TechDogs-"Procore Announces Second Quarter 2023 Financial Results"

Software Development

Procore Announces Second Quarter 2023 Financial Results

By Business Wire

Business Wire
Overall Rating

CARPINTERIA, Calif.--(BUSINESS WIRE)--$PCOR--Procore Technologies, Inc. (NYSE: PCOR), a leading global provider of construction management software, today announced financial results for the second quarter ended June 30, 2023.

“I’m proud of the results we delivered this quarter as we continued to work toward our vision of improving the lives of everyone in construction,” said Tooey Courtemanche, founder, president and CEO of Procore. “We’re delivering solutions that help the construction industry find valuable efficiencies in an uncertain environment. I am excited to showcase what digital and cultural transformation means for the industry at large at Groundbreak 2023.”

“Although the demand environment remains challenging, we delivered solid results in the second quarter, highlighted by continued growth on the topline and improving operating leverage,” said Howard Fu, CFO of Procore. “Looking ahead, we remain focused on our pursuit of efficient growth and are on track to reach positive and sustainable free cash flow this year. We look forward to sharing more at our upcoming Investor Day.”

Second Quarter 2023 Financial Highlights:

  • Revenue was $229 million, an increase of 33% year-over-year.
  • GAAP gross margin was 81% and non-GAAP gross margin was 85%.
  • GAAP operating margin was (26%) and non-GAAP operating margin was (1%).
  • Operating cash outflow for the second quarter was $12 million.
  • Free cash outflow for the second quarter was $24 million.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Recent Business Highlights:

  • Added 615 net new organic customers in the second quarter, ending with a total of 15,704 organic customers.
  • Achieved a gross revenue retention rate of 94% in the second quarter.
  • In the G2 2023 Summer Report, Procore maintained its #1 ranking across 11 categories, including construction project management, jobsite management, bid management, construction estimating, construction accounting, and more.
  • Announced partnership with The B1M, a leading construction video channel, to raise awareness about mental health in the construction industry through a global campaign, "Get Construction Talking."

Third Quarter and Full Year 2023 Outlook:

Procore is providing the following guidance for the third quarter and full year 2023:

  • Third Quarter 2023 Outlook:
    • Revenue is expected to be in the range of $232 million to $234 million, representing year-over-year growth of 24% to 26%.
    • Non-GAAP operating margin is expected to be in the range of (6%) to (5%).
  • Full Year 2023 Outlook:
    • Revenue is expected to be in the range of $921 million to $924 million, representing year-over-year growth of 28%.
    • Non-GAAP operating margin is expected to be in the range of (4.5%) to (4%).

A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future and cannot be reasonably determined or predicted at this time, although it is important to note that these factors could be material to Procore’s future GAAP financial results.

Quarterly Conference Call

Procore Technologies, Inc. will hold a conference call to discuss its second quarter results at 2:00 p.m., Pacific Time, on Wednesday, August 2, 2023. A live audio webcast will be accessible on Procore's investor relations website at http://investors.procore.com.

September 20, 2023 Investor Day

Procore Technologies, Inc. will host its 2023 Investor Day on Wednesday, September 20, 2023 from 9:00 a.m. to 12:00 p.m., Central Time. The event will be held in-person in conjunction with Groundbreak 2023, Procore’s leading construction technology conference, taking place at the McCormick Place Conference Center in Chicago, Illinois.

A live webcast of the event will begin at 9:00 a.m., Central Time, on September 20, 2023. Interested parties can access the webcast by registering here. A replay of the webcast will also be made available on Procore's investor relations website at http://investors.procore.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, about Procore and its industry that involve substantial risks and uncertainties. All statements in this press release, other than statements of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to future events or future financial or operating performance, and may be identified by the use of words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would,” or the negative of these words, or other similar terms or expressions that concern Procore’s expectations, strategy, plans, or intentions.

Procore has based the forward-looking statements contained in this press release primarily on its current expectations and projections about future events and trends that Procore believes may affect its business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors that could cause results to differ materially from Procore’s current expectations, including, but not limited to, our expectations regarding our financial performance (including revenues, expenses, and margins, and our ability to achieve or maintain future profitability), our ability to effectively manage our growth, anticipated performance, trends, growth rates, and challenges in our business and in the market in which we operate or anticipate entering into, economic and industry trends (in particular, the rate of adoption of construction management software and digitization of the construction industry, inflation, and challenging geopolitical conditions), our ability to attract new customers and retain and increase sales to existing customers, our ability to expand internationally, the effects of increased competition in our markets and our ability to compete effectively, our estimated total addressable market, and as set forth in Procore’s filings with the Securities and Exchange Commission. You should not place undue reliance on Procore’s forward-looking statements. Procore assumes no obligation to update any forward-looking statements to reflect events or circumstances that exist or change after the date on which they were made, except as required by law.

Non-GAAP Financial Measures

Procore believes that the use of certain non-GAAP financial measures as described below, when taken collectively, is helpful to investors because it provides consistency and comparability with past financial performance, and may assist in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. These non-GAAP financial measures are not prepared in accordance with U.S. generally accepted accounting principles, or GAAP.

Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Expenses, Non-GAAP Loss from Operations, Non-GAAP Operating Margin, Non-GAAP Net Income (Loss), and Non-GAAP Net Income (Loss) per Share: Procore defines these non-GAAP financial measures as the respective GAAP measures, excluding stock-based compensation expense, amortization of acquired intangible assets, employer payroll tax related to employee stock transactions, acquisition-related expenses, and the income tax effect of non-GAAP items. Non-GAAP gross margin is the ratio calculated by dividing non-GAAP gross profit by total revenue. Non-GAAP operating margin is the ratio calculated by dividing non-GAAP loss from operations by total revenue. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Non-GAAP diluted earnings per share is computed by giving effect to all potential weighted average dilutive common stock equivalents outstanding for the period, including options to purchase common stock, restricted stock units, and shares to be issued pursuant to the employee stock purchase plan. The dilutive effect of outstanding awards is reflected in non-GAAP diluted earnings per share by application of the treasury stock method.

Stock-based compensation expense includes the net effects of capitalization and amortization of stock-based compensation expense related to capitalized software and cloud-computing arrangement implementation costs. Stock-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of the compensation provided to our employees. Because of varying available valuation methodologies, subjective assumptions, and the variety of equity instruments that can impact a company’s non-cash expenses, we believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for meaningful comparisons between its operating results from period to period. The expense related to amortization of acquired intangible assets is dependent upon estimates and assumptions, which can vary significantly and are unique to each asset acquired; therefore, Procore believes non-GAAP measures that adjust for the amortization of acquired intangible assets provide investors a consistent basis for comparison across accounting periods. The amount of employer payroll tax-related items on employee stock transactions is dependent on restricted stock unit settlements, option exercises, related stock price, and other factors that are beyond Procore’s control and that do not correlate to the operation of the business. When evaluating the performance of its business and making operating plans, Procore does not consider these items (for example, when considering the impact of equity award grants, the company places a greater emphasis on overall stockholder dilution than the accounting charges associated with such grants). Additionally, acquisition-related expenses, such as transaction costs and retention payments, are expenses that are not necessarily reflective of operational performance during a period. Procore believes that the exclusion of acquisition-related expenses provides for a useful comparison of our operating results to prior periods and to its peer companies, which commonly exclude these expenses. Income tax benefits relate to the release of a portion of our valuation allowance as a result of deferred tax liabilities recorded related to available sources of income to realize our deferred tax assets. We exclude the income tax effect associated with certain of our non-GAAP financial measures because we believe that excluding this provides meaningful supplemental information regarding our operational performance. Overall, Procore believes it is useful to exclude these expenses in order to better understand the long-term performance of its core business and to facilitate comparison of its results period-over-period and to those of peer companies. All of these non-GAAP financial measures are important tools for financial and operational decision-making and for evaluating Procore's own operating results over different periods of time.

Non-GAAP financial measures may not provide information that is directly comparable to information provided by other companies in Procore's industry, as other companies in the industry may calculate non-GAAP financial measures differently. In addition, there are limitations in using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies, and exclude expenses that may have a material impact on Procore's reported financial results. Further, stock-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in Procore's business and an important part of the compensation provided to its employees. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Investors should review the reconciliation of non-GAAP financial measures to the comparable GAAP financial measures included below, and not rely on any single financial measure to evaluate Procore's business.

Free Cash Flow: Procore defines free cash flow as net cash (used in) provided by operating activities, less purchases of property and equipment and capitalized software development costs. Procore believes free cash flow is an important liquidity measure of the cash (if any) that is available, after our operating activities and capital expenditures. Procore uses free cash flow in conjunction with traditional GAAP measures to assess its liquidity and evaluate the effectiveness of its business strategies. Once Procore’s business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.

Other Metrics

Customer Count: The aforementioned customer count excludes customers acquired from Levelset and Esticom that have not yet been renewed onto standard Procore annual contracts. Remaining Levelset and Esticom legacy customers will be included in our customer metrics once they are renewed onto standard Procore annual contracts or upon integration of the sales process.

About Procore

Procore Technologies, Inc. (NYSE: PCOR) creates software for people who build the world. With a focus on providing timely and accurate data for all, Procore transforms the construction industry one project at a time - from hospitals and skyscrapers to airports and stadiums. Beyond its connected, innovative technology, Procore empowers the industry and its communities through Procore.org. For more information, visit www.procore.com.

Procore Technologies, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

(in thousands, except share and per share amounts)

Revenue

$

228,536

$

172,205

$

442,062

$

331,721

Cost of revenue(1)(2)(3)

42,304

36,735

82,506

70,067

Gross profit

186,232

135,470

359,556

261,654

Operating expenses

Sales and marketing(1)(2)(3)(4)

125,362

103,283

242,725

197,198

Research and development(1)(2)(3)(4)

73,216

63,822

153,252

124,076

General and administrative(1)(3)(4)

46,383

40,667

91,571

83,819

Total operating expenses

244,961

207,772

487,548

405,093

Loss from operations

(58,729

)

(72,302

)

(127,992

)

(143,439

)

Interest income

4,943

678

9,891

753

Interest expense

(491

)

(567

)

(987

)

(1,133

)

Accretion income, net

2,031

3,663

Other expense, net

(313

)

(890

)

(523

)

(347

)

Loss before provision for income taxes

(52,559

)

(73,081

)

(115,948

)

(144,166

)

Provision for income taxes

322

42

380

376

Net loss

$

(52,881

)

$

(73,123

)

$

(116,328

)

$

(144,542

)

Net loss per share attributable to common stockholders, basic and diluted

$

(0.37

)

$

(0.54

)

$

(0.83

)

$

(1.07

)

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted

141,238,489

135,927,677

140,446,873

135,232,404

(1)

Includes stock-based compensation expense and amortization of capitalized stock-based compensation as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

(in thousands)

Cost of revenue

$

2,880

$

2,046

$

5,376

$

3,504

Sales and marketing

14,470

12,572

27,574

22,868

Research and development

16,270

13,144

36,051

26,152

General and administrative

9,909

6,133

20,384

18,580

Total stock-based compensation expense*

$

43,529

$

33,895

$

89,385

$

71,104

*Includes amortization of capitalized stock-based compensation of $1.0 million and $2.0 million, respectively, for the three and six months ended June 30, 2023 which was initially capitalized as capitalized software and cloud-computing arrangement implementation costs.

(2)

Includes amortization of acquired intangible assets as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

(in thousands)

Cost of revenue

$

5,493

$

5,654

$

10,986

$

11,308

Sales and marketing

3,106

3,106

6,213

6,212

Research and development

675

895

1,409

1,797

Total amortization of acquired intangible assets

$

9,274

$

9,655

$

18,608

$

19,317

(3)

Includes employer payroll tax on employee stock transactions as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

(in thousands)

Cost of revenue

$

139

$

68

$

306

$

149

Sales and marketing

618

317

1,617

925

Research and development

891

523

2,247

1,550

General and administrative

503

182

1,135

727

Total employer payroll tax on employee stock transactions

$

2,151

$

1,090

$

5,305

$

3,351

(4)

Includes acquisition-related expenses as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

(in thousands)

Sales and marketing

$

548

$

208

$

1,454

$

415

Research and development

204

1,090

6,188

2,191

General and administrative

1,081

2,119

Total acquisition-related expenses

$

752

$

2,379

$

7,642

$

4,725

Procore Technologies, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

June 30,

2023

December 31,

2022

(in thousands)

Assets

Current assets

Cash and cash equivalents

$

312,518

$

296,712

Marketable securities

290,445

285,493

Accounts receivable, net

125,577

148,683

Contract cost asset, current

25,655

23,600

Prepaid expenses and other current assets

43,711

44,731

Total current assets

797,906

799,219

Capitalized software development costs, net

70,397

58,577

Property and equipment, net

37,121

39,193

Right of use assets - finance leases

35,681

37,026

Right of use assets - operating leases

40,223

41,934

Contract cost asset, non-current

42,112

40,477

Intangible assets, net

144,517

162,953

Goodwill

539,355

539,128

Other assets

18,640

21,903

Total assets

$

1,725,952

$

1,740,410

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable

$

15,539

$

14,282

Accrued expenses

60,090

99,182

Deferred revenue, current

416,788

396,535

Other current liabilities

27,468

21,639

Total current liabilities

519,885

531,638

Deferred revenue, non-current

5,145

5,278

Finance lease liabilities, non-current

44,574

45,578

Operating lease liabilities, non-current

35,630

38,087

Other liabilities, non-current

4,283

3,049

Total liabilities

609,517

623,630

Stockholders’ equity

Common stock

14

14

Additional paid-in capital

2,183,893

2,068,225

Accumulated other comprehensive loss

(2,001

)

(2,316

)

Accumulated deficit

(1,065,471

)

(949,143

)

Total stockholders’ equity

1,116,435

1,116,780

Total liabilities and stockholders’ equity

$

1,725,952

$

1,740,410

Remaining performance obligation:

The following table presents our current and non-current RPO at the end of each period:

June 30,

Change

2023

2022

Dollar

Percent

(dollars in thousands)

Remaining performance obligations

Current

$

622,639

$

469,341

$

153,298

33

%

Non-current

226,877

184,593

42,284

23

%

Total remaining performance obligations

$

849,516

$

653,934

$

195,582

30

%

Procore Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

(in thousands)

Operating activities

Net loss

$

(52,881

)

$

(73,123

)

$

(116,328

)

$

(144,542

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities

Stock-based compensation

42,487

33,895

87,425

71,104

Depreciation and amortization

17,336

15,403

34,210

30,550

Accretion of discounts on marketable debt securities, net

(2,030

)

(3,662

)

Abandonment of long-lived assets

94

887

535

887

Noncash operating lease expense

2,604

2,652

5,232

4,808

Unrealized foreign currency loss, net

149

832

557

355

Deferred income taxes

3

(286

)

5

(638

)

Provision for credit losses

2,004

740

3,730

642

Increase (decrease) in fair value of strategic investments

43

(81

)

6

(81

)

Changes in operating assets and liabilities

Accounts receivable

(19,371

)

(10,116

)

23,577

24,357

Deferred contract cost assets

(3,170

)

(3,295

)

(3,630

)

(7,361

)

Prepaid expenses and other assets

(2,847

)

59

1,701

(5,116

)

Accounts payable

(3,499

)

5,587

1,149

5,926

Accrued expenses and other liabilities

(2,929

)

(4,552

)

(31,110

)

(8,909

)

Deferred revenue

13,093

6,932

19,582

15,706

Operating lease liabilities

(2,760

)

(2,489

)

(5,381

)

(4,359

)

Net cash (used in) provided by operating activities

(11,674

)

(26,955

)

17,598

(16,671

)

Investing activities

Purchases of property and equipment

(2,521

)

(1,908

)

(4,694

)

(9,433

)

Capitalized software development costs

(9,400

)

(8,620

)

(17,351

)

(16,252

)

Purchases of strategic investments

(294

)

(689

)

(442

)

(3,018

)

Purchases of marketable securities

(139,286

)

(229,282

)

Maturities of marketable securities

118,817

222,726

Sales of marketable securities

5,452

5,452

Originations of materials financing

(7,931

)

(9,259

)

(17,007

)

(9,259

)

Customer repayments of materials financing

7,638

6,261

12,996

6,261

Settlement of post-close working capital adjustments from business combinations

1,291

Net cash used in investing activities

(27,525

)

(14,215

)

(27,602

)

(30,410

)

Financing activities

Proceeds from stock option exercises

7,217

7,697

10,939

14,604

Proceeds from employee stock purchase plan

13,006

11,513

13,006

11,513

Payments of deferred offering costs

(270

)

(270

)

Principal payments under finance lease agreements, net of proceeds from lease incentives

(520

)

(479

)

(930

)

(844

)

Net cash provided by financing activities

19,703

18,461

23,015

25,003

Net increase in cash, cash equivalents and restricted cash

(19,496

)

(22,709

)

13,011

(22,078

)

Effect of exchange rate changes on cash

(55

)

(981

)

(309

)

(806

)

Cash, cash equivalents and restricted cash, beginning of period

332,068

590,018

299,816

589,212

Cash, cash equivalents and restricted cash, end of period

$

312,517

$

566,328

$

312,518

$

566,328

Procore Technologies, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(unaudited)

Reconciliation of gross profit and gross margin to non-GAAP gross profit and non-GAAP gross margin:

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

(dollars in thousands)

Revenue

$

228,536

$

172,205

$

442,062

$

331,721

Gross profit

186,232

135,470

359,556

261,654

Stock-based compensation expense

2,880

2,046

5,376

3,504

Amortization of acquired technology intangible assets

5,493

5,654

10,986

11,308

Employer payroll tax on employee stock transactions

139

68

306

149

Non-GAAP gross profit

$

194,744

$

143,238

$

376,224

$

276,615

Gross margin

81

%

79

%

81

%

79

%

Non-GAAP gross margin

85

%

83

%

85

%

83

%


Contacts

Media Contact
Raelle Alfaro
press@procore.com

Investor Contact
Matthew Puljiz
ir@procore.com

Read full story here

First published on Thu, Aug 3, 2023

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