Procore Technologies, Inc. (PCOR) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

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.

Key Financial Performance

Revenue Growth 14.5% year-over-year, consistent with last quarter's growth. This reflects underlying business momentum and performance.

Non-GAAP Operating Margins Increased quarter-over-quarter to 17%, reflecting a commitment to improving efficiency.

Large Deals Growth 31% year-over-year growth in the number of 6- and 7-figure deals. This indicates strong performance in securing large contracts.

$100,000-plus ARR Customers Now totals more than 2,600, showing growth in high-value customer base.

Annual Construction Volume on Platform Increased by more than 30% over two years, despite a 27-point reduction in growth in the U.S. nonresidential and multifamily construction sectors.

International Revenue Growth 14% year-over-year, impacted by currency headwinds. On a constant currency basis, it grew 15% year-over-year.

Current RPO Growth 23% year-over-year, benefiting from longer average contract duration.

Current Deferred Revenue Growth 14% year-over-year, reflecting strong customer commitments.

Net New ARR Growth Faster than revenue growth, driven by outperformance in owner and specialty contractor motions, strong mid-market team growth, and continued execution in North America.

Non-GAAP Operating Margin Improvement Increased by 380 basis points quarter-on-quarter, including one-time benefits in G&A.

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Operating Highlights

Agentic roadmap: Procore announced new innovations leveraging proprietary construction data to enhance their platform, which customers believe will be transformative for the industry.

Resource management products: Procore introduced a comprehensive offering for labor, equipment, and materials management, with materials management set to launch next year.

Market share growth: Procore continues to grow faster than the U.S. nonresidential and multifamily construction market, achieving a 16.5 percentage point premium over the sector's growth.

Global expansion: Procore added new customers across various regions, including a leading Irish construction company, Goodman Australia, and a Fortune 200 natural gas company.

Revenue growth: Procore achieved a 14.5% year-over-year revenue growth in Q3 2025, with international revenue growing 14% despite currency headwinds.

Operating margin improvement: Non-GAAP operating margins increased to 17%, reflecting a 380 basis point improvement quarter-over-quarter.

Customer wins: Procore secured significant new customers, including a top 40 ENR general contractor, Valvoline Inc., and a leading hyperscale data center campus provider.

CEO transition: Ajei Gopal will take over as CEO on November 10, 2025, bringing over 35 years of experience, including leading ANSYS to significant growth.

Stock repurchase program: Procore announced a new $300 million stock repurchase program to optimize long-term shareholder value.

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Risk or Challenges

Construction Industry Downturn: The U.S. nonresidential and multifamily construction sectors have experienced a significant downturn, with growth declining from 25% year-over-year in Q1 2023 to negative 2% for the last two quarters. This represents a 27-point reduction in growth over two years, creating a challenging macroeconomic environment for Procore's core market.

Currency Headwinds: International revenue growth was impacted by currency fluctuations, contributing approximately 1 point of headwind to international revenue growth in Q3.

Competitive Pressures: While Procore has a strong market position, the company faces competition in certain segments, particularly in large upmarket transactions, which could impact its ability to secure new customers or expand existing relationships.

Economic and Construction Cycle Risks: The construction industry is cyclical, and prolonged downturns or slow recoveries could adversely impact Procore's growth and financial performance. The company is currently navigating a down cycle, which has been a steady headwind.

Leadership Transition: The transition to a new CEO, Ajei Gopal, introduces potential risks related to strategic continuity and execution, as leadership changes can sometimes lead to disruptions or shifts in company priorities.

Supply Chain and Resource Management: Procore's customers face challenges related to resource management, including labor, equipment, and materials. These issues could indirectly impact Procore's business if customers delay or reduce construction activities.

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Guidance & Outlook

Revenue Expectations: For Q4 2025, Procore expects revenue between $339 million and $341 million, representing year-over-year growth of 12% to 13%. For the full fiscal year 2025, revenue guidance has been raised to a range of $1.312 billion to $1.314 billion, reflecting total year-over-year growth of 14%.

Margin Projections: Q4 2025 non-GAAP operating margin is expected to be 14.4%. For the full fiscal year 2025, non-GAAP operating margin guidance has been raised to 14%, implying year-over-year margin expansion of 400 basis points.

Market Trends and Growth Expectations: Procore anticipates continued durable growth, driven by its ability to execute and take market share even in a challenging construction cycle. The company expects to benefit from a potential upward turn in the construction cycle, which is currently in a downtrend.

Capital Allocation: Procore has implemented a new stock repurchase program for an additional $300 million, maintaining flexibility in its capital allocation strategy to optimize long-term shareholder value.

Product and Platform Development: Procore plans to launch its materials management product next year, completing its comprehensive resource management offering. The company is also focused on leveraging AI and its proprietary construction data to enhance its platform capabilities.

CEO Transition and Strategic Direction: Ajei Gopal will assume the role of CEO on November 10, 2025, bringing extensive experience in scaling innovation and driving shareholder value. The transition is expected to position Procore for its next phase of growth.

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Shareholder Return Plan

Stock repurchase program: Year-to-date, the company has repurchased approximately $129 million in stock, representing 1.9 million shares. A new repurchase program has been implemented for another 1-year period for an additional $300 million. This program is part of the company's capital allocation strategy to optimize long-term shareholder value.

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Key Q&A

Q:Is the signal of a turning point in end market demand still reasonable to think about starting with the owners? What are you seeing in that segment of the business?

A:Craig Courtemanche stated that the macro environment remains consistent with previous quarters, with no significant changes in macro headwinds. He emphasized that owners are crucial as projects begin with them, and their excitement about building projects benefits Procore. However, he cautioned that even when headwinds turn into tailwinds, it takes time for projects to be greenlit, permitted, and reflected in Procore's revenue.

Q:What does the notably faster net new ARR growth compared to revenue growth indicate? Does it suggest future revenue growth acceleration?

A:Matthew Puljiz reiterated that the company had another strong quarter and is on pace for a strong year. He emphasized confidence in their base case of growth, with optimism and confidence remaining high. He did not directly confirm future revenue growth acceleration but expressed positive sentiment about Q4.

Q:What is your perspective on the data center opportunity, given recent major announcements and Procore's large expansion in the quarter?

A:Craig Courtemanche acknowledged that data centers are a small portion of the overall construction economy but noted Procore's strong presence in the data center world. He highlighted that while data centers are exciting, they represent a small part of the business, and the construction economy is diverse with sectors waxing and waning.

Q:Can you provide insights into how renewals trended in the quarter and the proportion of stable or growing ACV commitments?

A:Matthew Puljiz described renewals as very healthy and noted an increase in contract duration. He characterized the underlying health of the business as stable to positive and trending in the right direction. Craig Courtemanche added that Procore now has $1 trillion of committed construction volume annually, reflecting strong customer acquisition and expansion.

Q:What factors contributed to the highest cRPO growth in 7 quarters?

A:Matthew Puljiz attributed the cRPO growth to a strong quarter and increasing contract duration. He noted that the underlying cRPO growth rate is consistent with revenue growth. Craig Courtemanche emphasized the large TAM, Procore's category leadership, and strong go-to-market execution as contributing factors.

Q:What improvements have you seen in the go-to-market strategy, and what are the proudest outcomes?

A:Craig Courtemanche highlighted improved customer intimacy and additional resources provided to customers, leading to revenue expansion and goodwill. Matthew Puljiz noted tangible benefits such as improved execution, higher pipe conversion, improving expansion rates, lower voluntary headcount attrition in sales, and positive customer feedback.

Q:What intrigued you about Ajei's ideas during the search process for the new CEO?

A:Craig Courtemanche mentioned that Ajei and he shared a passion for serving the construction industry. Ajei's experience in building global businesses and partner ecosystems aligned with Procore's future needs. Courtemanche expressed confidence in Ajei's inspirational leadership and operational expertise.

Q:Are net revenue retention rates trending up, and what products are driving this trend?

A:Matthew Puljiz stated that churn is stable and expansion is improving, which are tailwinds for NRR. However, pooled contract models with NRR of 100% during the contract term act as a headwind. He suggested that NRR might remain similar to last year. Financials and resource management products are driving improvements, with analytics also being a customer favorite.

Q:Where do you think the construction industry will digitize the most in the next 5 years?

A:Craig Courtemanche emphasized the potential of AI and Procore's proprietary construction data to drive productivity and optimize businesses. He highlighted the opportunity to leverage data to improve the industry's efficiency and move it up from being one of the least digitized industries.

Q:How is the beta testing of pricing and packaging adjustments going?

A:Matthew Puljiz reported positive feedback from customers on the simplicity of the new good, better, best bundles tailored to stakeholders. The changes aim to simplify the menu of options and provide a clear graduation path for customers. Craig Courtemanche added that the adjustments meet customer preferences for simpler pricing models.

Q:Is the large deal activity in Q2 and Q3 indicative of a new pattern, and how is the Q4 large deal opportunity shaping up?

A:Matthew Puljiz noted that large deal activity typically occurs in Q4, but recent activity in Q2 and Q3 might indicate a new pattern. He described the Q4 pipeline as healthy, with a broad mix of stakeholders, geographies, and deal sizes. Craig Courtemanche highlighted the success across all stakeholders, not just GCs.

Q:Is the relationship between cRPO growth and forward revenue potential still applicable?

A:Matthew Puljiz confirmed that the relationship still exists but emphasized that formal guidance for next year will be provided in February. He suggested using current information to assess forward revenue potential.

Q:Where do you see Ajei making the biggest positive improvement to the business over the next few years?

A:Craig Courtemanche highlighted Ajei's experience in scaling businesses from $1 billion to $3 billion to $5 billion, building global businesses, and partner ecosystems. He expressed confidence in Ajei's ability to lead Procore into its next phase of growth.

Q:Can Procore remain committed to margin expansion while giving Ajei the flexibility to improve the growth profile?

A:Matthew Puljiz affirmed the commitment to margin expansion, targeting 400 bps of non-GAAP EBIT expansion this year and potentially higher next year. He emphasized providing Ajei with options and flexibility to make improvements.

Q:What feedback did you receive from customers at Groundbreak regarding the competitive landscape and Procore's product?

A:Craig Courtemanche reported no customer mentions of competitors at Groundbreak. Customers were impressed with Procore's achievements and excited about AI. He shared an example of a major construction company expressing interest in partnering with Procore on AI strategy. Matthew Puljiz reiterated Procore's category leadership and positive internal data.

Q:What is driving customers to opt for longer contract durations?

A:Matthew Puljiz attributed longer contract durations to pooled contract models offering flexibility for project schedules. He also noted that strategic relationships and Procore's mission-critical role encourage longer-term commitments. Craig Courtemanche emphasized Procore's indispensability to customers as a factor.

Q:What additional color can you share on the current demand environment and traction in international geographies?

A:Craig Courtemanche and Matthew Puljiz stated that the macro environment remains challenging but stable, with no notable changes. They expressed optimism about Procore's performance despite headwinds and anticipated a tailwind when the environment improves.

Q:What assumptions were factored into the 4Q guidance?

A:Matthew Puljiz stated that the guidance philosophy remains consistent with past practices, reflecting confidence in the current quarter and standing behind the guidance provided.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on future revenue growth acceleration, the exact impact of pricing and packaging adjustments on financial trajectory, and the precise timing of macro environment improvements turning into tailwinds. Additionally, they deferred detailed guidance for next year until February, citing the new CEO's upcoming role.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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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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