All right, good afternoon. I'm Aaron Kimson, a VP on the Software Equity Research team here at Citizens JMP Securities. We're ecstatic to have Procore CFO, Howard Fu, with us today for a fireside chat. Howard, how's the conference been? Good. Good. Thanks for having us. Of course, thanks for coming on. So starting off, I'm sure this is probably the most common question you've gotten from investors since earnings: Can you walk us through the tailwind to CRPO growth in 4Q23, and how you expect CRPO to evolve throughout 2024? Yeah. So for Q4, I wouldn't necessarily call it a tailwind. I think we got a little bit of a benefit from some early renewals that caused the CRPO growth in Q4 to tick up by 1 or 2 percentage points. You know, excluding that, it's consistent what we talked about in terms of our FY 2024 revenue growth expectations. The best way to think about it in terms of that 1-2 percentage points is think about flat renewals that would have happened in the first week of January, happened in December instead, and it's just a timing aspect. It has nothing to do with, let's say, incremental bookings or anything like that. Got it. And then how do you feel about your renewal base that's set up in the back half of 2024? And is there the potential for more early renewals as we go through 2024 to maybe smooth it out versus the acceleration that's kind of implied? Yeah, I wouldn't expect incremental or anything systematic in terms of early renewals. That's not something that we typically drive. It's something that's typically driven by our customers. And so I wouldn't necessarily expect anything around early renewals. In terms of the renewal book going into the back half of the year, we talked about CRPO and the seasonality of that in H1 and H2. I'm essentially giving you guys visibility into what our bookings seasonality is, and the main driver of that is this strength that we saw in the enterprise space, upmarket, coming through the back half of fiscal 2022 or 2023, and that continuing on, and in addition to us putting resources behind that going into fiscal 2024. Those customers are just gonna have longer sales cycles, and that's gonna lead into an H2, H2 dynamic in terms of that seasonality. Understood. Then you called out on the 4Q call, you know, to expect smaller revenue beats relative to your guide going forward. Over the past four quarters, you've beat the consensus revenue estimate by an average of 6.8%, 4Q was 5.8%. Can you talk about the change in guidance philosophy and what might be driving the smaller beats going forward? Yeah, sure. I think Let me back up a little bit in terms of the framework that we shared at Investor Day. And I think that's a really good place to start. The intent of that framework was really to give folks an idea of how we think about emphasizing and pulling the different levers in different growth scenarios. And the key thing about that is, one, we would be managing appropriately, depending on the different growth scenarios, what our cost profile is, but also that in all those scenarios, we are looking to expand and compound free cash flow per share. So it's important to go back to that framework. And in honesty and full transparency, the guidance for fiscal 2024 was really to make sure that we maintained and stayed within that framework. We didn't feel like it was necessary to artificially guide low just to maintain a certain level of beat. We still hold that the low 20s, in terms of growth rate, is where we'll end up in fiscal 2024. And you back into kind of what that looks like in terms of the left side of the framework, and that results in that smaller beat. The one nuance that I'll say is, you know, it's not necessarily that we've changed our guidance philosophy, in that we still have the same conviction that we're gonna beat our revenue guide, right? So, I just wanna make sure that that's clear. Understood. I appreciate that slide. I love that slide so much with all the companies I cover, that's one of my favorite slides. So taking maybe a step back a little bit, can we talk about how you think about the TAM? And then, you know, the question that long-onlys are focused on here that I get a lot is: How long can Procore continue to grow revenue 20%+ with U.S.-based GCs as the main driver of growth? Yeah, I think there is a bit of a common misconception that we don't have room to grow in US GCs, and that's just not true. I think if I think about where we are, how much we are penetrated in US GCs, it's. I think it's somewhere in the 20s%, in terms of percentage ranges. So there's still a tremendous amount of opportunity to continue to grow in that specific cross-section of stakeholder and segment. And so even with that as the primary driver, I still think that there's tremendous amount of room to maintain 20% growth from a revenue standpoint going forward in the next couple of years. Having said that, we continue to make progress across other stakeholders, like owners and subcontractors, which are actually earlier stage in terms of the evolution and how long we've been in that market, and so there's still tremendous contribution there that would allow us to continue to grow. Got it. Then kind of back to the numbers, I suppose. You had 62 customers with greater than $1 million in ARR at the end of 2023. That was up 32% year-over-year. I wanna talk a little bit about how big are your biggest customers today? How big can they get, and what's the right way to think about the split between GCs and owners within those 62 customers? Yeah. So our largest customer is actually in the high seven figures today in terms of annual revenue that we get. While most of the 62 customers that are a $1 million ARR or above are still in the GC stakeholder category, our largest customer actually is an owner. This also comes back to what I talked about in the prior question, to answer to your question about how long we've been serving the GC market versus how long we've been serving the owners in the SC market. As we continue to evolve and as those businesses continue to grow, I think there's still room both in the GC space and definitely in the owner space in terms of those large, greater than a $1 billion, customers going forward. Understood. And, do you think there's more you can do to capture the economics from owners, right? Like, an owner writing you a, what's a large ticket for a GC, it's not a huge ticket for them relative to some of their other spend, you know? There's still room, right? And it's kind of the same answer. When we look at how long we've been, I think we've been going after that market for something just around five years or so. So there's still tremendous amount of room to make inroads in terms of just volume capture in that specific stakeholder. But also, when you think about the evolution of the product and value needs that Procore can deliver across the stakeholders, there's gonna be certain things that may be more aligned to what an owner might specifically need. So we've talked about, as an example, in terms of the progression from project management to other products, you know, in the owner space, they may be more interested in the financial suite, ERP connectors, project financials, and so forth, whereas downmarket, it might be more about workforce management and so forth. So there's still tremendous amount of room, both in terms of volume as well as some of these cross-sell and cross-product type of opportunities in the owner space. Yeah, that's exciting. And then, as you set to cross $1 billion in annual revenue in 2024, you know, how do you think about the commonalities and necessary changes, maybe organizationally, between what got the company to $1 billion in revenue and what can help you get to, you know, $2 billion-$5 billion over the coming- Yeah coming years? I think this is where a lot of companies stumble, typically, is right around $1 billion in revenue. Yeah. Yeah, look, this is where I start to get kind of a little bit excited here, but the... What got us here is definitely not gonna get us to where we need to be when we think about going from 1 to 5x to $5 billion, and I think about that across a number of dimensions. One dimension is from a product standpoint. So when you think about our mix of products, it's largely going to be project management, and then we're gonna start to see that evolution to get from 1 to $5 billion move more towards into some of these cross-sell components, right? Which would include things like project financials, Pay, and maybe some of these other more nascent businesses that we're testing and continue to build out. The other component is around the mix between U.S. and non-U.S. in terms of our business. We've always talked about our international TAM being much larger than the U.S. TAM, and yet today, the international or non-U.S. revenue represents only about 14% or 15% of our revenue, so that mix is going to shift as well. And then I think the third piece is going to be around stakeholder mix. I talked about how there's still tremendous amount of room in U.S. GC, as an example, to continue to grow volume and cross-sell. But as we get from $1 billion-$5 billion, you can start to see that mix start to grow in terms of the owners in the SC space as well. So that's the third thing. I think the fourth thing that you're gonna see that's going to continue to evolve is really this scalability and how we scale and the balance between growth and profitability. And you've seen some of that in the recent, in our recent results that we've delivered, both last year, well, last year, and the last couple of years, and our guidance for specifically margin this year. So you're gonna see all those dimensions start to evolve. Got it. And then, I guess we can talk international and pay, two of the things you just mentioned. Yeah. So international growth is still pretty small, 14% of the business in the fourth quarter. Growing 35% year-over-year constant currency, which was flat sequentially. It actually accelerated on an actual basis or on an as-reported basis. So what's going well in international? What could be going better? Yeah, so let me, let me just kind of go back in history just for a little bit. Similar to kind of, how long we've been in, in serving the customer segments, international, we have to remember, is the same. We actually haven't been in the international or non-US markets all that long. I think we started in 2017, 2018, or somewhere about those parts. And so when you think about that timeframe, and then you get into a COVID type of, environment, then you get into 2021 and going into 2022, where the non-US markets were actually our strongest performing markets, and when we started to see that, we started to pour a lot of resources into those markets. Now, we thought we were gonna be pouring fuel on the fire. What ultimately happened was, we put a lot of resources in trying to take advantage of that accelerated growth, particularly in the beginning stages of that evolution. And frankly, we could not consume that much capacity in the right way. And then you throw into that, the down cycle in the economy in 2023, and that also impacted kind of how that performance went. Having said all that, I think we've done a really nice job in what we talked about before in terms of changing how we go to market from a process standpoint, changing the mix of investments. We put some new leadership in place. We actually just started a new leader in our APAC geo. And I just think that we've been more focused, for one, and more deliberate about how we deploy the resources in specific markets. And then more, more specifically, I think coming out of fiscal 2023, EMEA or UKI, specifically, is the one area that we started to see some results from a top-line standpoint, and they're in a much better position going into fiscal 2024. Overall, I would say that international or non-US is hitting that stability type of phase, and there's still a lot of work to be done. Don't get me wrong, there's still a ton of work, but I think we hit that stable phase, and then we're gonna continue to make progress. How much harder has it been, if it's been harder relative to what you expected when you started to go international with sales in 2017, 2018, with the amount of localization required, the dynamics between GCs, owners, and subs? Can you talk a little bit to that? Yeah. I don't know if it's more difficult than we thought. I think that we didn't recognize, one, some of the nuances between those different markets and the stages that we're in, in terms of how we were deploying our resources and the allocation of those resources. And like I said before, we kind of just added too much all at once. And one of the main things that we did, going through last year and towards the back part of this year, and we continue this year, I can't overemphasize enough the focus and how much that has allowed us to make progress in our key markets. And that has made a tremendous difference in terms of just really being able to focus on the areas that we think we are making the biggest progress in, versus just kind of trying to do everything everywhere, and that has made a tremendous amount of difference. So it's more about recognizing what our resources are, where they're going, what they're supposed to do, and the focus on that, more than how difficult it is versus what we thought. Yeah, I appreciate that. That's one thing from talking to you and Tooey more, like the methodical approach you're taking to all different parts of your business, with that pay being one of them. So can you talk about where you are on the journey with pay, the time and steps involved in getting pay customers ramped, and maybe when you'll start to take it to customers outside of the U.S. So, you know, pay is very early. We keep saying that. It's very early and, you know, we're obviously excited about pay. In terms of just mechanically how the evolution or the implementation would go, you really have to go directly back to the start of this journey for our customer, to the initial sale. A lot of times when we talk about getting pay, Procore Pay in the hands of our customers, we're actually dealing with a different buyer and a different user in our customer base, so for example, an AP department, as an example. And let's say we start to. We do make the sale, and then the implementation. There's an implementation that has to happen. For example, both the GC and the SC has to sign up and get implemented and get up to speed on an account with our banking partner. So that's another piece that's there. And then once that's set up, there's just a natural progression in terms of running payment volume through Procore Pay, and you're going to do that as new projects come on. You're not gonna, you know, if you're an SC or a subcontractor or a specialty contractor, you're not gonna want your GC to switch payment processing or payment processes in the middle of a project. So there's that component. As new projects come on, then they start to run payment volume through those new projects. So when you add all those pieces up, it could be upwards of 24 months before somebody gets fully ramped. But once it's ramped, it starts to complete the last step of an ecosystem in terms of liens and getting comfortable to be paid and so forth. That has a tremendous amount of value to our customers and is actually tremendously sticky. Yeah, one of your customers, I think, or one of your competitors, in early February, made an acquisition in the payments space. Kind of the company they bought was based in Australia, has some, Yeah some footprint, a lot in Europe, some in North America. When you think about that, I mean, payments, right? You earn the right to take payments by having the best software throughout the whole process. Is that something that puts any kind of pressure on you, you and the management team, to roll pay out faster, or are you just gonna continue to take the methodical approach? Well, the first way I'll answer that is we are. We don't need any more motivation to go as quickly as possible in terms of getting something like this into the hands of our customers and to start adding value. And so that's the first piece of it. The second piece of it, you know, we looked at the what our major competitor making this acquisition as a positive. We looked at it as something that's a reinforcement of our direction that we're going. We saw that and said, "Hey, it's another proof point that we're heading in the right direction." Now, specifically, in terms of doing that via acquisition versus doing the way that Procore is doing it internally, I think there's... It's a lot of times it's underestimated the value of having something like a pay that is part of an overall process and overall ecosystem on the same platform, versus doing something like that that's a little bit more through an acquisition and needing the integration. And I think that's something that's sometimes underestimated. Yeah. And so we feel good, and we actually think that that's validation of where we're going. Definitely. Hey, we've got about 8 minutes left, so I'll turn it over to the audience, if anyone in the audience has questions. What are the couple of most important things for you to get right this year? Couple of the most important things to get right: number one, I think, is executing in our upmarket go-to-market, I think. When we think about the back part of last year and where we started to see strength in the overall economic environment and what was the most stable and where we're putting our resources, I think that's definitely one. The other piece is somewhat related to that, but also more in general, continuing to make progress and deliver value in terms of our product roadmap. Not just specifically associated with what's serving the upper end of the market, but in general, making sure that we, you know, complete our core offerings and continue to make enhancements in our core offerings, as well as to build out the entire ecosystem and continue to build out the entire ecosystem and the construction and construction ecosystem and the value that we add. We hear a lot from our customers for us to finish our swing on the core product, and so I think that's critical as well. What, what's an example of a gap there? An example of the gap we talked about, for example, on the enterprise space, where even though the core product and Project Management or Quality and Safety or Project Financials are there, a gap that we talked about is in the enterprise space, the level of configurability that's necessary in the upmarket is just very different than what we might see that's needed at the fringes in a mid-market or a downmarket. So that's a great example of something like that. Okay. I think you looked at some nuances in different markets internationally. Can you speak to what those are and kind of what the approach is there? Yeah, yeah. So, there. I'll answer that from a number of dimensions. One is, when we think about, let's say, Germany or France, which is very early stage, a nuance in terms of the stage of that business or the evolution of that business would be really focusing on brand and investments in brand recognition versus just starting off and putting sales folks on the ground, as an example. Whereas if we got some of our more developed markets in, let's say, UKI or Asia Pacific or AN Z, really, it's more about the distribution and the proportion that we put into marketing and to go-to-market, into professional services, into SEs. It's about what that mix looks like, as an example. Then another dimension would be nuances in each specific market. What's the, what's the dynamics between the different stakeholders? And often I like to use an example of, if you go to a MENA, as an example, the dynamics between the three stakeholders might be that a ctually, it might not, might be, it is, that the owners actually hold a tremendous amount of, of power in that, in the dynamics. Whereas, let's say, US or many parts of the other parts of the world, it's really the GC that, that holds that position. So that's another example of something like that. How important are interest rates for the business? Are rates just steady, or do you need them to go down for the business to remain healthy or reaccelerate? Interest rates, I think, is one factor that impacts the sentiment of our customers. And the reason I answer it that way is, one of the things that we've learned over the last 12-18 months is that we used to think that backlogs and the ability to finance the backlogs was the primary and the main driver of how our customers made buying decisions for something like a Procore. What we've discovered is that it's not just the backlogs, because backlogs have remained largely stable. It's really the sentiment of the buyer and the psyche of the buyer that impacts the buying decisions more, and interest rates are definitely going to be one of those factors. But it's not the only factor, right? The other thing that we talked about in terms of what, the way that we expect fiscal 2024 to play out, is that we talk about our customers over the last 12-18 months, largely becoming or starting to become more acclimated. Basically, what we mean by that is, adjusting, how they operate in this macroeconomic environment, of which interest rates they have to react to as well, to be able to then sustain their business. And so that's why I'm answering it that way. It's one factor. I would love it for interest rates to drop, but it's not the only factor. I want to ask about your new CRO, Larry Stack. Yeah. I think he came, he was running sales at, was it at Red Hat? Red Hat. With IBM, yeah. So he's about three weeks into his new role now. Can you talk about his initial priorities, you know, the evolution of your go-to-market organization as you're increasingly focusing on market? Yeah. So, look, Larry's been here three weeks plus a couple of days. Look, let's give him a little bit of time. Let him get his feet wet a little bit. And one of those weeks is an orientation, right? Like, I think, I think what Larry is gonna be focused on, initially, is really going to be learning about our processes, our people, our leaders, and really understanding the construction industry and spending time with our customers. Most immediately, in terms of business impact, given his background, I think he's gonna start to put his fingerprints on likely the enterprise motion and some of those larger deals, and that's also gonna dovetail into him learning about the industry and our customers as well. But I think that, you know, he'll start to put more of his fingerprints on our motions, on our business, on our organization, towards the latter part of this year, with likely a larger impact going into fiscal 2025. Look, it's week three plus, so let's let him get his feet wet a little bit. Absolutely. Yeah. Excited to see how it plays out. And then maybe the last question I have is on capital allocation. So balance sheet's really healthy, right? I think you ended the year with $634 million- Yeah in net cash. You've been inquisitive in the past. You haven't done any large M&A, I don't think, since you bought Levelset- Yeah which has been a little while now. You know, how are you thinking about areas of organic investment versus, you know, build versus buy at this time? Yeah, look, we last year was the first year that we were free cash flow positive. We will remain there from this point forward. The way I think about capital allocation relative to kind of our cash balance on our balance sheet, it all comes back to how I think about the levers as I'm managing to increasing and continuously compounding free cash flow per share. And when I think about ways to do that, obviously, growth is gonna be one of the main factors there, and considering what that looks like in terms of organic versus inorganic or M&A growth, is gonna be one of those factors. We actually haven't been that acquisitive. And so we recently acquired a company called Unearth that helps us with geolocation. It helps to round out our civil and infrastructure product offering. So that's definitely gonna be one factor. Another factor is I definitely think about how much of that capital to devote into profitability, which also feeds into free cash flow per share, and then also shareholder return in terms of managing our SBC and our dilution. Share buybacks have to be in that equation and considering what that looks like, all in the service of really going after and managing our North Star metric around the financial health of Procore, which is free cash flow per share. So that's really how I think about those factors. Perfect. That's a good spot to leave it. Thank you so much for coming out, Howard. Thanks a lot. Appreciate it. All right.