My name is Sterling Auty. I'm a software analyst, head of software here at SVB MoffettNathanson. Thank you very much for joining us for our next session. Very happy to have with us Tooey Courtemanche, who's the Founder and CEO of Procore. As you can see up on the screen, there is a QR code. If you'd like to ask a question, feel free to scan the QR code. It'll come up to the iPad here. If for some reason you're having any trouble with it, just raise your hand. We'll incorporate your questions as we go along, and I'll just repeat them into the microphone for the webcast. With that, Tooey, thanks for joining us. Really appreciate it. Well, thank you, Sterling. Always great to see you and always fun to talk about my favorite subject. I'm happy. It's great that we've got 50 minutes to really dive in. Yeah. It's not, it's not gonna be a rush quick and done. There's a few faces in the audience that are gonna be new to the story, maybe for the benefit of them. Why did you start Procore? Just maybe just give the quick kind of one-minute elevator pitch as to what is Procore, and what do you do, and what makes you special. Absolutely. Well, how many people feel like they don't know the story? Well, good enough. We got a couple. Yeah. First of all, Procore is a construction software platform. We're a global company now, but the backstory on the company is I'm one of these unique individuals that I have two skills in life, which is I very much am involved in love construction, I'm also a technologist. Having grown up in the construction industry, I had an opportunity at one point to become a real estate developer. I went from being a carpenter to a developer, again, learning more and more about how construction gets delivered, learning more and more about how crazy and how disorganized and chaotic the construction process is. ended up getting a job in technology in the Bay Area. I was joking with someone today that Everybody know what IVR is? Mm-hmm. Most people don't. Interactive Voice Response. Before the Internet, for the younger people in the crowd, you used to have to call, like, to get your bank balance, you'd have to call on a telephone. I was the guy who programmed those telephone systems, really, really antiquated technology, but I was a software engineer. Found out early on that I was a much better software salesperson than an engineer. I ended up selling solutions, and then I ended up starting my own company. Lo and behold, in 1999, my wife said to me, we were living in the Bay Area, she said, "Hey, guess what? We're moving to Santa Barbara." I said, "No, we're not. I'm running my company in the Bay Area." She said, "No, no, your son and I are moving to Santa Barbara." "There's an airport there, too, so if you wanna see us, you'll come." That got us to Santa Barbara, bought the house, bulldozed the house. All of a sudden I realized, like, wow, all the chaos that I remembered about construction was still existed. Nobody had improved upon anything. I'd been working in the Bay area helping Fortune 500 companies improve their business processes with technology, and I'm like, "This is something I can do." I way underestimated the complexity of what I was taking on, and I also was arguably a decade plus early in the process. Here we are today. We are a global company. We were built as a platform. We have about a dozen products. We sell to owners, general contractors, and specialty contractors, and we sell to the enterprise mid-market SMB. We sell in the U.S., and then we have sales forces in 11 different countries. We've come a long way since those early days. I think that's a great way to finish because the segue is you're on the cusp of breaking through that billion-dollar revenue mark, and that's kind of rarefied air for software companies. I f you look back, what do you think is maybe the one or two things that really made it successful to get there? Maybe it was,... Give me something that maybe you learned and you're like, "Geez, boy, if I did it again, I'd do this differently. Yeah. Well, first, we got really lucky because when I started Procore, I was used to working with Oracle databases, I called my Oracle sales rep that I used to work with, and I asked him for a quote for an Oracle database, and it was $50,000. I was selling the software at the time that I was building at $95 a month. I'm like, "If every customer has to have their own database, like this is never gonna work." I just added a company ID on the front of every table in my single database that I was using, ended up creating a SaaS platform in 2002 that like just because I was too cheap to buy lots of databases. The reality was it turned out we then developed a platform over time. I think we got really lucky in the early days because of that. Having a single code base, multi-tenant architecture really paid off. Number one. Number two, I think, the way that Procore, the one thing I'd like people to think about Procore is we are not just a software company. We are a true partner to the industry that we serve. You can ask any one of our customers, and a lot of times what they'll talk about first is what Procore does as opposed to what Procore sells. Being the partner to the industry really helped. The industry had been served up a lot of really not useful software prior to Procore. They were very dubious, and you really had to earn their trust, and partnering was a great way to do it. The other thing is, I think really it's helped us that all we do is construction. w e have a lot of competitors that I don't even know how these CEOs, like, just weave together a narrative as to what's most important, but that are doing different industries. Construction's hard enough, and the complexity of the industry is great enough. I think the focus really helped us as well. Lots of lessons learned. Just the one thing that just came to mind was, I feel like I need to apologize to my wife. I started selling Procore in 2002. Keep in mind, the iPhone didn't come out till 2007. The iPad didn't come out till 2011. I essentially had written software for an industry that couldn't use my software. For the first decade and a half, we were kinda wandering through a dark desert of trying to find early adopters. It wasn't really until around 2015 that that thing started to take off. I probably could have kept a paycheck coming in for, like, a decade from another line of work. That was a lesson learned. The other thing is, I know founders love to talk about, like, their hero's journey. Like, this has not been a hero's journey, I'm gonna be honest with you. Every day, we learn lessons. Actually, one of my, a guy I call my co-founder, Steve Zahm, used to tell each other, "All you had to do is make one better decision than all the bad decisions every single day, and you will advance the business over time. Mm-hmm. It worked. W e made lots of mistakes along the way, but boy, did we learn a lot as we have grown. Mm-hmm. Now that we've been around for 21 years we got a lot of pattern recognition. I knew you were onto something special when you were still private, and I went to Groundbreak, which for those that haven't done it, that's your big user conference. Ev en as a private company, you had close to 2,000 people that were showing up and really willing to talk about the use of the solutions. One of the things that I also find investors don't really have a full appreciation for is just the state of the technology within the commercial construction or just the construction industry as a whole. Mm-hmm. Maybe give a sense what is that environment that you're selling into or... Yeah. fighting to improve? Yeah. A lot of people love to talk about competition. Our biggest competitor is Microsoft Office. More than 50% of the folks that we are selling to are literally running their construction companies or specialty contracting company off of Excel, Outlook, and Word. And the problem is that those are all very, very limited. In an industry where any one particular project you're working on can have thousands of formal legal documents, that is just not. There's no workflow engine or anything else. The state of the industry is very much still analog, we like to say. The benefit of selling into the largest, least digitized industry on the planet is that we get to look at all the other industries, like manufacturing and finance, that have already gone through the digital transformation, and just basically steal the playbook, right? Because it's no different. Getting people to move off of manual processes onto automated processes it's the same effort in just a different industry. Going last in the digital transformation has really been a big benefit to us. The other thing is, I love to dispel the notion. People think of contractors as luddites, or they think that they're just technology-phobic or whatever. That's not true. Some of the smartest people I know work in construction, and some of the best Excel jockeys I've ever met in my life sit in job site trailers, not in investment banks. These guys can do things with Excel that will just blow your mind. Though they haven't been given lots of great technology over the years, they've figured out how to do a lot with a little. Along those lines, do you think?, you kinda outlined the three core end customer markets: general contractors, owner-operators, and specialty contractors. What was the tip of the spear that got you in? Is there still just some demographics that are around the core ownership of... when you look across maybe the ENR Top 500 general contractors- Yeah. Are there some demographics where maybe it's that next generation taking over that might help propel technology adoption? Absolutely. We had the, I guess, the privilege of providing our software to... I think it's 98% of every construction management program, university program in the United States, trains the future workforce on Procore. That's pretty cool. That means that in the United States of America, if you get a construction diploma from any 1 of the universities, you basically are being taught Procore. That really has a very big uplifting effect. Yeah. , a lot of general contractors have been doing this, their work, or specialty contractors, the same way for years. The very first question they ask all their new hires is, like, "What are they teaching you?" Also when they hire somebody out of another company, they'll be like, "What software is the other company using?" We get this. We can come into corporations from a brand perspective, both through the university program as well as through people that leave other jobs and come in. That has a really big impact. We've also heard our customers say that if you're a graduate from a construction management program, and you're out talking to 4 different contractors, you're gonna ask them what technology stack they use. Because if they don't use technology, you're gonna be in a world of hurt, and that. Yeah. If they use old client server solutions, you're in a world of hurt. If you're using one of those companies that they buy out a lot of software and they haven't woven them together yet, you're in a world of hurt. If you're using Procore, you're using a state-of-the-art tool. Frankly, in a world where there's in construction, the biggest problem in construction is there's too few people to build the things that need to get built. In the world where there's such a discrepancy between the number of people capable of getting jobs built and the number of jobs that need to get built. Yeah. The power is in the hands of the employee, and they have a lot of sway in talking about where they wanna work. Procore seems to be an advantage for folks or customers to hire people. Looking at kind of the state of the company, state of the industry, et cetera, what has you most excited now? Like today? 'Cause I have, I gotta do. One of the biggest privileges of being a founder of a tech company that serves in construction is I get to go to do what are called job site walks, where I get to put on my construction clothes and my steel toe boots and. Yesterday I did a job site walk in East Harlem for a charter school, a $50 million charter school. What gets me most excited is seeing our solution in the hands of people in real time actually doing their job. There was a guy named Mark, who was a project superintendent, and Mark is a, like, out of central casting for the curmudgeonly 64-year-old superintendent New Yorker, right? I'm like, "Oh, gosh, here we go. Mark could be one of two personas to me." Turns out Mark is the biggest power user on the job site. He had never used technology before Procore, and the products that we put in his hand make his job so much easier that he is out there just... It was funny, we were walking together up a stairwell, and he's like, ", Procore's punch list tool is so amazing. I was using the photo..." I just go, "Dude, you don't need to sell me on Procore." Like, I'm kind of a fan. Anyway, what gets me excited is seeing that, and there's a lot of other things that are connected, the connected nature of our platform. How many people here have ever remodeled or built a house before? Okay, well, this is gonna resonate with you 'cause you'll realize that when you did that, you were the owner, you hired a GC. Chances are you probably never worked with that person again, but you might have, or prior to that, and the subcontractors are all new, and you don't know the subcontractors. That alone, just the complexity of that dynamic, means that those folks have to figure out how to work together on a project in order to deliver it on schedule and on budget. If one of those team players drops the ball, everyone loses, right? The more you can connect the workflow processes across these different legal entities, subcontractors, suppliers, GCs, owners, even lenders in some cases, the more you can get people working off the same sheet of music, the less risk that are in projects. We're doing a really good job of connecting all these users on our global platform. That's exciting for me. Let's actually take that a step deeper. Yeah. You talk about the job site walk, et cetera. Let's start with the GC. Yeah. Just give one or two real granular examples. What is it that they're actually doing in your software? Yeah. Well, the first thing you're gonna notice when you walk on a job site is, everyone has a smartphone, of course. Most of the project managers, superintendents, and foremen have an iPad, or some sort of hardened device. They're gonna have the drawings open first and foremost. It's,. I got another privilege, got to tour George Lucas's new art museum in Los Angeles. Wow. -like a month ago. It's a billion and a half dollar building. It's two city blocks big, and it looks like the Millennium Falcon. There's not a straight line in it. It's so freaking cool. Yeah, I had the opportunity to tour that, and they had a set of blueprints that was 120 pages thick, that was what they call the. It was the county stamp set, so it was the permit set. I looked at them, I'm like, "God, I don't see blueprints very often anymore." They said, "Yeah, the county makes us. We have to have one set." The guy that I was talking to said that at one point, in previous jobs he's worked on, that they had to rent a warehouse just to store all the blueprints that they were using for one particular project because 120 times all the different trades times every change you make to the drawings, you have to get a new set printed, and you can't lose the old set 'cause you have to compare. Now they're just carried around their iPad, and they can go back and look at previous revisions. They can create an RFI. They can drop a pin on there. They can drop a photo on there. They can do a before and after photo. Like, it's just. You're gonna see them with the drawings probably first and foremost. It's RFIs, it's submittals. There's all these terms of art in construction. Because construction is so litigious, they've created all these terms of art that, are these contract documents that require lots of signatures and approvals and workflows to get done. You'll see them managing those complex documents. Photos is a big thing. Document control is huge. Not just the contract documents, but just the documents itself. The budget, I mean, they're always trying to figure out the budget. They're creating change orders on the fly. For all of you who raised your hand, I'm sure you're very familiar with the two least favorite words of an owner, which is change order. Yeah. That happens every day in construction. It's pretty much anything that can happen, can happen through Procore. Those words are followed closely by delay. Yeah. Yeah., there's only two things in construction that matter: time and money, schedule and budget, right? Yeah. Yes., Interestingly enough, most owners, they will accept a cost overrun over a schedule overrun. Not having your facility up and running and making making the widgets that you sell is way worse than spending 2% extra 'cause there was a budget overrun. Yes, that is definitely true. I mean, it makes perfect sense. The other area that I wanted to make sure we got into is how you price. Yeah. , how do you price, for those that don't know? Yeah. Why did you go that way? Is that actually a positive or a headwind, especially in an economy like this? Again, I guess today's my day of being vulnerable. I'm gonna tell you why we price it this way. Well, in the very beginning, we all all of our competitors were selling seat licenses, right? That's how software was sold. First and foremost, the lead software engineer said, "We can build in a very complicated management system for seat licenses, or if you come up with a different pricing model, we don't have to put all that energy into creating these this complexity in the code base, and we can start delivering value to the customers." I went out and started talking to the potential customers, and I'm like, "What is... , how do you think about price?" They're like, ", we buy our insurance based off our construction volume." Beginning of the year, they meet with their insurer, and they'll come up with a, "We're gonna do $50 million in construction this year. Therefore our premiums are gonna be based on X, Y, and Z." We're kinda used to a volume-based pricing. I thought, well, there's a great way to skirt the the seat license challenge. Because our mission is to connect everybody in construction on this platform, I knew that there were gonna be many people that needed to be involved in Procore that were not gonna be paying customers. If they weren't paying customers, and they had to make a decision if they were gonna buy a seat or not, that was gonna limit the virality of our ability to deliver our solution and to deliver on our mission. The construction volume pricing model that we came up with was highly unusual at the time in software. Mm-hmm. In fact, I had a lot of our competitors that would come up to me and say, like, "That is your death knell. This is gonna kill you." Well, what it turns out is it turned out to be a huge advantage for us. Our customers tend to love it because they can control the amount of spend that they're gonna put on Procore, and it's based off of a pool of projects, of dollars that go into projects, that they get to use throughout the year. If they need more, they can buy more. It just works out really well. I think in an era of uncertainty, which we can all agree, if you just pick up a newspaper, we're in an era of uncertainty, having the predictability on pricing and knowing that you can buy as little or as much of it as you want, is a good thing. It's you can't do that with seat licenses or tokens or whatever people sell. Absolutely. Using that as a segue into just the broader discussion around the economy, the one pushback I get is, "Hey, Sterling, why the heck would I invest in Procore? They're serving an incredibly cyclical industry.", how would you answer that? I would say the person hasn't quite understood the scale of this industry., $11 trillion globally growing to $14 trillion in the next few years. If you just kind of say, look at it in terms of the scale, number 1. Number 2 is where are we as an industry in the digital transformation journey? Yeah. Very early days yet., our customers tell us that they can do 50% more construction volume if they run Procore than if they don't run Procore per person. In an industry that's constrained by finding qualified people to do work, being able to do more with less people is a big thing. We are a value add to anybody who's trying to get construction done. Effectively, the industry is so complex that our products solve for that complexity and help reduce risk. Many years ago, when I was raising capital back in, like, 2004, I was talking to the president of Swinerton Construction, one of the largest contractors in California, and he's like, "Just pitch me on your product. Give me the two-minute elevator pitch." I'm like, "We're a construction project management software platform." He said, "No, you're not." He goes, "You're a risk management platform." He goes, "We run 2% gross margin businesses. The work that you do helps us not go out of business. We don't think of you as project management. We think of you as risk management." We provide so much value, not just for making people more productive, but to manage risk and create transparency in a product that even in a a time of uncertainty, there's a ton of demand. The other thing people don't understand, a lot of, a lot of the things that get built are not financed with debt, for instance. Interest rates don't really have an impact on it. like the school I was at was not financed with debt. It was a school., all of the infrastructure work and all this other stuff. There's the construction economy is so big and it's so diverse across so many different sectors that there's always opportunity. Our biggest challenge is that people read about housing starts, and they're like, "Oh, the construction industry is falling apart." Well, I think housing plus offices is like around 10% of the overall construction that's done in the U.S. I'm sure that's true globally. You a headline can make you think the industry is struggling. What happens in construction is when certain segments wane, like we've seen with offices and office buildings, other sectors grow. Like the infrastructure bill, the CHIPS Act, all of those billions and billions of dollars are actually being pumped into sectors that were smaller before those numbers, those dollars got pumped in. I know I'm talking a lot, but I wanna finish by saying. Our customers run diversified portfolios. Everyone thinks of a contractor as their buddy who builds houses. That's not the standard customer at Procore. That's not the standard contractor in the U.S. Our customers will run portfolios across many different sectors. Yeah. They'll have a infrastructure division, they'll have an energy, clean energy division, they'll have a multifamily division, and they'll have a commercial warehousing whatever division. When one area wanes, they just shift their resources to the other sectors where there's actually strength. That creates a lot of continued opportunity across this huge TAM. That gives you a huge amount of opportunity, but there's no segment that's immune to what's happening. Nope. -in, in the macro, I think you called this out a little bit. Can you maybe highlight what are you seeing in terms of some of the, some of the headwinds that have kinda creeped into your customers? Yeah. The biggest headwind I think that's creeped into our customers is the same headwind that's creeped into every person's mind in America, which is doubt about the future, right? It's not about construction, but it's just you pick up a newspaper, it seems like seems like the predictions are very dire for the world in general. I think that alone, just the psychological kind of a perspective is a headwind. Yeah. Certain sectors do,. I mean, I think that the office space subsegment has been pretty much in the tank for two years now. Yeah. We've done very well because when that went in the tank, people shifted their resources. We actually looked at the overall construction spend in the U.S. over the last few years, and it's just continued to grow. The pie gets bigger every year. There's not less to get built. There's not less demand out there., there's more tailwinds, we think, than headwinds., our customers do have this little sentiment about, like everyone else is, like, "What's the future gonna hold?" Yeah. When investors look at you, there's a massive global opportunity, but the majority of your business is in the U.S. Is there a sense of kinda how far you've penetrated that opportunity in the U.S.? Yeah. Yeah. We said this at Investor Day, but we think the U.S. TAM is around $3.5 trillion. We have about 14% of that construction volume and about 2% of those logos on our platform today. That, that by definition I think means very under-penetrated. Our most penetrated segment in the U.S., which is U.S. GCs, is less than 25%. If you just thought about Procore as a, as a, as a U.S. company, which we're not, the opportunity to grow this business is just enormous as the pie even gets bigger. We have a lot of opportunity there. Of course, the global business. You're right, 85% of our revenue today comes from the U.S. Yeah. Our global business is growing at or a little bit faster than that. That business is gonna grow a lot. We look at the TAM, about 10% of the TAM is the U.S. market, 90% is the non-U.S. market. We're very fortunate that our product is ubiquitous, and it can work pretty much anywhere that we wanna go. The opportunities are just, if you take off the constraints of the U.S., are just Enormous. Yeah. Yeah. Yeah. One of the questions that came in is how can some of the construction material suppliers better work with Procore? We have a lot of ideas in that front. We have, we started some fintech businesses recently, and one of them is a material finance business. This is one level above the supplier, but it essentially gets us the ability to be the purchaser of the suppliers, of the supplies for the project. That might sound like a crazy idea, but in the world of construction, there's this Thomas Jefferson, our founding father, came up with this thing called a mechanic's lien. The mechanic's lien in construction basically says that any materials that get purchased for a job, it's the responsibility of the owner of the project that they go onto to make sure they get paid for. You get these secured rights when you purchase materials on jobs. Suppliers, sub-subcontractors are always strapped for cash, 'cause they don't get paid very quickly. That's another business that we're starting with Procore Pay. The ability to get those supplies in the hands of the project in addition The subcontractors don't have to take cash off their balance sheet to do it, is a big win. That's allowing us to develop relationships with the suppliers. The suppliers would love to be able to have access to a marketplace in Procore, which we have a lot of people at Procore that are anxious someday to build a materials marketplace. We have so much data on this platform, it's absolutely just it's ridiculous. I mean, I can tell you how much a part price of concrete costs in your hometown. Like, if you gave me 10 minutes, I could go look it up. I don't think anybody else can do that because we have all that data in the system. If you needed to buy an air handler for the roof of this building, we can tell you what the warranty issues are on every single product that's ever been installed because we have all the warranty information in there, punch list items, quality inspection items. We know everything there is to know about that air handler. We could probably tell you if, as you're designing a building, "Don't use that Kohler Model 123 air handler because it has a higher cost of ownership." Like, those kind of things are really exciting opportunities over the horizon. You kind of started to frame fintech., how long does it take to ramp some of these opportunities, and where do you eventually see that fintech opportunity playing out for Procore? Yeah. I'll define what they are maybe first. Yeah. We've classified there's 3 different discrete businesses that we're building. One is this material finance business, as I mentioned before, helping our subcontractors maintain cash on their balance sheet so they can actually take on more work and have less risk by doing those the purchasing. There we acquired a company called Levelset a year and a half ago, and they had started this business, and so we're just trying to expand it. All of the businesses I'm explaining right now are in the discovery phase. They're not in the execution and growth phase. That business itself, we're using some of cash from our balance sheet to do this, but it's a very little amount. It's inconsequential. If this business does turn out to the material finance business take off, we will find a capital provider that we'll partner with, and we'll just basically be the middleman. We don't wanna be a bank. That's one. We announced last week, Procore Risk Advisors. I never believed in a million years that I was gonna get into the insurance business, but it turns out that in construction, one of the number one costs in construction is insurance. We learned this because insurance companies came to us and said, "Hey, we build all of our risk profiles based off of actuarial data. You all have actually current data and a lot of it, we would like to partner with you." We came up with these programs where people would get a discount if they're Travelers customer, and they were on the Procore platform. Made us realize, "Hey, we should look into this." We did. We looked into it, and what we found was, this is rough math, but what we found was 5% of every $1 that goes into a construction project goes into insurance. That is ridiculous. That is absolutely ridiculous. What we did is we surveyed our customers from the best to the most risky, and we asked them what% they're paying on their premiums. They're all paying 5%, which means the insurers have no idea where risk lies, and therefore everyone's paying the max. Yeah. We thought, "Hey, wait, let's give this a shot." We did it. We've been trying this, and it seems to be working. We can put together not only a. We've started a brokerage. We can not only put together a submission. Here's something to note. Every construction project in the U.S. has to have a builder's risk policy on it. If you're a construction company that has 400 projects, you're buying insurance policies many times a day, right? It's a pain in the ass. You have to fill out these long forms, and your brokers don't do any work 'cause you're a captive business, and they don't really benefit from getting you lower premiums, so you're just whatever. What we do is we put together a submission package of not only the standard form, but we tack on page after page after page of backup data about how they perform on Procore. What does their quality score look like? What does their risk scores look like? What do their performance scores look like? We put together this comprehensive package. We could submit that as a broker to a carrier, and get them much better rates is the hypothesis. Then we obviously get a commission on that. Those commissions are, they're very healthy. You can measure those in multiples of what our customers pay for our SaaS product. Remember, they're buying project insurance every single day of the year. It's kind of an exciting business. Three weeks old, we'll see. These are like all the other... These businesses are all in that trial phase, which is we're learning. We have Procore Pay, which we have been talking about for a long time, which we're gonna announce later this year. That's really exciting. That's really just getting all of the flow of funds on the Procore platform, from the owner to the GC to the specialty contractor., in a world where we have hundreds of billions of dollars of invoicing happening on our platform, it's ripe for moving those funds. On top of that, in the future, we can build really interesting businesses like early pay or factoring material supplying more material supplying, gathering a bunch of data that can be used for other purposes as well. It's really exciting, that this is all coming. Well, especially, that's what I've seen in my personal life for years is that trapped capital. Mm-hmm. , that payment. The specialty contractors could be doing so much more if there was a faster turnover- Yeah ..., in terms of payment, in terms of hiring equipment, jobs that they supply, and just helping the industry as a whole. We had a couple other questions that came in. I wanna make sure that we get to. While you read that, I will say that one thing people don't understand is that a subcontractor has to be, carry a bond. It's. In order to get bonded, one of the biggest criteria is what is the strength of your balance sheet? If you are buying the 800 toilets for the Salesforce Tower, as a plumber, and you show up with those toilets, you just paid for those. You're not gonna get paid by Mr. Benioff for, like, 120 days. You're basically a bank for the project, and that's true with every subcontractor. People don't really think of it that way. The strength of the balance sheet really does dictate the amount of work. It's not only getting people paid faster, but it's getting people... Yeah having stronger balance sheets. Absolutely. The one that came in is about competition. What do you see? What is the competitive landscape here in the U.S.? What does it look like internationally?, how do you think about companies like an Autodesk that are both a competitor but also complementary in terms of their software being used through the overall process? The first thing to note is that still to this day, more than 50% of the people that we talk to as potential Procore customers are coming from Greenfield. They're not an Autodesk customer. They're not an Oracle customer. They're a Microsoft customer, right? And so when we think about competition, it's really dislodging the status quo as opposed to technology. And that is still very remarkable. That's true in the U.S., and it might even be more true globally. We see in these international markets that they seem to be a little bit less mature than the U.S. market. There isn't a lot of true dedicated platforms. There's a lot of point solutions that are out there, but not a lot of true platforms in these markets. We think that the opportunity is is pretty big then. What was the second half of your question? Just in terms of who is the primary competition and. Oh. Yeah. Well, you asked what we think of Autodesk. Yeah. How you compete and also complementary in certain aspects of it. I'm glad you used that term because they have a phenomenal set of products for designers. Anybody here that raised their hand about building the project realized how disconnected the architect is from the construction process. The architect is strictly a designer. They're there to create something that is a conceptual rendering of what's gonna get built, it's not what gets built. There is a clear delineation between design and delivery. The way we always say it is architects wear penny loafers, contractors wear steel-toe boots, right? Two different buyers, two different need sets. The fact that Autodesk does so well on the design side, we integrate with all those products on our platform. What we do is we make it so it's relevant to the person in the field. We have a great iPad app that integrates with what's called a BIM file, which is a three-dimensional rendering of the building. We created an iPad app for folks that have big, dirty thumbs. So you turn your iPad sideways, and there's two giant joysticks, virtual joysticks that you can fly around and figure out, like, what that light is and what's behind it and stuff. That's what we do. We help the people in the field get the job done by leveraging the technology at their hand. We're not gonna be a design software company. That doesn't make any sense. That's not what we do. We build software for the people that build the world, not the people who design the world. It's just the difference. Do you think that there's a...? The follow-up question that I always get from investors, "Well, this doesn't it make sense to have a vertically integrated stack? Is it easier to come out of the architect to the job site or vice versa?" You said you don't wanna go to the architect, but how viable is it or what part of the industry, I think about the Boston Properties and a few others that maybe have architects all integrated. maybe for some accounts, it makes sense, but how much of the market really kinda? Yeah. That's. To be totally fair, there is a small segment of the industry that does, both design and construction called design-build firms. Even them, I mean, we have, like, Ryan Companies is one of the largest design-build companies in North America. They are fully Procore enterprise-wide, like,. Yeah. There are some that are just... Look, they bought software from Autodesk for a long time because they buy AutoCAD or Revit, and they just decide they're gonna buy another product from them. Arguably, our product is just a much better product. We're a platform. They're a bunch of solutions that are not connected. ultimately, the experience isn't as good. yeah, I mean, we, we really don't spend a ton of time thinking about them. Yeah. We think about what our customers need, and they do need a Revit file. They need the BIM files on their devices. We do a lot, we do a lot of great things on top of what they deliver. One of the other questions came in is just talk about how do you sell? What is the go-to-market strategy and kind of where are you in building that out? Yeah. We are a very much a direct sales organization in general. We have very discrete motions for the enterprise mid-market and SMB and owners, GCs and specialty contractors. But at the core, they're all direct. We have a very large focus right now more on the SMB side to make it more kind of transactionally e-commerce, to lower the CAC in those particular areas. That's gonna change a little bit on that front over in the coming years. Yeah. In some international markets, some markets are just reseller markets, right?, Mexico is a great example. The firms there want to buy through a trusted software provider. Yeah. that they know. However the customer wants to buy, we meet them on that place in that journey. In general, we still are going into folks that have mud on their boots that need a software solution, as opposed to going to the CIO of a company and trying to sell them on a technology stack. We get penetrated into companies very quickly when we go into the job site trailer. Yeah. I love that. I always tell people when I'm discussing Procore, now that we talked about it, pay attention to construction sites, look for the trailer, and look for the Procore flag hanging off the side of it. Here's a good one. Yesterday as we're leaving this job site, great group of people, by the way, someone asked: What's the biggest challenge you've had building this building? It's a very challenging building. This thing had. Like, the structural engineering was just mind-blowing. The head of the construction division for the company happened to be there. He said, he goes," what? That's an easy one." We're like, "What?" He goes, "When the Wi-Fi went down." I'm like, we're in a new age, right? Yeah. I'm like, "Bless you, my son." Like, Procore works a lot better when the Wi-Fi is working than when it's not working. It was interesting that it wasn't like was the steel delayed? Was it the? Yeah. Was labor cost a challenge? It was when the Wi-Fi went down. That's too funny. Yeah. You've said a couple of times, datasets. Yeah. Massive datasets. Yes. Which immediately comes to my mind, those were the biggest datasets feel to me like they can win when it comes to AI. What's AI gonna do to your business? Yeah. Well, it's gonna do a lot, I believe. It's gonna do a lot to... I mean, we all know. Yeah. It's gonna do a lot to a lot of businesses. Before I talk about AI, though, I do wanna talk about data because data is not just about AI. Data is about organization of people's businesses around the things that are most important to them. Data could be people in the system. It can be documents in the system. The data platform that we have created is just enormous. In fact, when they tell me how big it is, I can't even get my head around how large, like, the data set that we have now is. That's a real asset for Procore because that allows us to put together insights that we can reflect back to our customers to allow them to run better, safer jobs. That's kind of at the core, like the benefit of having a single code base. Yeah. -architecture is that we have all of this data. Then you look at, okay, well, what can you do with AI? Here's a spoiler alert, Procore's had machine learning data scientists on staff for several years plus. We acquired a company called ndus.ai. We've acquired another couple companies that had some real talent in there. We've had a lot of data scientists on staff that are machine learning experts. We had a lot of focus on image processing first, not as much on the natural language processing, like. Yeah. large language models. If you think about in construction, there's a lot of things that you can do with image processing. You can from a photo, you can take a you can count the number of two-by-fours that are on a job site one day, and then you can count it the next day and realize that what their production rates are, right? You can do a lot with applying AI to imagery as well as blueprints. Blueprints tend to be PDFs in a lot of cases. How do you make blueprints into objects? How do you make a room into an object? How do you make an air handler into an air handler? We can do all that with all this abilities that we have on the machine learning side for image processing. When it comes to natural language processing, large language models, the way we look at it is there's two advents. There's the internal, how do we run Procore today? How do we apply all of this interesting AI and large language models to benefit our customers? On the internal side, I have a mandate across my leadership team that we, they all have to be on the bleeding edge of knowing how their cohorts in other businesses are applying large language models- Mm-hmm. -to optimize their businesses., my chief legal officer's out talking to his network, my chief data officer's out talking to her network. They're all out there trying to figure out what are people doing to staying on top of it. The impact is so high of some of these things can really... I mean, you think about you think about I was Satya Nadella was talking about the GitHub Copilot, he was telling me, he's like, "Procore needs a Procore Copilot." I'm like, "Yeah." Think about the amount of information if we could load it, if we could train a model with project data to be able to ask it, like, "What's the biggest risk on this project? What's the what day do my plumbers have to be here? What day do the materials have to be stored in the staging area?" Like, all of that's in there. So we should be able to serve that up in a way that's meaningful. We even did a little internal test where we ran some, we trained GPT-3.5 on 1 project's worth of data. We asked the question, "What's the biggest risk to this project?" It kicked back, like submittal 135, has a, is overdue, and that delay is gonna impact like a bunch of other things, which is gonna cause this project to go over budget and over schedule. We didn't train GPT-3.5 on what a submittal was, right? That's a very, that's a term of art and construction. It knew somehow. Like magically. We get these kind of insights that like, wow, this is gonna change the world. When you have the data set, and you have the ability to glean insights from it, I think the world is kind of exciting. I think about your general contractors and pre-construction bids. Yeah. , taking what you talked about in terms of the marketplace and being able to factor that in among 1,000 other parameters to come up with better, so it could improve profitability in addition to productivity of the users. Honestly, even the biggest construction companies today, their estimating department, their estimators pick up the phone when they're trying to do a digital takeoff off of a set of blueprints. They'll pick up the phone and call the supply house and ask, "What does a yard of concrete cost today?" Right? Yeah. Like, that's ridiculous. Like that is... They, they do that for everything on there. The fact that we have all of this data, we should allow you access to that data to be able to make better decisions, yeah, from buying out the job. How about the, the number one criteria of how a general contractor selects their subcontractors is, how often do I play golf with the, with the CEO of that company, right? It has nothing to do with the quality of the business that the person's running. It's like, "This is my golf buddy. I'm gonna work with him." Imagine if you can use quantifiable data, even qualitative data to assess the next best drywall contractor to work with. Yeah. Imagine the impact on your bottom line as a general contractor if you could do that, and we have all that data. Last question is, you put into effect the change that was previously announced, which is Paul stepping out of the CFO role into a new role. Yeah. Howard stepping into the CFO role, maybe just kind of what is Paul's focus gonna be and kinda how are you dividing your time and attention around that business? Paul has been one of my most trusted advisors and confidants for years. I know of him as being one of the most capable people on the planet. Paul too. Yes. He's a wonder a force of nature. Yeah. -is the way to look at Paul. My role is to remove all impediments from him and his teams as possible, and make sure that they have the resources that they need to be able to learn fast and generate as much game tape as we can, so we can actually go back and look and see what's working and what's not. Yeah, he, we're really treating this as a, as a separate business unit, isolated from the bureaucracy of a bigger company like Procore, and able to run fast, and frankly learn, which means you break things. Mm-hmm. If the blast radius is so small, it's just that's what you do. I'm very confident that Paul, like everything else he's done at Procore, is gonna have a very big impact. Yeah, Paul started as like my chief of staff, and then he was the chief data officer, and then he was like head of strategy. There's not a job at Procore that Paul hasn't, like, transformed and made into an amazing group. I'm very confident that we got the right guy in the right role, and he's pretty pumped too. Yeah. Yeah. Yeah. So. It sounds great. With that, Tooey, thank you so much for joining us. We really appreciate it. Yeah. Well, thank you, Sterling, and thank you all for listening to me go on and on and on. Yeah, that was fun. Thank you.