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01/11 08:25
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A session reflect a positive sentiment overall, with strong financial performance, optimistic guidance, and positive customer feedback on AI integration and go-to-market changes. Despite cautious revenue projections for fiscal '26, the focus on margin expansion and free cash flow targets is encouraging. Additionally, the increase in cross-sell and expansion dynamics, along with early large deal activity, suggests a positive trajectory. The lack of detailed fiscal '26 guidance is a minor concern but does not overshadow the positive outlook for the near term.
Revenue Total revenue in Q2 was $324 million, up 14% year-over-year. International revenue grew 13% year-over-year, impacted by currency headwinds. On a constant currency basis, international revenue grew 16% year-over-year.
Non-GAAP Operating Margin Q2 non-GAAP operating income was $44 million, representing a non-GAAP operating margin of 13%, which increased 300 basis points quarter-on-quarter. The improvement is attributed to better profitability management.
Current RPO Current RPO grew 21% year-over-year, benefiting primarily from longer average contract duration.
Current Deferred Revenue Current deferred revenue grew 13% year-over-year, reflecting strong contract performance.
Expansion Mix The mix between volume expansion and product cross-sell shifted to 70-30 in Q2, with the cross-sell portion increasing primarily from higher attach of the financials suite.
Procore Helix: Introduced as an intelligence layer with capabilities like Assist (formerly CoPilot), Agent Builder for custom workflows, and Developer Studio for cross-platform integrations.
Owners Portfolio Hub: A comprehensive portfolio management solution tailored for owners, including integrated asset management for fixed assets.
3D Streaming BIM Engines: Enhanced through acquisitions of Novorender and FlyPaper, unlocking powerful 3D streaming capabilities.
Customer Wins: Added new customers like Calpine Corporation, Clayco, and a leading U.S. egg producer, showcasing Procore's ability to standardize operations and support growth.
Global Expansion: Secured wins in Japan, UAE, and with entities like Purdue University and a top 10 ENR 600 specialty contractor.
Public Sector Opportunity: Achieved FedRAMP in-process designation, enhancing ability to serve federal markets and public sector projects.
Revenue Growth: Achieved $324 million in Q2 revenue, up 14% year-over-year, with international revenue growing 13% despite currency headwinds.
Operating Margin: Non-GAAP operating margin improved to 13%, with a 300 basis point increase quarter-over-quarter.
Go-to-Market Transition: Progressed in transitioning to a new operating model, improving sales efficiency and retention metrics.
AI and Technology Integration: Focused on leveraging AI to transform workflows and attract new talent to the construction industry.
Long-term Financial Goals: Aiming for 25% free cash flow margins in the medium term and 40% in the long term, supported by the new go-to-market model.
Macroeconomic and Geopolitical Conditions: The company acknowledges risks related to macroeconomic and geopolitical conditions, which could impact customer demand and overall operations.
Currency Headwinds: International revenue growth was negatively impacted by currency headwinds, contributing to a 3-point reduction in growth.
Go-to-Market Transition: The ongoing transition in the go-to-market strategy poses execution risks, though it is expected to yield long-term benefits.
Federal Market Entry: While the FedRAMP in-process designation is a positive step, serving the federal market introduces regulatory and operational complexities.
Supply Chain and Project Delays: A new customer faced costly project delays and inefficiencies due to manual processes, highlighting potential risks in operational execution.
Economic Uncertainty: The company remains cautious about external economic factors that could influence its financial performance and customer behavior.
Foreign Exchange Volatility: FX volatility continues to pose challenges, particularly in international markets, affecting revenue and profitability.
Revenue Expectations: For Q3 2025, revenue is expected to be between $326 million and $328 million, representing year-over-year growth of 10% to 11%. For the full year fiscal 2025, revenue guidance has been raised to a range of $1.299 billion to $1.302 billion, representing total year-over-year growth of 13%.
Non-GAAP Operating Margin: Q3 2025 non-GAAP operating margin is expected to be between 13% and 13.5%. For the full year fiscal 2025, non-GAAP operating margin guidance is maintained at 13% to 13.5%, implying year-over-year margin expansion between 300 and 350 basis points.
Long-Term Financial Milestones: The company aims to achieve 25% free cash flow margins in the medium term and 40% free cash flow margins in the long term. The go-to-market transition is expected to yield durable long-term growth and improvements in sales efficiency, driving best-in-class terminal margins.
Market Opportunity and Growth: Procore sees significant opportunities for continued market share gains, particularly in the federal market with the FedRAMP in-process designation and broader public sector opportunities. The company is optimistic about leveraging AI advancements to drive faster, smarter decisions with less risk.
Product and Innovation Outlook: Procore plans to showcase new innovations at the Groundbreak event in October 2025, which are expected to be transformative for customers, the industry, and shareholders.
The selected topic was not discussed during the call.
The earnings call highlights strong revenue growth, increased guidance, and margin expansion, which are positive indicators. Product innovation and market opportunity in the federal sector, along with AI advancements, further bolster the outlook. The Q&A section reveals stable churn and improving expansion, with positive feedback on pricing adjustments and no major competitive threats. Although management avoided some specifics, the overall sentiment remains optimistic, suggesting a likely positive stock price movement.
The earnings call summary and Q&A session reflect a positive sentiment overall, with strong financial performance, optimistic guidance, and positive customer feedback on AI integration and go-to-market changes. Despite cautious revenue projections for fiscal '26, the focus on margin expansion and free cash flow targets is encouraging. Additionally, the increase in cross-sell and expansion dynamics, along with early large deal activity, suggests a positive trajectory. The lack of detailed fiscal '26 guidance is a minor concern but does not overshadow the positive outlook for the near term.
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