot because I'm going to -- I use the hell out of Procore. One of the things that I'm doing today, which is really exciting, is I have my architects account connected to my account and we're collaborating through connected drawings, which is a unique use case, but it actually solves a lot of the problems that we have. And now what I'm most excited about is being of the ladle agent builder on top of all this. Like -- so I've been begging for a scheduling tool for 22 years, right? I finally got one. But scheduling tool alone, super cool, super powerful time and money, schedule and budget really matters. But when you can tie the schedule to the actual operational data inside of Procore, let's say, the manpower log and the daily log compared to like who showed up and who was supposed to show up, that kind of level of integration of data across the platform is going to be transformative. And so I'm really excited about unlocking all of these use cases.

I'll let you go on.

Yes. Well, I was going to say Procore Connect, I just think that's a really, really cool unique opportunity that I don't think anybody else can deliver upon, and it makes me really excited. And I think it solves a bunch of fundamental problems about collaboration. Like every project is sort of a unique set of stakeholders who come together to build this thing. And I think that by over time, Procore delivering really good products for each of those folks, but then also allowing them to interconnect seamlessly is potentially game changing for construction. So that's definitely the thing that gets me most excited. It's also really hard to build.

So we are working very aggressively on it with a lot of our partner customers. But yes, that to me over time, feels like it's just going to be a huge differentiator for Procore.

Mine is probably not as obvious in the announcements, but it's very subtle. Tooey asked me this question before I went on stage yesterday and what was I most excited about, and I probably surprised you when I answered it, because it was actually the BIM piece. It's BIM tied to the graph, and I'll tell you why is -- in the U.S., everything is very 2D centric when you build, but everything really starts with the model. So you're building a physical building. You're building something that has a very complex model behind it. that requires an enormous amount of engineering specifications, alignment, coordination of what this thing is going to be. The ability to kind of go from 3D to 2D to spatial and then have all the inferred connections of everything that goes on to actually build that thing, we actually have the building blocks coming together for that. And before, it was very constrained to maybe a design team or BIM experts.

We've now have the ability to federate the most sophisticated models in the world, very similar to Google Earth or Google Maps, where they're literally streaming the world to you and you're able to consume that at the level of detail that you need, whether you're on a mobile device or on your desktop. We now have the capability to do that, and we are able to do that with a model. And so I would say it's the connected graph, inferred data tied to a model, federated out to everybody on a job site, really creates a magical thing for a sub that's trying to install an HVAC handler or somebody trying to do conduit or wiring like those things are very difficult to understand on drawing sets. And e-mailing individuals. And so I think the world of construction will change. And I think the next set of big announcements you'll see from us will be along the lines of that. And hopefully, we'll be talking about that at Innovation Summit in the springtime.

By the way, I asked an owner, one of the largest retail owners in the United States last night, this question. And they said connect. They're like -- you all cannot connect the connect us fast enough because we want all of that data. So I do think, Geoff, you're on the right track. The other thing I want to point out is, I think there's so much potential with image capture a picture is worth a thousand words, right? It's -- there are safety violations in there. There's labor productivity information in there. There's material supply. There's staging information in there. And I think that, that is going to be transformative.

And I could go on and on.

Thank you so much, Tooey, Steve and Geoff, and this concludes our investor session for today.

And thank you all very much. Appreciate you.

Thank you everybody.