UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to _______
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of April 29, 2022, the registrant had
Table of Contents
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Page |
PART I. |
4 |
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Item 1. |
4 |
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4 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
5 |
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6 |
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7 |
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9 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
Item 3. |
32 |
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Item 4. |
33 |
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PART II. |
34 |
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Item 1. |
34 |
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Item 1A. |
34 |
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Item 2. |
61 |
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Item 6. |
62 |
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63 |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, are forward-looking statements of our future operating results and financial position, our business strategy and plans, market growth and trends, and objectives for future operations, and the impact of the ongoing coronavirus pandemic (the “COVID-19 pandemic”), on our financial conditions and results of operations. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain 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 our expectations, strategy, plans or intentions. These forward-looking statements include, but are not limited to, statements concerning the following:
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our expectations regarding our financial performance, including revenues, expenses, and margins, and our ability to achieve or maintain future profitability; |
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our expectations regarding our ability to successfully integrate Express Lien, Inc. (d/b/a Levelset), a Delaware corporation (“Levelset”), and LaborChart, Inc., a Delaware corporation (“LaborChart”), into our business and receive the anticipated benefits from all such transactions; |
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our ability to effectively manage our growth; |
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anticipated trends, growth rates, and challenges in our business and in the markets in which we operate; |
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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; |
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our ability to attract new customers and retain and increase sales to existing customers; |
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our ability to expand internationally; |
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the effects of increased competition in our markets and our ability to compete effectively; |
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our estimated total addressable market; |
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our ability to develop new products and features, and whether our customers and prospective customers will adopt these new products and features; |
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our ability to maintain, protect, and enhance our brand; |
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the sufficiency of our cash to meet our cash needs for at least the next 12 months; |
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future acquisitions, joint ventures, or investments; |
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our ability to comply or remain in compliance with laws and regulations that currently apply or become applicable to our business in the United States (“U.S.”) and internationally; |
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the effects of the COVID-19 pandemic or other public health crises; |
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our reliance on key personnel and our ability to attract, maintain, and retain management and skilled personnel; |
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the future trading price of our common stock; and |
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our anticipated use of the net proceeds from our initial public offering (“IPO”). |
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our 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 described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
1
In addition, statements that “we believe,” and similar statements, reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.
2
RISK FACTORS SUMMARY
Investing in our common stock involves a high degree of risk. Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, as well as other risks we face can be found under the heading “Risk Factors” in Part II of this Quarterly Report on Form 10-Q.
Our business is subject to a number of risks of which you should be aware before making a decision to invest in our common stock. These risks include, among others, the following:
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we have experienced rapid growth in recent periods, and such growth may not be indicative of our future growth. If we fail to properly manage future growth, our business, financial condition, results of operations, and prospects could be materially adversely affected; |
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we have a history of losses and may not be able to achieve or sustain profitability in the future; |
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our business may be significantly impacted by changes in the economy and related reductions in spend across the construction industry; |
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the construction management software industry is evolving and may not develop in ways we expect; |
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our current and future products and features may not be widely accepted by our customers, and we may not be able to respond to technological changes or changes in customer demands and preferences, or develop new products and functionality; |
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we are continuing to expand our operations outside the United States, where we may be subject to increased business, regulatory, and economic risks that could materially adversely affect our business, financial condition, results of operations, and prospects; |
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our business depends on a strong brand, and if we are not able to maintain and enhance our brand, our ability to maintain and expand our customer base will be impaired, and our business will be harmed; |
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our ability to increase our customer base and achieve broader market acceptance of our products will significantly depend on our ability to develop and expand our sales and marketing capabilities, the failure of which could materially adversely impact our business financial condition, results of operations, and prospects; |
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we operate in a competitive market, and we must continue to compete effectively; |
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our results of operations may fluctuate significantly, which could make our future results difficult to predict and could cause our results of operations to fall below expectations; |
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if we lose key management personnel or if we are unable to retain or hire additional qualified personnel, we may not be able to achieve our strategic objectives and our business, financial condition, results of operations, and prospects could be materially adversely affected; |
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we are subject to stringent, changing and sometimes potentially inconsistent obligations related to data privacy and security (both domestically and globally), and our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, reputational harm, loss of revenue or profits, loss of customers or sales, and other adverse consequences, any of which could materially adversely affect our business, financial condition, results of operations, and prospects; |
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if our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, reputational harm, loss of revenue or profits, loss of customers or sales, and other adverse consequences, any of which could materially adversely affect our business, financial condition, results of operations, and prospects; |
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any failure to offer high quality support for our customers and collaborators may harm our relationships with our customers and, consequently, our business; |
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if we fail to maintain an effective system of disclosure controls and internal control over our financial reporting, including our acquisitions, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired and our business, financial condition, results of operations, and prospects could be materially adversely affected; and |
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the COVID-19 pandemic has had and could continue to have an adverse impact on our business, operations, and the markets and communities in which we, our partners, and our customers operate. |
3
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements
Procore Technologies, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except number of shares and par value) |
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March 31, 2022 |
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December 31, 2021 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Contract cost asset, current |
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Prepaid expenses and other current assets |
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Total current assets |
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Capitalized software development costs, net |
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Property and equipment, net |
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Right of use assets - finance leases |
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Right of use assets - operating leases |
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Contract cost asset, non-current |
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Intangible assets, net |
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Goodwill |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Deferred revenue, current |
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Other current liabilities |
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Total current liabilities |
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Deferred revenue, non-current |
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Finance lease liabilities, non-current |
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Operating lease liabilities, non-current |
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Other liabilities, non-current |
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Total liabilities |
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Contingencies (Note 6) |
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Stockholders’ equity |
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Preferred stock, $ at March 31, 2022 and December 31, 2021; outstanding at March 31, 2022 and December 31, 2021. |
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Common stock, $ authorized at March 31, 2022 and December 31, 2021; and and December 31, 2021, respectively. |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
) |
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( |
) |
Accumulated deficit |
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( |
) |
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( |
) |
Total stockholders’ equity |
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Total liabilities, redeemable convertible preferred stock and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Procore Technologies, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
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Three Months Ended March 31, |
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(in thousands, except share and per share amounts) |
|
2022 |
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2021 |
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Revenue |
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$ |
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$ |
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Cost of revenue |
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Gross profit |
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Operating expenses |
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Sales and marketing |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
) |
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( |
) |
Interest expense, net |
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( |
) |
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( |
) |
Other income (expense), net |
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( |
) |
Loss before provision for income taxes |
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( |
) |
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( |
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Provision for income taxes |
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Net loss |
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$ |
( |
) |
|
$ |
( |
) |
Net loss per share attributable to common stockholders, basic and diluted |
|
$ |
( |
) |
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$ |
( |
) |
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted |
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Total comprehensive loss |
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Net loss |
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$ |
( |
) |
|
$ |
( |
) |
Foreign currency translation adjustment |
|
|
|
|
|
|
( |
) |
Comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Procore Technologies, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(unaudited)
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Redeemable |
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Accumulated |
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Convertible |
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Additional |
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Other |
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Total |
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Preferred Stock |
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Common Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders' |
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||||||||||||||
(in thousands, except share amounts) |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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(Deficit) |
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||||||||
Balances as of December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
|
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|
$ |
( |
) |
|
$ |
( |
) |
Exercise of stock options |
|
|
- |
|
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- |
|
|
|
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|
|
|
|
- |
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|
|
|
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|
|
- |
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|
- |
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|
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Stock-based compensation |
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- |
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|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Foreign currency translation adjustment |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Net loss |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balances as of March 31, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Redeemable |
|
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|
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Accumulated |
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|||||||||||
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Convertible |
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Additional |
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Other |
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Total |
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|||||||||||||
|
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Preferred Stock |
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Common Stock |
|
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Paid-in |
|
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Comprehensive |
|
|
Accumulated |
|
|
Stockholders' |
|
||||||||||||||
(in thousands, except share amounts) |
|
Shares |
|
|
Amount |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income (Loss) |
|
|
Deficit |
|
|
Equity |
|
||||||||
Balances as of December 31, 2021 |
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Exercise of stock options |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Stock-based compensation |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Issuance of common stock upon settlement of restricted stock units |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Foreign currency translation adjustment |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balances as of March 31, 2022 |
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements
6
Procore Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2022 |
|
|
2021 |
|
||
Operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by operating activities |
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
Abandonment of long-lived assets |
|
|
- |
|
|
|
|
|
Noncash lease expense |
|
|
|
|
|
|
|
|
Unrealized foreign currency (gain) loss, net |
|
|
( |
) |
|
|
|
|
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
|
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|
|
Deferred contract cost assets |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
|
( |
) |
Accrued expenses and other liabilities |
|
|
( |
) |
|
|
|
|
Deferred revenue |
|
|
|
|
|
|
|
|
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash flow provided by operating activities |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Capitalized software development costs |
|
|
( |
) |
|
|
( |
) |
Purchases of strategic investments |
|
|
( |
) |
|
|
- |
|
Settlement of post-close working capital adjustments from business combinations |
|
|
|
|
|
|
- |
|
Net cash flow used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing activities |
|
|
|
|
|
|
|
|
Proceeds from stock option exercises |
|
|
|
|
|
|
|
|
Payments of deferred offering costs |
|
|
- |
|
|
|
( |
) |
Principal payments under finance lease agreements, net of proceeds from lease incentives |
|
|
( |
) |
|
|
( |
) |
Net cash flow provided by financing activities |
|
|
|
|
|
|
|
|
Net increase in cash, cash equivalents and restricted cash |
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
( |
) |
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, end of period |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
Procore Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2022 |
|
|
2021 |
|
||
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
Restricted cash, current at end of period included in prepaid expenses and other current assets |
|
|
- |
|
|
|
|
|
Restricted cash, non-current at end of period included in other assets |
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash at end of period shown in the condensed consolidated statements of cash flows |
|
$ |
|
|
|
$ |
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
Cash paid for interest other than finance leases |
|
$ |
|
|
|
$ |
|
|
Cash paid for income taxes |
|
|
|
|
|
|
- |
|
Cash received for lease incentives |
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
|
|
Operating cash flows from finance leases |
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
|
|
|
|
|
|
|
|
Financing cash flows from finance leases |
|
|
|
|
|
|
|
|
Noncash investing and financing activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment included in accounts payable and accrued expenses at period end |
|
|
|
|
|
|
|
|
Capitalized software development costs included in accounts payable and accrued expenses at period end |
|
|
|
|
|
|
|
|
Deferred offering costs included in accounts payable and accrued expenses at period end |
|
|
|
|
|
|
|
|
Stock-based compensation capitalized for software development |
|
|
|
|
|
|
|
|
Conversion of available-for-sale debt securities into equity securities |
|
|
|
|
|
|
- |
|
Right of use assets obtained in exchange for operating lease liabilities |
|
|
|
|
|
|
|
|
Noncash net change due to operating lease remeasurement |
|
|
( |
) |
|
|
( |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
Procore Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. |
ORGANIZATION AND DESCRIPTION OF BUSINESS |
Description of Business
Procore Technologies, Inc. and subsidiaries (together “Procore”, the “Company”, “we”, “us”, or “our”) provide a cloud-based construction management platform and related software products that allow the construction industry’s key stakeholders, such as owners, general contractors, specialty contractors, architects, and engineers, to collaborate on construction projects.
The Company was incorporated in California in 2002 and re-incorporated in Delaware in 2014. The Company is headquartered in Carpinteria, California, and has operations globally.
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of presentation
The accompanying condensed consolidated financial statements include the interim financial statements of Procore Technologies, Inc. and its subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are unaudited. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2021. The condensed consolidated balance sheet information as of December 31, 2021 has been derived from our audited consolidated financial statements. The condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal recurring items, necessary for the fair statement of the condensed consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. Certain balances have been reclassified to conform to current year presentation.
Use of estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management periodically evaluates its estimates and assumptions for continued reasonableness, primarily with respect to revenue recognition, the period of benefit of contract cost assets, the fair value of assets acquired and liabilities assumed in a business combination, stock-based compensation expense, including the fair value of the Company’s common stock prior to the effective date of the Company’s initial public offering (“IPO”), the recoverability of goodwill and long-lived assets, useful lives of long-lived assets, capitalization of software development costs, income taxes, including related reserves and allowances, and self-insurance reserve estimates. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. Management bases its estimates on historical experience and on various other assumptions that management believes to be reasonable. Actual results could differ from our estimates.
In light of the currently unknown duration and severity of the COVID-19 pandemic, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply our significant accounting policies. As of the date these condensed consolidated financial statements were issued, the impacts of the COVID-19 pandemic did not have a significant impact on our estimates or judgments. Judgments and assumptions may change, as new events occur and additional information is obtained, as well as other factors related to the COVID-19 pandemic and economic recovery that could result in a meaningful impact on our condensed consolidated financial statements in future reporting periods.
Segments
We operate as a operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and assess performance. Our CODM is our Chief Executive Officer. In recent years, we have completed a number of acquisitions which have allowed us to expand our products offered on our platform. While we provide different product offerings, including as a result of the Company's acquisitions, our business operates as one operating segment because our CODM evaluates the Company’s financial information for purposes of assessing financial performance and
9
Procore Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
allocating resources on a consolidated basis.
Deferred offering costs
Deferred offering costs of $
Strategic investments
Investments in equity securities
We hold investments in equity securities of certain privately held companies, which do not have readily determinable fair values. We do not have a controlling interest or significant influence in these companies. We have elected to measure the non-marketable equity securities at cost, with remeasurements to fair value only upon the occurrence of observable price changes in orderly transactions for the identical or similar securities of the same issuer, or in the event of any impairment. This election is reassessed each reporting period to determine whether a non-marketable equity security has a readily determinable fair value, in which case they would no longer be eligible for this election. All gains and losses on such equity securities, realized and unrealized, are recorded in other income (expense), net on the condensed consolidated statements of operations and comprehensive loss. We evaluate our non-marketable equity securities for impairment at each reporting period based on a qualitative assessment that considers various potential impairment indicators. If an impairment exists, a loss is recognized in the condensed consolidated statements of operations and comprehensive loss for the amount by which the carrying value exceeds the fair value of the investment. In connection with certain equity securities purchased in the first quarter of 2022, the Company has a contractual obligation to provide additional investment funding of up to $
As of March 31, 2022, the Company held investments in equity securities of privately held companies of $
Available-for-sale debt securities
Available-for-sale debt securities are recorded at fair value with changes in fair value recorded in other comprehensive income or loss. We periodically review our available-for-sale debt securities to determine if there has been an other-than-temporary decline in fair value. If the impairment is deemed other-than-temporary, the portion of the impairment related to credit losses is recognized in other income (expense), net in the accompanying condensed consolidated statements of operations and comprehensive loss, and the portion related to non-credit related losses is recognized as a component of comprehensive loss. The Company held $
Fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value measurements are based on a fair value hierarchy using three levels of inputs, of which the first two are considered observable and the last is considered unobservable, as follows:
|
Level 1 |
Quoted prices in active markets for identical assets or liabilities. |
|
Level 2 |
Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or similar assets or liabilities. |
10
Procore Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
|
Level 3 |
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
As of March 31, 2022 and December 31, 2021, the carrying value of the Company’s financial instruments included in current assets and current liabilities (including accounts receivable, accounts payable and accrued expenses) approximate fair value due to the short- term nature of such items. The Company classifies its money market funds recorded in cash equivalents within Level 1 of the hierarchy as the values are derived from quoted prices in active markets. As of March 31, 2022 and December 31, 2021, cash equivalents of $
The Company's investments in equity securities of privately held companies are recorded at fair value on a non-recurring basis. The Company’s investments in available-for-sale debt securities are remeasured at fair value each reporting period. The estimation of fair value for these investments requires the use of significant unobservable inputs, and as a result, the Company classifies these assets as Level 3 within the fair value hierarchy. For investments without a readily determinable fair value, the Company looks to observable transactions, such as the issuance of new equity by an investee, as indicators of investee enterprise value and are used to estimate the fair value of the investments.
Deferred revenue
Contract liabilities consist of revenue that is deferred when we have the contractual right to invoice in advance of transferring services to our customers. The Company recognized revenue of $
Remaining performance obligation
The transaction price allocated to remaining performance obligations represents the contracted transaction price that has not yet been recognized as revenue, which includes deferred revenue and amounts under non-cancelable contracts that will be invoiced and recognized as revenue in future periods. As of March 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $
Significant accounting policies
Other than as described below, the accounting policies used in the preparation of these condensed consolidated financial statements are the same as those disclosed in the audited consolidated financial statements and related notes for the year ended December 31, 2021.
Self-insurance reserves
In January 2022, the Company elected to partially self-fund its health insurance plan. To reduce its risk related to high-dollar claims, the Company maintains individual stop-loss insurance. The Company estimates its exposure for claims incurred at the end of each reporting period, including claims not yet reported, with the assistance of an independent third-party actuary. As of March 31, 2022, the Company’s net self-insurance accrual was $
Materials finance revenue
In connection with our acquisition of Express Lien, Inc. (d/b/a Levelset) (“Levelset”) in November 2021, the Company assumed a materials finance line of business, pursuant to which the Company facilitates the purchase of construction materials from suppliers and allows its customers to finance their purchases of such materials from the Company on deferred payment terms. Revenue is reported on a net basis as the supplier is primarily responsible for fulfilling the materials purchase orders and the Company does not have control over such materials. Materials finance revenues were not material to the quarter ended March 31, 2022.
11
Procore Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Recently adopted accounting pronouncements
Simplifying the Accounting for Convertible Instruments
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The new guidance simplifies the accounting for certain financial instruments by removing certain separation models required under current U.S. GAAP, including the beneficial conversion feature and cash conversion feature. ASU 2020-06 also improves and amends the related Earnings Per Share guidance for both Subtopics. ASU 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021 and interim periods within that fiscal year. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. On January 1, 2022, the Company adopted ASU 2020-06, using the full retrospective approach. The adoption had an immaterial impact on the Company’s condensed consolidated financial statements.
3. |
LEASES |
We have primarily entered into lease arrangements for office space, in addition to other miscellaneous equipment. Our leases have initial non-cancelable lease terms ranging from
Operating lease commencements and modifications resulted in net increases to right of use assets–operating leases and corresponding operating lease liabilities on our condensed consolidated balance sheet of $
4. |
INTANGIBLE ASSETS AND GOODWILL |
Intangible assets
Our finite-lived intangible assets are summarized as follows (in thousands):
|
|
March 31, 2022 |
|
|||||||||
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|||
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|||
Developed technology |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Customer relationships |
|
|
|
|
|
|
( |
) |
|
|
|
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
December 31, 2021 |
|
|||||||||
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|||
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|||
Developed technology |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Customer relationships |
|
|
|
|
|
|
( |
) |
|
|
|
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
12
Procore Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Intangible assets amortization expense is summarized as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Cost of revenue |
|
$ |
|
|
|
$ |
|
|
Sales and marketing |
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
Total amortization of acquired intangible assets |
|
$ |
|
|
|
$ |
|
|
Goodwill
As of March 31, 2022, the Company had goodwill of $
5. |
ACCRUED EXPENSES |
The following represents the components of accrued expenses contained within our condensed consolidated balance sheets at the end of each period (in thousands):