Procore Announces Strong Second Quarter 2021 Financial Results

Rhea-AI Summary

Procore Technologies, Inc. (NYSE: PCOR) reported second quarter earnings for 2021, showcasing a 27% year-over-year revenue growth to $122.8 million. The GAAP gross margin stood at 79%, while the non-GAAP gross margin reached 84%. Although operating margins were negative at (121%) for GAAP and (4%) for non-GAAP, the company added 481 new customers, bringing the total to 11,149. Procore also announced plans for revenue between $125 million and $127 million for Q3 and $496 million to $499 million for the full year.

Positive

• 27% year-over-year revenue growth to $122.8 million.
• GAAP gross margin at 79%, non-GAAP gross margin at 84%.
• Added 481 new customers, reaching 11,149 total customers.
• Expansion into Singapore and the U.A.E.
• Acquisition of INDUS.AI enhances analytics capabilities.

Negative

• GAAP operating margin is negative at (121%).
• Non-GAAP operating margin is negative at (4%).
• Operating cash outflow for Q2 was $3.1 million.

Procore Technologies, Inc. (NYSE: PCOR), a leading provider of construction management software, today announced financial results for the second quarter ended June 30, 2021.

“Procore delivered record results in our first quarter as a public company,” said Tooey Courtemanche, Founder, President and CEO of Procore. “Our performance is a testament to our dedication to the construction industry, and the trust it has in us as a partner. Our commitment to this industry has always been, and will remain, core to who we are as we continue pursuing our vision of improving the lives of everyone in construction.”

“We are pleased with our performance in Q2 as we saw growth across all aspects of the business,” said Paul Lyandres, CFO of Procore. “We continued to expand our customer base, enter new international markets, and further invest in our products and platform, delivering incremental value to our customers.”

Second Quarter 2021 Financial Highlights:

• Revenue was $122.8 million, an increase of 27% year-over-year.
• GAAP gross margin was 79% and non-GAAP gross margin was 84%.
• GAAP operating margin was (121%) and non-GAAP operating margin was (4%).
• Operating cash outflow for the second quarter was $3.1 million.
• Successfully completed our initial public offering on May 24, 2021, selling 10.41 million shares at $67 per share and raising total proceeds of $665.1 million net of underwriting discounts and commissions.

Non-GAAP gross margin and non-GAAP operating margin are non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release.

Second Quarter 2021 Business Highlights:

• Added 481 net new customers in the second quarter, ending with a total of 11,149 customers.
• Announced product enhancements to our Financial Management portfolio.
• Announced an enhanced Preconstruction solution during Procore’s Innovation Summit.
• Awarded top honors for five key categories in the G2 2021 Summer Report.
• Announced our expansion to both Singapore and the U.A.E.
• Acquired INDUS.AI, an artificial intelligence-powered analytics platform.

Third Quarter and Full Year 2021 Outlook:

Procore is providing the following guidance for the third quarter and full year 2021:

• Third Quarter 2021 Outlook:
  • Revenue is expected to be in the range of $125 million to $127 million.
  • Non-GAAP operating margin is expected to be in the range of (7%) to (8%).
• Full Year 2021 Outlook:
  • Revenue is expected to be in the range of $496 million to $499 million.
  • Non-GAAP operating margin is expected to be in the range of (6%) to (7%).

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 3:00 p.m., Pacific Time, on Thursday, August 5, 2021. A live audio webcast will be accessible on Procore's investor relations website at http://investors.procore.com.

Forward-Looking Statements

Statements Procore makes in this press release may include statements which are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, which are usually identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” "outlook", “seeks,” “should,” “will,” and variations of such words or similar expressions.

Procore intends these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are making this statement for purposes of complying with those safe harbor provisions.

This press release contains forward-looking statements about Procore and its industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this press release, including, but not limited to, statements regarding the expected performance of Procore’s business and objectives of management for future operations, are forward-looking statements. 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. 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 non-GAAP gross margin and non-GAAP operating margin is helpful to its investors. These measures, which are referred to as non-GAAP financial measures, are not prepared in accordance with U.S. generally accepted accounting principles, or GAAP. Non-GAAP gross profit and non-GAAP gross margin are defined as gross profit and gross margin, respectively, excluding stock-based compensation expense, amortization of acquired technology intangible assets, and employer payroll tax related to employee stock transactions. Non-GAAP gross margin is the ratio calculated by dividing non-GAAP gross profit by total revenue. Non-GAAP income (loss) from operations and non-GAAP operating margin are defined as GAAP loss from operations and GAAP operating margin, respectively, excluding stock-based compensation expense, amortization of acquired intangible assets, and employer payroll tax related to employee stock transactions. Non-GAAP operating margin is the ratio calculated by dividing non-GAAP income (loss) from operations by total revenue.

Because of varying available valuation methodologies, subjective assumptions, and the variety of equity instruments that can impact a company's non-cash expenses, Procore believes that providing non-GAAP financial measures that exclude stock-based compensation expense allow 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). 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.

About Procore

Procore is a leading provider of construction management software. Over 1 million projects and more than $1 trillion USD in construction volume have run on Procore's platform. Procore’s platform connects key project stakeholders to solutions Procore has built specifically for the construction industry—for the owner, the general contractor, and the specialty contractor. Procore's App Marketplace has a multitude of partner solutions that integrate seamlessly with Procore’s platform, giving construction professionals the freedom to connect with what works best for them. Headquartered in Carpinteria, California, Procore has offices around the globe. Learn more at Procore.com.

PROCORE-IR

Procore Technologies, Inc. Condensed Consolidated Statements of Operations (unaudited)
(in thousands, except share and per share amounts)		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2021				2020				2021
Revenue		$	96,553			$	122,790			$	188,890			$	236,728
Cost of revenue (1)(2)(3)			17,069				25,493				34,526				45,852
Gross profit			79,484				97,297				154,364				190,876
Operating expenses:
Sales and marketing (1)(2)(3)			42,638				99,905				90,700				153,870
Research and development (1)(2)(3)			26,518				88,627				54,751				123,172
General and administrative (1)(3)			13,467				57,827				29,450				75,754
Total operating expenses			82,623				246,359				174,901				352,796
Loss from operations			(3,139	)			(149,062	)			(20,537	)			(161,920	)
Interest expense, net			(538	)			(576	)			(920	)			(1,138	)
Change in fair value of Series I redeemable convertible preferred stock warrant liability			(10,605	)			—				(10,605	)			—
Other income (expense), net			741				(44	)			(477	)			(227	)
Loss before provision for income taxes			(13,541	)			(149,682	)			(32,539	)			(163,285	)
Provision for income taxes			208				37				244				166
Net loss		$	(13,749	)		$	(149,719	)		$	(32,783	)		$	(163,451	)
Net loss per share attributable to common stockholders, basic and diluted		$	(0.50	)		$	(2.04	)		$	(1.22	)		$	(3.11	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted			27,346,530				73,539,568				26,893,572				52,564,840

(1) Includes stock-based compensation expense as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2021				2020				2021
		(in thousands)
Cost of revenue		$	268			$	4,918			$	535			$	6,079
Sales and marketing			3,115				42,855				5,234				46,107
Research and development			1,912				51,317				3,849				54,563
General and administrative			1,331				38,353				2,708				40,997
Total stock-based compensation expense		$	6,626			$	137,443			$	12,326			$	147,746

(2) Includes amortization of acquired intangible assets as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2021				2020				2021
						(in thousands)
Cost of revenue		$	761			$	1,086			$	1,522			$	2,172
Sales and marketing			404				466				808				945
Research and development			183				680				305				863
Total amortization of acquired intangible assets		$	1,348			$	2,232			$	2,635			$	3,980

(3) Includes employer payroll tax on employee stock transactions as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2021				2020				2021
		(in thousands)
Cost of revenue		$	—			$	330			$	—			$	334
Sales and marketing			7				1,215				76				1,357
Research and development			20				1,748				35				1,822
General and administrative			25				635				27				715
Total employer payroll tax on employee stock transactions		$	52			$	3,928			$	138			$	4,228

Procore Technologies, Inc. Condensed Consolidated Balance Sheets (unaudited)
(in thousands)		December 31, 2020				June 30, 2021
Assets
Current assets
Cash and cash equivalents		$	379,907			$	1,060,512
Accounts receivable, net			77,692				66,782
Contract cost asset, current			13,598				15,324
Prepaid expenses and other current assets			16,772				23,243
Total current assets			487,969				1,165,861
Capitalized software development costs, net			18,538				18,946
Property and equipment, net			30,252				31,470
Right of use assets - finance leases			42,108				40,770
Right of use assets - operating leases			49,756				46,094
Contract cost asset, non-current			19,454				22,749
Intangibles, net			33,241				43,935
Goodwill			125,966				137,335
Restricted cash, non-current			3,104				3,104
Other assets			10,379				7,883
Total assets		$	820,767			$	1,518,147
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity
Current liabilities
Accounts payable		$	9,012			$	6,513
Accrued expenses			28,492				42,964
Deferred revenue, current			213,438				226,151
Other current liabilities			10,768				11,953
Total current liabilities			261,710				287,581
Deferred revenue, non-current			6,373				4,612
Finance lease liabilities, non-current			48,835				48,003
Operating lease liabilities, non-current			46,558				43,601
Other liabilities, non-current			1,919				7,688
Total liabilities			365,395				391,485
Redeemable convertible preferred stock			727,474				—
Stockholders’ (deficit) equity
Common stock		3				13
Additional paid-in capital			124,755				1,687,184
Accumulated other comprehensive income (loss)			187				(37	)
Accumulated deficit			(397,047	)			(560,498	)
Total stockholders’ (deficit) equity			(272,102	)			1,126,662
Total liabilities, redeemable convertible preferred stock and stockholders’ (deficit) equity		$	820,767			$	1,518,147

Remaining performance obligation:

The remaining performance obligation was $478.4 million as of June 30, 2021, approximately 72% of which is expected to be recognized as revenue within 12 months. The remaining performance obligation was $379.3 million as of June 30, 2020, approximately 71% of which was expected to be recognized as revenue within 12 months.

Procore Technologies, Inc. Condensed Consolidated Statements of Cash Flows (unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2020				2021				2020				2021
Operating activities
Net loss		$	(13,749	)		$	(149,719	)		$	(32,783	)		$	(163,451	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Stock-based compensation			6,626				137,443				12,326				147,746
Depreciation and amortization			6,405				7,819				12,397				15,120
Change in fair value of Series I redeemable convertible preferred stock warrant liability			10,605				—				10,605				—
Abandonment of long-lived assets			658				—				966				554
Noncash lease expense			1,601				1,869				3,150				3,735
Unrealized foreign currency (gain) loss, net			(1,392	)			86				(370	)			691
Deferred income taxes			—				(72	)			—				(99	)
Changes in operating assets and liabilities, net of effect of business combinations
Accounts receivable			(10,138	)			(9,610	)			6,484				11,113
Deferred contract cost assets			634				(3,500	)			796				(5,062	)
Prepaid expenses and other assets			1,449				(1,122	)			(123	)			(5,723	)
Accounts payable			(1,850	)			608				(88	)			(2,908	)
Accrued expenses and other liabilities			730				9,420				(11,498	)			14,535
Deferred revenue			(5,664	)			4,206				(776	)			10,845
Operating lease liabilities			(1,513	)			(557	)			(2,046	)			(1,929	)
Net cash flow (used in) provided by operating activities			(5,598	)			(3,129	)			(960	)			25,167
Investing activities
Purchases of property and equipment			(2,051	)			(1,801	)			(5,311	)			(4,194	)
Capitalized software development costs			(2,961	)			(3,523	)			(6,930	)			(5,716	)
Strategic investments			—				(3,450	)			—				(3,450	)
Acquisition of businesses, net of cash acquired			—				(19,982	)			(3,325	)			(19,982	)
Net cash flow used in investing activities			(5,012	)			(28,756	)			(15,566	)			(33,342	)
Financing activities
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs			4,942				—				157,942				—
Proceeds from issuance of Series I redeemable convertible preferred stock warrant			—				—				11,923				—
Proceeds from initial public offering, net of underwriting commissions and discounts			—				665,129				—				665,129
Proceeds from stock option exercises			4,332				17,499				10,059				29,126
Payment of debt issuance costs			(61	)			—				(80	)			—
Payments of deferred offering costs			(640	)			(2,987	)			(2,216	)			(3,527	)
Payment of deferred business acquisition consideration			—				(475	)			—				(475	)
Principal payments under finance lease agreements, net of proceeds from lease incentives			(387	)			(428	)			(658	)			(742	)
Net cash flow provided by financing activities			8,186				678,738				176,970				689,511
Net (decrease) increase in cash, cash equivalents and restricted cash			(2,424	)			646,853				160,444				681,336
Effect of exchange rate changes on cash			1,404				(102	)			336				(731	)
Cash, cash equivalents and restricted cash, beginning of period			283,628				417,107				121,828				383,253
Cash, cash equivalents and restricted cash, end of period		$	282,608			$	1,063,858			$	282,608			$	1,063,858

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,
		2020				2021				2020				2021
		(dollars in thousands)
Revenue		$	96,553			$	122,790			$	188,890			$	236,728
Gross profit			79,484				97,297				154,364				190,876
Stock-based compensation expense			268				4,918				535				6,079
Amortization of acquired technology intangible assets			761				1,086				1,522				2,172
Employer payroll tax on employee stock transactions			—				330				—				334
Non-GAAP gross profit		$	80,513			$	103,631			$	156,421			$	199,461
Gross margin			82	%			79	%			82	%			81	%
Non-GAAP gross margin			83	%			84	%			83	%			84	%

Reconciliation of loss from operations and operating margin to non-GAAP loss from operations and non-GAAP operating margin:
		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2021				2020				2021
		(dollars in thousands)
Revenue		$	96,553			$	122,790			$	188,890			$	236,728
Loss from operations			(3,139	)			(149,062	)			(20,537	)			(161,920	)
Stock-based compensation expense			6,626				137,443				12,326				147,746
Amortization of acquired intangible assets			1,348				2,232				2,635				3,980
Employer payroll tax on employee stock transactions			52				3,928				138				4,228
Non-GAAP income (loss) from operations		$	4,887			$	(5,459	)		$	(5,438	)		$	(5,966	)
Operating margin			(3	%)			(121	%)			(11	%)			(68	%)
Non-GAAP operating margin			5	%			(4	%)			(3	%)			(3	%)

 

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FAQ

What were Procore's financial results for Q2 2021?

Procore reported a revenue of $122.8 million for Q2 2021, a 27% increase year-over-year.

What is the outlook for Procore's revenue in Q3 2021?

Procore expects revenue between $125 million and $127 million for Q3 2021.

How many new customers did Procore add in Q2 2021?

Procore added 481 net new customers in Q2 2021.

What are Procore's expected full year revenue figures for 2021?

Procore's full-year revenue is expected to be between $496 million and $499 million.

What was Procore's gross margin in Q2 2021?

Procore's GAAP gross margin was 79%, and non-GAAP gross margin was 84% in Q2 2021.