Procore Technologies Inc

NYSE:PCOR

Earnings Call Transcript 2021-Q4

[Operator]

Good evening. Thank you for attending today's Procore Technologies, Inc. FY '21 Q4 Earnings Call. My name is Salina and I will be your moderator. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. [Operator instructions] I would now like to pass the conference over to our host, Matthew Puljiz with Procore Technologies. Please go ahead.

[Matt Puljiz, VP, IR]

Thanks. Good afternoon nd welcome to Procore's 2021 fourth quarter earnings call. I'm Matthew Puljiz, VP of Investor Relations. With me today are Tooey Courtemanche, Founder, President and CEO, and Paul Lyandres, CFO. A complete disclosure of our results can be found in our press release issued today, which is available on the Investor Relations section of our website. Today's call is being recorded and a replay will be available upon the conclusion of the call. Comments made on this call may include forward-looking statements regarding our financial results, products, customer demand, operations, the impact of COVID-19 on our business and other matters. These statements are subject to risks, uncertainties and assumptions and are based on management's current expectations as of today, February 22, 2022. Procore undertakes no obligation to update any forward-looking statements to reflect new information or unanticipated events except as required by law. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Therefore these statements should not be relied upon as representing our views as of any subsequent date. We'll also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of non-GAAP to GAAP measures is provided in our press release. Additionally, we may refer to certain results as organic, which we generally define as business performance or results that exclude the recent acquisition of Levelset. However, with respect to our customer account metrics, we define organic to mean customers under Procore contracts. With that, let me turn the call over to Tooey.

[Tooey Courtemanche, Founder, President and CEO]

Thank you, Matt, and thank you, everyone, for joining us today. In the fourth quarter, we delivered excellent results and continued to make great progress towards our mission of connecting everyone in construction on a global platform. I am very proud of the work our team did by closing out the year strong, continuing to integrate our recent acquisitions, expanding the depth and breadth of our platform and as always, investing in our people and culture. Today, I'll start by providing additional color on our results and I'll share what I'm looking forward to this year and beyond. So let's dive in. Annual revenue surpassed a $0.5 billion for the first time in our history. And I very grateful to our customers and employees for getting us to this milestone. Our deep and expanding customer relationships drove this outstanding performance. On an organic basis, we ended 2021 with greater than 12,000 customers. The number of organic customers contributing more than a $100,000 in ARR grew by 32% to end the year north of 1100. We also ended 2021 with a total of 30 organic customers contributing more than $1 million in ARR an increase of over 50% from the previous year. Most of these customers initially landed with much smaller contract sizes and grew to surpass a million dollars in ARR in just a few years. This progression underscores how we are really just beginning to digitize this industry. Our customers are also heavily engaged with our platform. We now have over two million active users. These users uploaded 400 million photos, documents and inspections last year, reflecting continued growth in our platform usage. We expanded the depth and breadth of our platform adding nearly 100 new partners to our app marketplace in 2021, bringing total integrations to nearly 350 by the end of the year. Today, 91% of our customers use at least one integration up from approximately 81% a year ago. This is important because higher adoption of marketplace integrations is strongly correlated with logo retention and customer success on the platform. 2021 provided further evidence that once our customers adopt our lead leading platform solution, they stay with us. Our gross retention rate improved to 95% reflecting the value our platform brings to the industry. Our customers are not only staying with us. They're expanding. BE&K building group, a US-based general contractor expanded and deployed Procore enterprisewide after initial evaluation. They selected Procore due to our comprehensive and unified platform that allowed them to replace multiple disparate solutions, including competitors. We also added new GCs to the platform. Naval Construction is growing into new region in the US where Procore is already heavily used by owners and specialty contractors. After a competitive evaluation, it became clear that Procore was a solution that could grow with them and will enable them to best partner with their new stakeholders. Outside the US, we continue to expand internationally. [indiscernible] Construction is one of the largest global builders. They operate across several continents with unique requirements and regulations. After evaluating several systems, they chose to partner with Procore, given our flexible yet standardized platform. Procore is gaining significant momentum with owners as well. In Q4 two major multi-national pharmaceutical companies became Procore customers. The largest of these two deals relates to the expansion of their facilities to increase capacity for the development of life saving products. Their leadership identified Procore as the optimal solution to improve efficiencies while managing their increase in construction volume. And finally, Pueblo Mechanical, a US specialty contractor is pursuing an aggressive growth strategy. In order to scale, they needed to implement standardized processes across all of their subsidiaries. They chose Procore because of our robust platform and the flexibility it provides them to connect to various ERPs across their subsidiaries. You know, I personally enjoyed my time that I was able to spend with the Pueblo team and I really admire their ambition and focus. I'm not only pleased with the customers that joined us and the financial results that we delivered. I am really most proud of our ability to grow the business while maintaining the culture and partnership that sets Procore apart and we continue to be recognized for this. In November, we were named the 2021 philanthropists of the year by the United States minority contractors association. More recently, we were ranked as the number construction project management software by the JV Knowledge Construction Technology report for the fifth year in a row. And we were just named as one of the best places to work in Glassdoor's Employees Choice Awards. I am particularly proud of this recognition by our employees, as it signifies our ability to maintain our unique and values driven culture, even as we rapidly scale. So the results we delivered, the customer relationships we developed and the recognition we received reflect how well positioned Procore is to lead the construction industry in its digital transformation, changes constant and construction and in 2021, we continue to support an industry through a highly dynamic environment. Over the last two years, you've heard us and many others talk about the broader macro environment. I'd like to share our perspective on this topic. We see 2021 as a transition year from playing defense and navigating unprecedented challenges in 2020 to playing offense in capitalized on opportunities in 2022. Listen, some very real headwinds continue to impact the construction industry though, we do expect that many of these challenges will resolve themselves over time. With that said there are some favorable and lasting tailwinds with regard to Procore's business above and beyond the catalyst we've shared before. First, the hybrid working model made possible by cloud solutions like Procore is likely here to stay for some of the folks who are previously expected to be on the job site every single day and second, the labor shortage exacerbated by an uptick in early retirements has prompted an increased reliance on younger members of the workforce and this future generation of builders have expectations of using consumer grade and mobile centric technology like Procore in their work. Ultimately we believe there's enough tailwinds offsetting the headwinds that we're not any outsized positive or negative impact on Procore's performance due to external forces. As such, we are more confident than ever that we should be leaning into the opportunity. This past year was an excellent example of that. Now let's get into what we're planning for 2022 and beyond. Look up in doing this for 20 years and I firmly believe that we're entering one of the most exciting and transformative chapters in Procore's history. We're starting the year confident with an exceptional caliber of talent and a brand and a platform that have never been stronger. So here's what's top of mind for me is a look towards the future. First, the opportunity is massive and we have multiple avenues for continued growth ahead of us. You've heard me say this many times that we're operating in a truly massive global market, that's significantly under-digitized and underpenetrated. I believe that nothing will illustrate this more clearly than if we zoom in on the US market. Look in 2021, the US construction industry was approximately $1.5 trillion in annual construction volume. Keep in mind the majority of the spend flows through all three stakeholders, the owner, the general contractors and the specialty contractors. That means that we estimate the true opportunity for Procore in the US is approximately $3.5 trillion. So when you drill down on just US general contractors, and then you drill down even further to US enterprise general contractors, there's about 2,500 logos in this cohort alone. These 2,500 logos represents close to $900 billion in annual construction volume of which we are just under 25% penetrated. This cohort is thought to be the most digitized and we still have so much more runway. So if you take a step back and look at it, the broader spectrum of customer sizes, all three stakeholders and geographies beyond the US, it becomes abundantly clear just how large Procore's global opportunity actually is. In fact, we believe that we have single digit construction volume penetration across just the markets we're in today. It is really amazing when you think about it like that. We also continue to see a lot of growth potential in cross-selling additional products to our existing customers. Our newer products outside of project management and quality and safety, continue to be well received by our customers. Nothing's more important than managing time and money construction and I'm continually hearing that our approach to financial is revolutionizing how construction is done for all stakeholders. Currently 59% of our customers use financial management and more than 75% of our 1,106 figure customers have adopted at least one product within this category. We expect to see this adoption in even further as the impact of shortages and delays likely lead more customers to prioritize risk mitigation and seek better control over their project financial. Second, the power of our connected platform continues to be one of our differentiators. As Founder and CEO, my focus is always first and foremost on our mission to connect everyone in the industry, our customers, stakeholders and collaborators on a global platform. So I spend a lot of my time with our product team to ensure we're continuing to lay the foundation to truly connect all people, systems and data in one place. The surface area of all our products is very large, but the real power comes from the interconnectivity of our platform. This interconnectivity not only helps our customers run better projects and businesses, it enables us to develop new ways to connect and serve the industry. For example, last quarter, we announced that we're building the Procore construction network. This network would not only give the industry new ways to find more reliable partners, but it'll give us the ability to better convert collaborators into customers and expand and accelerate our existing flywheel. Many of the products on our platform are interconnected, allowing our customers to seamless move from each phase of the construction process in one place. So typically by making an enhancement to one product, we by extension are enhancing adjacent products. For example, our customers use our bidding product to solicit and award bids during pre-construction. If the accepted bids are automatically converted into contracts within our financial product, which are then subsequently converted into the budget against which actual performance can be compared. The more products a customer uses, the more automation and synergies they benefit from. Third, we are laying the groundwork for longer term strategic initiatives and beginning to build out our future FinTech solution. A single global cloud-based platform generates a massive amount of data that we can harness to help our customers run better businesses. It's important for investors to remember that many folks involved in construction manage highly complex, high risk businesses with low margins and challenging cash flow dynamics. That's why Procore is committed to the right FinTech solutions to help our customers manage risk and accelerate growth and ultimately run better businesses. Back in September, we announced our intent to acquire Levelset and shared the strategic value it bring to our long term initiatives. Since closing the acquisition in November, our teams have begun to not only formulate our plans, but also to operate against them. I look forward to updating you later this year on our progress. I do want to stress that this journey is going to take years and it'll require investment, experimentation and thoughtful execution. As a major shareholder, I am committed to getting this right and I am confident that this will benefit both the industry and my fellow long term shareholders. Finally, none of this would be possible without the continual investment in our people and culture. A big focus of mine in 2022 and beyond will be to continue developing world class leaders, engaging our people and scaling our organization alongside our business especially as we continue to grow. Our healthy culture is felt by our customers every single day and it's one of the reasons why we can provide them with unparalleled partnership and service because we never stop working to ensure everyone at Procore is aligned with the needs of our customers. So there you have it. I founded Procore 20 years ago to digitally transform the industry that I love. I am so proud of what we have accomplished to date, but we're really just getting started in our journey of building an even broader platform to serve an evolving industry. What really gets me excited is the opportunity to deliver an elegant combination of software and FinTech solutions that will ultimately address the industry's biggest priorities of managing risk and accelerating growth. This industry is so special. The people that are quite literally building the world around us deserve a best in class solution to perform their life's best work. With that, I'll hand it over to Paul,

[Paul Lyandres, CFO]

Thanks Tooey, and thank you to everyone for joining us today. As Tooey described, Q4 was a very strong close to an important year for Procore. I'm incredibly proud of our performance in 2021 and I'd like to share some specific highlights as I reflect on our fourth quarter and full year. Revenue in Q4 was $146 million up 33% year over year and up 30% organically when excluding Levelset's $4 million contribution. Non-GAAP operating margin was negative 13% in Q4 and this includes approximately 130 basis points of headwind from Levelset. As we shared during our Q3 earnings call, our organic operating margin declined meaningfully from Q3 to Q4 due to an acceleration of attractive growth investments. I'll share more on how investors view our investment levels and run rate expenses in a moment. Turning to the balance sheet metrics, short term deferred revenue in Q4 was $302 million up 41% year over year. Total RPO in Q4 with $603 million with short term RPO representing approximately 70% of that and growing 35% year over year. In addition to strong new business and renewal performance, our backlog metrics benefited from better invoice duration mix, as well as earlier renewal timing and invoicing. This dynamic contributed to why short term DR is growing faster than short term RPO. It's worth noting that Levelset's revenue contribution came in higher than our guidance primarily driven by our early adoption of the new purchase accounting standard issued by the FastBee late last year. This new standard allows acquirers to essentially forego the deferred revenue writedown that was originally factored into our guidance. We no longer expect any deferred revenue writedown from Levelset or future acquisitions given our early adoption of this new standard. Taking a step back, our strong Q4 results are a reflection of several positive trends we saw in the year. You heard Tooey describe 2021 year as a transition year for the industry and the business. Therefore it's important not to look at 2021 in a vacuum, but rather as part of a broader multi-year backdrop. I'd like to share some color on what this multi-year backdrop looked like for us, by going back to 2020. During 2020, the construction industry and our business faced unprecedented challenges. Though we chose to continue investing in R&D, due to the pandemic sales and marketing growth decelerated meaningfully. Our strategy was to remain resilient through the pandemic's toughest periods on construction while widening our products advantage. This led to our 2020 P&L showing substantial year-over-year margin improvement, approximately 20 percentage points and durable revenue growth stemming from our excellent 2019 performance. Entering 2021 we anticipated that the industry's recovery would begin and wanted to best position ourselves to capitalize on that. Across the organization, we identified numerous attractive opportunities to pull forward 2022 hiring into 2021. We continued investing in R&D while reaccelerating sales and marketing investments. We ended the year with over 2,800 employees of which over 1200 are within sales and marketing and grew headcount within this part of the organization by 47% year-over-year. These investments ultimately translated to accelerated revenue growth throughout 2021 and tangible benefits to our business. Here are a few notable highlights. First, this is a very strong year for our financial management offerings. This product category is our second biggest after project management and is one of our fastest growers. Second, we continue to see the strength of our broader platform strategy with 71% of total ARR generated from customers using four more products and 37% generated from customers using six or more products. This is up 300 and 500 basis points respectively from 2020 and is a testament to the value customers are obtaining from the platform as a whole. Third, our growth benefited from continued improvement in renewal dynamics and improved churn, which is notable given the increasing renewal book and total book of business. Finally, our international business continued to strengthen as we entered into the UAE and Singapore and began preparations for France and Germany's launch later this year. In Q4, international revenue grew 56% year over year, and now comprises 15% of total revenue up 200 basis points year over year. As we enter 2022, we are expecting another year of investment in the business, which will lead to a second year of declining operating margins and make 2022 look outsized from a spend perspective. However, these investments are providing returns in both the near and long term, helping to drive durable outer year growth and fuel longer term Fintech solutions while also enabling us to deliver operating margin expansion beginning in 2023. With that backdrop, here's our guidance for full year and Q1 2022. for the full fiscal year 2022, we expect revenue between $661 million and $666 million, including a contribution of $25 million from Levelset and representing total year-over-year growth between 28% and 29%. Non-GAAP operating margin for the year is expected to be between negative 15% and negative 16% and includes a margin headwind of 400 basis points from Levelset. For the first quarter of 2022, we expect revenue between $149 million and $151 million representing year-over-year growth between 31% and 33%. Q1 non-GAAP operating margin is expected to be between negative 15% and negative 16%. Finally regarding free cash flow flow margin, investors can expect a year-over-year trend line that is similar to that of our operating margin outlook. In summary, we delivered very strong results to end the year. We're more bullish than ever on the long term opportunity in front of us. As we enter 2022, we believe we are making the right investments to fuel continued growth and build towards our longer term vision. I'd like to close out by again, thinking our customers, the construction industry, our partners, employees, shareholders, as well as the communities we serve for giving us this opportunity. Now let's turn it over to the operator to begin the Q&A.

[Operator]

[Operator instructions] The first question comes from Brent Thill with Jefferies. Please proceed.

[Unidentified Analyst]

Hi, this is [indiscernible] on for Brent Thill. Thank you for taking my question. Tooey maybe first one for you, wanted to ask about, you mentioned the construction demand environment and playing off in 2022. Could you talk a little bit about the dynamics impacting the industry from inflammation to labor tightness and how that will impact your outlook in 2022?

[Tooey Courtemanche, Founder, President and CEO]

Absolutely [ph] so yeah, no, I'm glad you asked that question, because that is probably the number one question that people ask me. So the way we look at it is, is pretty simple. First we look at the fact that the industry is facing some significant headwinds, like I just said a few minutes ago and that is around the cost of commodities, the challenge with getting actually materials and equipment to job sites with all the supply chain challenges as well as inflation. All of those things are creating a headwind for the industry. Before I move into the tailwinds, I do want to assure you that I talk to our customers every day and they all remain very optimistic about the future. But beyond that, we also see that we have these tailwinds and the way I look at it is the there's like a from today's vantage point, there's really a net neutral impact on Procore. The tailwinds are real. These are the overall digital transformation and these new ideas around people working remote now having to use a platform like Procore and the fact that the older generations leaving the industry faster than we've anticipated. So those are all tailwinds that ultimately net out to be against the headwinds to be very net neutral in how we look at the world. The reason I remain so highly optimistic is that these tailwinds that I keep talking about, they are not going away. They are going to be at this for the long haul. The fact that digital transformation's only going to accelerate across this, this $14 trillion opportunity over time and then we look at the headwinds, we really do think that those headwinds will work themselves out to some degree or another over time. So, over the long run, I remain very optimistic about the opportunity ahead of us but don't want to discount the challenges that we're faced today.

[Unidentified Analyst]

Got it. And maybe a quick one for Paul, if I could. Thank you for disclosing those additional metrics in terms of the number of customers using four plus and six plus products. Could you maybe tell us how to think about the contribution to growth from like new customers versus existing customers and your expectations for the future?

[Paul Lyandres, CFO]

Yeah, look, I think we continue to believe that there's a massive opportunity within our existing install base. And that's a reflection of what you heard us talk about in the earning script around continue to see the platform payoff and continue to see further pen with our customers. At the same time Tooey talked a lot about where we are within just the overall market opportunity in his comment to single digit penetration and so today we continue to see our revenue being driven by a healthy combination of both of those. And when we forecast out in the future, we don't foresee that changing. We have tremendous opportunity that still remains within our install base our new logo, and we're pretty focused on going after both.

[Unidentified Analyst]

Got it. Perfect. Thank you.

[Operator]

Thank you. The next question comes from Brent Bracelin with Piper Sandler. Please proceed.

[Brent Bracelin, Piper Sandler]

Thank you for taking the question and good afternoon. Tooey we'll start with you, impressive here to see the highest number of new customer ads, I think in two years also putting up the highest billings growth in two years, how much of this acceleration would you attribute to improving conditions after this really challenging 2020 versus more company specific share gains and these digitization tailwinds really kicking in?

[Tooey Courtemanche, Founder, President and CEO]

Well, Brent, great to hear your voice. It's hard to parse them apart, frankly. I will say that we -- when we look at what's happened over the last say three years we do realize that we are returning to a state of normalcy. So things are reverting back to how they were pre COVID in a lot of ways. However we are facing, like I mentioned, these headwinds that might not have been there before. But yes, the digital transformation acceleration is something that we're seeing and we're seeing it in lots of places. Like for instance, I'm really proud of our performance with our international book of business and the fact that it grew 56% last year. We are able to see the global market opportunity as being so much bigger than the US market and we're actually seeing the performance there. So lots of bright spots. We're also seeing a lot of bright spots around adoption of our financial products. They continue to sell very, very well across the board to all of our stakeholders. So I wish I could tease it apart, but it's hard to say I would -- I think it's a combination of both, but over time I think these tailwinds are going to pay off and I think our ability to execute just gets better and better over time with this opportunity. So I'm bullish on both fronts.

[Brent Bracelin, Piper Sandler]

Got it. And then quick follow for Paul in short term RPO, particularly strong this quarter, I think north of $6 million sequential ad short term RPO accelerated 36%. Could you just maybe compare, contrast the backlog of the business as it stands today and your visibility into this year versus maybe where you were a year ago? Any thoughts on just the durability and visibility you have in the growth would be helpful here?

[Paul Lyandres, CFO]

Yeah. Look, I think the call out short term RPO is the right one. As we talk to investor, that is the metric we would point you to as the closest proxy for how to think about our growth go forward. I would call out, we shared that our short term RPOs up 35% year over year. If you back out the impact of M&A, that would actually get closer to 33%. And so, ultimately as we think through our guidance in the short term RPO, you think those are good numbers to try and get it against when you think about kind of growth go forward. And as I hope you've taken from our earnings call so far, we're very bullish about the opportunity ahead.

[Brent Bracelin, Piper Sandler]

Great. Great to hear and thanks for the color. Thank you.

[Operator]

Thank you, Brent. The next question comes from DJ Hines with Canaccord. Please proceed.

[DJ Hines, Canaccord]

Hey guys congrats on the strong results. Tooey, I really appreciate the market penetration color, especially in the enterprise GC market. I get that question. My follow up there would be if you guys have 25% of construction spend in that most penetrated market, the other 75%, how much is owned by competitors versus being true white space, right? And if this end of the market is more replacement, like what's typically the catalyst that needs to happen for a prospect swap out an incumbent.

[Tooey Courtemanche, Founder, President and CEO]

Yeah. So when we focus in on the, and I appreciate you calling that out because we really did want to create an example of how big this opportunity is at the US enterprise GC market. So when we look at that particular segment, when the customers that we are going after in that market tend to be on legacy solutions that they have yet to replace and they tend to have been old school ERP client server type applications that have some bolt-on project management tools for instance and they just haven't made the leap yet to come over. But actually in a lot of cases, we actually will have a percentage of that customer's business already be it a owner's mandate that we're working with an owner that wants them to use Procore or they may be running us in a division within their company. So we generally are displacing some legacy solution and the way we look at it in general is there's so much opportunity ahead of us because of this. Like I said, with only 25% penetration, this is our most digitized market that we actually serve, which leads us to be very, very optimistic about the global opportunity as the rest of the global construction market actually starts becoming more and more digitized. So yeah, lots of opportunity and I do want to assure you because people ask this question too, which is, this is not a product market fit challenge, our product works great across the enterprise. It's a time to adoption challenge, which is the longer our products have been to market, the longer we've been working with customers, the more they're going to adopt. So it's just for us, it's green space for us to capture from now and into the mid and the longer term.

[DJ Hines, Canaccord]

Yeah, that's great to hear and then a follow up for Paul. So 47% headcount growth in sales and marketing in '21. I don't know if these numbers are in the filing, but if we looked at sales and marketing headcount growth over a two year period, what would that kind of look like? And then the follow up would be like what's contemplate in the margin guide in terms of sales and marketing headcount growth in '22.

[Paul Lyandres, CFO]

Yeah, I think that the thing I'll actually point you to and that it's important to take away is if you look at that 47% number, it is reflective of the Levelset acquisition as well. And so if you want to think about sales and marketing on an organic perspective, it's closer to the low thirties. In general, as we talked about 2020 was really the biggest slowdown for us in sales and marketing growth. I don't have the numbers off top hand for '21 to '22, but I would tell you that we have expect that those numbers will normalize and start to align closer and closer with revenue growth as we get through this catch period of kind of that three year window I talked about.

[DJ Hines, Canaccord]

Yep. Yep. Okay. Makes sense. Thanks guys.

[Operator]

Thank you, DJ. The next question comes from Kash Rangan with Goldman Sachs. Please proceed.

[Kash Rangan, Goldman Sachs]

Hi, thank you very and much. Congratulations on a very nice end of the year. Tooey I is encouraged to cure some of the commentary that you've provided. One was net new customer growth was pretty significantly stronger in the quarter than what we had expected. I'm curious if we could parse out, how much of that is because of I know that there are headwinds, which you acknowledge, which we appreciate, how much of that is real improvement in the fundamental of the business versus maybe customers that came through the acquisition. Also, secondly, very intrigued by a commentary on FinTech. I don't think you formally talked about this particular product line. Can you just take a step back for us and explain what is the big problem that construction industry faces from a payments perspective and what is the uniqueness of what Procore can do and what kind of impact you're having on your financials, maybe that could be handled by Paul. Thank you so much. Yeah.

[Paul Lyandres, CFO]

Yeah, Kash. Great to hear your voice. Well let me just clear the air on the first question or after that. We are not getting any contribution from M&A on that front. So this is the success that we're seeing is all is based on the fundamentals of the business that you know, so well. But you know that I will love to talk to you about these FinTech businesses because this is an area where I'm really passionate. Let me just start by saying Procore is celebrating our 20-year anniversary. So I'm going to shamelessly plug our 20 year anniversary, because I think it's really, it's a fun one for Procore. We've been in -- we've been providing solutions to this industry for those two decades and if you think about what we do for the industry, we're really in helping our customers manage risk, right? So project management is really risk management and so we've been doing this for a long time and we realized over the years that not only are we providing all this risk management solutions to the industry, but because we're a platform we're able to capture all of this data and trust me a tremendous amount of data around project risk and so we realized that we can reflect that data back into insights to our customers today to allow them to run better bit. But we also realize is that there's other services that the industry needs in order to be successful. So we now are getting really good at understanding how where risk lies in construction. So the way we're looking at 2022 is, is that we're building the foundation for these FinTech businesses around creating risk profiles that allow us to better identify how we can do things around, let's say material financing, which is one of the areas where we're interested in looking and we're pursuing. How do we know who a good material finance customer could be? Well, we know where risk lies and so we can put together these risk profiles. And then on the insurance side, all of this is related to risk. So we can put together risk profiles on folks that could allow them to purchase insurance for less money than they're paying today because we can help them by knowing where risk lies. So all of the things that we're working on now are building this foundation and then over the long run, which is going to take some time as we experiment through 2022 and beyond, we'll be able to deliver on these new FinTech businesses, but it is a multi-year journey. But tell you, what's really exciting about it to me, Kash is I'm seeing fingers on keyboards every day, delivering on this and it's really, really exciting and I know you asked about payments, should we? I believe didn't you as one of the Fintechs, maybe not, but it's just the other, it's the other one -- I didn't yeah, you did. So it's just the third area where we are really encouraged As you know, we acquired Levelset. We made the announcement in September. We actually closed the in November and a lot of the things that they're working on are helping us on the compliance side of financial management, which actually gets us closer to being able to deliver on payments. And on that front alone, we are also making headway again, it's a multi-year journey, but we're actually -- we're actually seeing some progress on our end. And we'll talk more about as we, how things to share, but it's all very, very exciting.

[Tooey Courtemanche, Founder, President and CEO]

Yeah. And then maybe just to round out on the couple of other points specific to myself, to reinforce the customer account piece Kash as Tooey said, there's no M&A inclusive in that. And if anything, frankly, the headwinds that, we talked about on the macro front still do persist largely for the SMB. So it's important to note, as we have talked about in the last quarter that customer count actually still faces some degree of a headwind largely in the SMB. And it's why you see such a big disparity in the growth rates between our total customer count and the 100 K plus customer. On the margin impact associated with some of the FinTech investments that Tooey just spoke about, I point you to where we talk about the headwind associated with the Levelset acquisition. We talk about how it's 400 basis points of headwind to our overall guidance. That is an area where we are looking at that acquisition as an acceleration of these investments and a big part of that dollars that we're spending with the Levelset team is going deeper on this data foundation and on start to experiment and really invest in these FinTech solutions and so that's a place I would point you to think about the margin impact.

[Kash Rangan, Goldman Sachs]

Got it. So Paul, these investments in calendar '22, should we expect a positive outcome in calendar '23? Because you conservatively rightly so, you're planning -- you're guiding to slower revenue growth in calendar '22 versus 2021, but should we expect that to reverse scores as a result of what could be positive effecting the investments? That's it for me? Thank you so much and happy 20th anniversary.

[Paul Lyandres, CFO]

Hey, thanks Kash. We think across the spectrum of the investments we are making across international product, these various areas that we're going to be able to sustain durable growth in the outer years. I would not tell you or anyone on this call to model in direct revenue impacts associated with these FinTech investments, anytime in the foreseeable future.

[Operator]

Thank you, Kash. Next question comes from Brian Schwartz with Oppenheimer. Please proceed.

[Brian Schwartz, Oppenheimer]

Oh yeah. Hi. And I had my congratulations to a real nice finish to the business for the year. And thank you for taking my questions. Tooey, I wanted to circle back. You mentioned in your opening commentary, you talked about the structural changes that the pandemic has unleashed on the end mark. Specifically, you talked about the new hybrid work model and the technology demands of the younger workers in the labor force. The question I wanted to ask you, maybe in your conversations or you look at the pipeline just specifically for these structural changes, how much of this new investment cycle has taken place, or maybe saying it another way, how much of this new investment cycle do you think is still out there in the end market?

[Tooey Courtemanche, Founder, President and CEO]

That's a tough one. So Yeah, I don't know. Maybe Paul, do you have any,

[Paul Lyandres, CFO]

Well, can you elaborate what you mean investments in this cycle? I'm not sure I follow exactly what you mean that Brian.

[Brian Schwartz, Oppenheimer]

Yeah, maybe more directly. I think there's a big debate around pull forward to demand and from the structural changes that got unleashed, from the pandemic, now we're in the third year of the pandemic. So just trying to see how much of that end market has already made these investment versus how much is, is still left out there to go. Thanks.

[Tooey Courtemanche, Founder, President and CEO]

Got it. Appreciate the clarity there, Brian. Yeah, I think we are actually one of those industries that had the opposite effects. We did not benefit from pull forward. As we think through the structural dynamics that TUI was referencing earlier, we see those as long term tailwinds things like digitization picking up in this industry. So we pointed to, we're still single percent penetrated here. This market has a ton of runway and really what COVID has done is more brought to light the need to digitize for these stakeholders who otherwise might have sat on the sidelines longer. We do not believe that has resulted in a pull forward in any sense,

[Brian Schwartz, Oppenheimer]

Thanks Paul, for that color. And then the one follow up. I actually had it for you unless Tooey wants to take it. You did mention qualitatively that you saw improvements in the net revenue retention number. And I was just wondering if you could just provide any clarity or any call on how much of that is coming from increasing spend, from the existing customers versus those customers adding the new products that you've disclosed. Thanks.

[Tooey Courtemanche, Founder, President and CEO]

Yeah. It's a combination of both. It's why we, we went ahead and wanted to speak to the kind of additional growth we've seen in the four and six customer penetration. It's hard for us to suss it out specifically as these deals. In many cases, customers will come in and they'll expand volume while also buying additional products. At the same time, we look at really that adoption of the products and, and overall are very pleased with the ability to further penetrate into the platform and think there's a lot more runway and that we'll continue to see construction volume being a driver of expansion, but at the same time, we will continue to see our further and further push into expanding wallet chair also help contribute to that growth.

[Brian Schwartz, Oppenheimer]

Great. Thanks for taking my questions and congrats on real nice finish to the year.

[Operator]

Thank you, Brian. The next question comes from Adam Borg with Stifel. please proceed.

[Unidentified Analyst]

Hi, this is Austin [ph] with ion Adam Borg Thank you for taking the question do for tooi. You know, pro's historically on the market via a direct footprint and just given the start of the year, I was curious, like, how are you thinking about the opportunity for building out the channel, especially as you'd love to increase your international presence in coming years?

[Tooey Courtemanche, Founder, President and CEO]

Yeah, absolutely. So by the way I appreciate the question Austin. The when we look at any international expansion, our go to market strategy will look very closely at what the buying patterns are of how our, how the, you know, the prospects there want to buy software. And so we're very attuned to the fact that some markets are very channel heavy and some markets are, you know, expect more direct sales. So it really depends on which market you're talking about as to, you know, how we're gonna look at it. But ultimately what ends up happening is we will generally have a direct sales force. That's augmented by channel partners. And so it's, it's a big part of our international go to market, but yeah, so it's, it's really market dependent, frankly.

[Unidentified Analyst]

Great. That's it for me? Thank you.

[Operator]

Thank you. The next question comes from Saket Kalia with Barclays. Please proceed.

[Saket Kalia, Barclays]

Okay, great. Hey Tooey, Hey Paul, thanks for taking my questions here. Two, we maybe, Hey to we maybe just start with you. You know, I think it was mentioned earlier, but it, it feels like PROCO financials has been doing, doing really well lately. And so I was wondering if you just talk a little bit about what sort of adoption do you have within the customer base for financial specifically and, and who are you displacing, or what you're displacing there when you make that sale?

[Tooey Courtemanche, Founder, President and CEO]

Well, the, so thank you for, yes, we have been we've been very bullish on, on our financial products cuz they have been doing very well and they they've been very well received. So we have we're very fortunate that our financial products are needed by owners, general contractors and specialty contractors. And we, we like to think of our financial product lines as being somewhat of an industry defining solution. Prior to Procore, you would do a lot of your financial management in Excel as a project manager. And then you would VPN into your ERP system and try to make sure that the invoices that you're keeping track of from the job site trailer are making it into the ERP. It was very complicated and it was very prone to have mistakes entered into the systems. And so ultimately what we wanted to do was we wanted to bring the, what Procore so good at is bringing the concept of collaboration workflow and, and ease of use to the tools that the folks in the job site needed in order to get all of the financials under control and then connect to the back office ERP solutions through ERP connectors. And we've been, and this, this has resonated very well again with all segments of the market all stakeholders. In general, it just acknowledges the fact that construction management is done in the job site trailer and financial management for the corporate is done in the, in the corporate office. And we bridge that gap really, really nicely. And it's being very well received.

[Saket Kalia, Barclays]

Got it, got it. That makes a lot of sense. Paul, maybe, maybe for you France and Germany, I, imagine are really interesting markets. I guess if, if you were to sort of look at the equation for, for the market opportunity there in terms of construction volume and whatever you want to call it sort of take rate or, or price, how do you sort of think about that, calculus and sizing the those, those terms either collectively or individually?

[Paul Lyandres, CFO]

Yeah. Appreciate the question. I think that, when we think about our international opportunity, it is important to note that construction's a little different than other markets. We really do have to look at, a number of factors from GDP population growth. When we, we think about the impacts that a market will have when we expand into it, I think it's, it's no surprise that France and Germany are among, if not really the largest markets we see in continental Europe today and represent hundreds of billions of dollars of construction volume. We think we're a great fit in those respective markets and have a, a pretty big, healthy opportunity to build a multi hundred million dollar opportunity within just those regions. And so while it's early days, and while we do believe that, international will be a, a big opportunity to continue to grow in we think that France and Germany represented an awesome opportunity ahead, and one that we think we can build really big businesses in.

[Saket Kalia, Barclays]

Got it. Paul, if I could squeeze in the housekeeping question, if that's all right and, and apologies, I joined late, so I'm not sure if this was asked, but I know we talked about organic growth on revenue. And I think also on CRPO, just to make sure the questions asked, did we see anything about how much acquisitions add to the deferred revenue balance?

[Paul Lyandres, CFO]

We did it it's about two points.

[Operator]

Thank you socket. The next question comes from Jason Celino with KeyBanc , please proceed.

[Jason Celino, KeyBanc]

Great. Thanks bid me in maybe Tooey, really interesting to hear your comments on the hybrid model for construction, but maybe for those of us who haven't necessarily set foot on a construction site, what are some of the roles that we're maybe in the trailer that are now moving to hybrid and maybe what, what solutions is?

[Tooey Courtemanche, Founder, President and CEO]

Yeah, I'm glad you asked that Jason, because yeah, we were not super clear on that one. So, so there's several jobs that were kind of historically done in the job site trailer that don't necessarily have to. And so you think about folks that do bidding on projects or pricing on projects. Those folks can do that from pretty much anywhere. And, and so those are, estimators for instance also the [indiscernible] group, which is the visual design group which will be doing updates to models and or updates to designs don't necessarily have to be in the job site trailer every single day to get their job done. In fact, I've heard stories time and time again, about how much more productive they are when they're able to work from home, kind of in isolation, and then come into the job site trailer, a day or two a week. And it's very similar Jason, to what I think we all experience in the work world is there are some folks that just are required to have kind of head space and heads down space. And so those are the folks that, that, don't necessarily have to be there. Now, if you're pouring concrete, of course, you're not gonna do that from your living room. So you got to, there's certain jobs that actually have to be there every day, but then there, there are certain folks that don't.

[Jason Celino, KeyBanc]

Perfect. No, that's a good explanation. And then a quick, follow up on the sales hiring, Procore really didn't turn on the sales style until Q2 last year. So my question is, how long does it typically take for a salesperson to contribute or reach for productivity?

[Tooey Courtemanche, Founder, President and CEO]

Yeah. unfortunately as with many things, Jason, it's not a one size fits all answer. if you go back and think about our go to market approach, we have customers who pay us single digit thousands of dollars up to customers who pay us millions of dollars and the, motions you would expect to see from a sales rep are pretty consistent with the, the size of the customer more than anything. And so when you look at reps who are, very much focused on the SMB you're talking months, and when you start to talk about enterprise reps, it can be quarters, but nothing atypical in terms of our ramp time relative to other software companies.

[Operator]

Thank you, Jason. That concludes today's Q&A session I would like to pass the conference back to the management team for closing remarks. Matt Puljiz Thank you everyone. Talk to you soon.

[Operator]

That concludes the PO pro core technologies, Inc. F Y 21 Q4 earnings call. Thank you for your participation. You may now disconnect your line.