Procore Technologies Inc (PCOR) (Q1 2024) Earnings Call Transcript Highlights: Strong Revenue ...

• Revenue: $269 million, up 26% year-over-year.

• International Revenue Growth: 32% year-over-year; 33% on a constant currency basis.

• Non-GAAP Operating Income: $37 million, operating margin of 14%.

• Current RPO and Deferred Revenue Growth: Grew 20% and 21% year-over-year, respectively.

• Q2 Revenue Guidance: Expected between $274 million and $276 million.

• Full Year Revenue Guidance: Expected between $1.14 billion and $1.144 billion.

• Q2 Non-GAAP Operating Margin: Expected between 11% and 12%.

• Full Year Non-GAAP Operating Margin: Expected between 9% and 10%, implying margin expansion of 700 to 800 basis points.

• Warning! GuruFocus has detected 3 Warning Signs with PCOR.

Release Date: May 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Procore Technologies Inc (NYSE:PCOR) reported a 26% year-over-year revenue growth in Q1.

• The company's international revenue grew by 32% year-over-year, showcasing strong global market penetration.

• Procore Technologies Inc (NYSE:PCOR) was ranked #8 among G2's Top 100 Global Software Companies for 2024, indicating strong brand recognition and market trust.

• The company continues to improve its efficiency profile, delivering strong margin performance in the quarter.

• Procore Technologies Inc (NYSE:PCOR) is leveraging AI effectively, as demonstrated by the introduction of Procore Copilot, enhancing data analytics and operational efficiency for clients.

Negative Points

• Despite revenue growth, Procore Technologies Inc (NYSE:PCOR) faces persistent challenges in the macroeconomic environment, impacting the construction industry.

• The company's Q1 international results were slightly impacted by currency headwinds, indicating potential volatility in foreign earnings.

• Procore Technologies Inc (NYSE:PCOR) anticipates a challenging demand environment throughout 2024, which could affect growth and customer acquisition.

• The company's customer renewal rates are stable but not improving, suggesting potential issues in customer retention or market saturation.

• Procore Technologies Inc (NYSE:PCOR) is still in the early stages of seeing material financial benefits from its new product, Procore Pay, indicating a slower than expected ramp-up.

Q & A Highlights

Q: Tooey, could you share your perspective on the competitive environment and whether that's changed at all? A: Craig F. Courtemanche, Founder, Chairman, CEO & President of Procore Technologies, Inc., stated that there has been no change in win rates and Procore continues to be a premium product commanding a premium price. The industry recognizes the value Procore drives, as evidenced by significant savings like those seen by Bernards on their BIM expenditures.

Q: Howard, as Procore starts selling more to larger enterprise customers, how are your sales resources aligned to this objective? Are there any early signs of success in this pivot in the go-to-market strategy? A: Howard Fu, CFO & Treasurer of Procore Technologies, Inc., clarified that the shift towards enterprise customers began last year, aligning resources to where relative strength was observed. This is not a new pivot but an extension of ongoing efforts in the enterprise market.

Q: Tooey, given your focus on infrastructure and international segments, how do you see the infrastructure opportunity helping to catalyze international adoption? A: Craig F. Courtemanche explained that infrastructure investment varies globally and is typically part of a diversified portfolio for Procore's customers, which doesn't distort their business but complements it. The focus remains on diversified portfolios which include strong infrastructure components.

Q: Howard, can you discuss the observed stability in renewal activities and its implications for the financial outlook in the latter half of the year? A: Howard Fu noted that the stability in Q1 renewals reinforces the assumption that the latter half of the year will be stronger, driven by enterprise and upmarket expansions. This stability is a positive indicator for the company's performance moving forward.

Q: Tooey, is the data center segment big enough to offset near-term challenges in the construction industry? A: Craig F. Courtemanche acknowledged the significant role of data centers in the construction industry but emphasized that they are part of a broader diversified portfolio. He highlighted Procore's strong fit and brand presence in the data center construction sector.

Q: Howard, regarding the operating margin guidance and potential areas for efficiency gains, where do you see opportunities for improvement? A: Howard Fu, CFO, mentioned that efficiency gains are being realized across all functional areas, with a focus on investing in R&D and potentially adjusting go-to-market strategies based on demand. The flexibility built into their plans allows for adjustments to optimize the margin profile.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.