10-Q 1 pcor-10q_20220331.htm 10-Q pcor-10q_20220331.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

 

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: 001-40396

 

Procore Technologies, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

73-1636261

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

6309 Carpinteria Avenue

Carpinteria, CA

93013

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (866) 477-6267

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, $0.0001 par value

 

PCOR

 

The New York Stock Exchange

 

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.     Yes      No  

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).     Yes      No  

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

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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      No  

As of April 29, 2022, the registrant had 135,563,890 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

4

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

5

 

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

33

PART II.

OTHER INFORMATION

34

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

61

Item 6.

Exhibits

62

Signatures

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:

 

our expectations regarding our financial performance, including revenues, expenses, and margins, and our ability to achieve or maintain future profitability;

 

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;

 

our ability to effectively manage our growth;

 

anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;

 

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;

 

our ability to develop new products and features, and whether our customers and prospective customers will adopt these new products and features;

 

our ability to maintain, protect, and enhance our brand;

 

the sufficiency of our cash to meet our cash needs for at least the next 12 months;

 

future acquisitions, joint ventures, or investments;

 

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;

 

the effects of the COVID-19 pandemic or other public health crises;

 

our reliance on key personnel and our ability to attract, maintain, and retain management and skilled personnel;

 

the future trading price of our common stock; and

 

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:

 

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;

 

we have a history of losses and may not be able to achieve or sustain profitability in the future;

 

our business may be significantly impacted by changes in the economy and related reductions in spend across the construction industry;

 

the construction management software industry is evolving and may not develop in ways we expect;

 

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;

 

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;

 

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;

 

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;

 

we operate in a competitive market, and we must continue to compete effectively;

 

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;

 

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;

 

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;

 

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;

 

any failure to offer high quality support for our customers and collaborators may harm our relationships with our customers and, consequently, our business;

 

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

 

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)

 

March 31,

2022

 

 

December 31,

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

586,914

 

 

$

586,108

 

Accounts receivable, net

 

 

79,777

 

 

 

113,977

 

Contract cost asset, current

 

 

18,358

 

 

 

17,030

 

Prepaid expenses and other current assets

 

 

40,730

 

 

 

35,173

 

Total current assets

 

 

725,779

 

 

 

752,288

 

Capitalized software development costs, net

 

 

34,898

 

 

 

27,062

 

Property and equipment, net

 

 

40,047

 

 

 

36,837

 

Right of use assets - finance leases

 

 

38,948

 

 

 

39,623

 

Right of use assets - operating leases

 

 

47,245

 

 

 

44,052

 

Contract cost asset, non-current

 

 

28,735

 

 

 

25,889

 

Intangible assets, net

 

 

192,501

 

 

 

201,977

 

Goodwill

 

 

540,024

 

 

 

540,922

 

Other assets

 

 

24,087

 

 

 

22,007

 

Total assets

 

$

1,672,264

 

 

$

1,690,657

 

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

14,408

 

 

$

15,490

 

Accrued expenses

 

 

58,892

 

 

 

65,907

 

Deferred revenue, current

 

 

310,000

 

 

 

301,557

 

Other current liabilities

 

 

25,316

 

 

 

20,750

 

Total current liabilities

 

 

408,616

 

 

 

403,704

 

Deferred revenue, non-current

 

 

4,166

 

 

 

4,024

 

Finance lease liabilities, non-current

 

 

46,952

 

 

 

47,344

 

Operating lease liabilities, non-current

 

 

43,820

 

 

 

41,573

 

Other liabilities, non-current

 

 

4,325

 

 

 

4,723

 

Total liabilities

 

 

507,879

 

 

 

501,368

 

Contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 100,000,000 shares authorized

   at March 31, 2022 and December 31, 2021; 0 shares issued and

   outstanding at March 31, 2022 and December 31, 2021.

 

 

-

 

 

 

-

 

Common stock, $0.0001 par value, 1,000,000,000 shares

   authorized at March 31, 2022 and December 31, 2021; 135,451,587

   and 134,046,926 shares issued and outstanding at March 31, 2022

   and December 31, 2021, respectively.

 

 

13

 

 

 

13

 

Additional paid-in capital

 

 

1,898,241

 

 

 

1,852,071

 

Accumulated other comprehensive loss

 

 

(238

)

 

 

(583

)

Accumulated deficit

 

 

(733,631

)

 

 

(662,212

)

Total stockholders’ equity

 

 

1,164,385

 

 

 

1,189,289

 

Total liabilities, redeemable convertible preferred stock and stockholders’

   equity

 

$

1,672,264

 

 

$

1,690,657

 

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)

 

 

 

Three Months Ended March 31,

 

(in thousands, except share and per share amounts)

 

2022

 

 

2021

 

Revenue

 

$

159,516

 

 

$

113,938

 

Cost of revenue

 

 

33,332

 

 

 

20,359

 

Gross profit

 

 

126,184

 

 

 

93,579

 

Operating expenses

 

 

 

 

 

 

 

 

Sales and marketing

 

 

93,915

 

 

 

53,965

 

Research and development

 

 

60,254

 

 

 

34,545

 

General and administrative

 

 

43,152

 

 

 

17,927

 

Total operating expenses

 

 

197,321

 

 

 

106,437

 

Loss from operations

 

 

(71,137

)

 

 

(12,858

)

Interest expense, net

 

 

(491

)

 

 

(562

)

Other income (expense), net

 

 

543

 

 

 

(183

)

Loss before provision for income taxes

 

 

(71,085

)

 

 

(13,603

)

Provision for income taxes

 

 

334

 

 

 

129

 

Net loss

 

$

(71,419

)

 

$

(13,732

)

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

 

$

(0.53

)

 

$

(0.44

)

Weighted-average shares used in computing net loss per share attributable

    to common stockholders, basic and diluted

 

 

134,530,010

 

 

 

31,357,060

 

Total comprehensive loss

 

 

 

 

 

 

 

 

Net loss

 

$

(71,419

)

 

$

(13,732

)

Foreign currency translation adjustment

 

 

345

 

 

 

(24

)

Comprehensive loss

 

$

(71,074

)

 

$

(13,756

)

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)

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Convertible

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

(in thousands, except share amounts)

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

(Deficit)

 

Balances as of December 31, 2020

 

 

85,331,278

 

 

$

727,474

 

 

 

 

30,707,113

 

 

$

3

 

 

$

124,755

 

 

$

187

 

 

$

(397,047

)

 

$

(272,102

)

Exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

1,264,484

 

 

 

-

 

 

 

11,038

 

 

 

-

 

 

 

-

 

 

 

11,038

 

Stock-based compensation

 

 

-

 

 

 

676

 

 

 

 

-

 

 

 

-

 

 

 

9,710

 

 

 

-

 

 

 

-

 

 

 

9,710

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(24

)

 

 

-

 

 

 

(24

)

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(13,732

)

 

 

(13,732

)

Balances as of March 31, 2021

 

 

85,331,278

 

 

$

728,150

 

 

 

 

31,971,597

 

 

$

3

 

 

$

145,503

 

 

$

163

 

 

$

(410,779

)

 

$

(265,110

)

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Convertible

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

(in thousands, except share amounts)

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balances as of December 31, 2021

 

 

-

 

 

$

-

 

 

 

 

134,046,926

 

 

$

13

 

 

$

1,852,071

 

 

$

(583

)

 

$

(662,212

)

 

$

1,189,289

 

Exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

697,998

 

 

 

-

 

 

 

6,795

 

 

 

-

 

 

 

-

 

 

 

6,795

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

39,375

 

 

 

-

 

 

 

-

 

 

 

39,375

 

Issuance of common stock upon settlement

    of restricted stock units

 

 

-

 

 

 

-

 

 

 

 

706,663

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

345

 

 

 

-

 

 

 

345

 

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(71,419

)

 

 

(71,419

)

Balances as of March 31, 2022

 

 

-

 

 

$

-

 

 

 

 

135,451,587

 

 

$

13

 

 

$

1,898,241

 

 

$

(238

)

 

$

(733,631

)

 

$

1,164,385

 

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

 

$

(71,419

)

 

$

(13,732

)

Adjustments to reconcile net loss to net cash provided by operating activities

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

37,209

 

 

 

10,303

 

Depreciation and amortization

 

 

15,147

 

 

 

7,301

 

Abandonment of long-lived assets

 

 

-

 

 

 

554

 

Noncash lease expense

 

 

2,156

 

 

 

1,866

 

Unrealized foreign currency (gain) loss, net

 

 

(477

)

 

 

605

 

Deferred income taxes

 

 

(352

)

 

 

(27

)

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

34,125

 

 

 

20,723

 

Deferred contract cost assets

 

 

(4,066

)

 

 

(1,562

)

Prepaid expenses and other assets

 

 

(4,925

)

 

 

(4,601

)

Accounts payable

 

 

339

 

 

 

(3,516

)

Accrued expenses and other liabilities

 

 

(4,357

)

 

 

5,115

 

Deferred revenue

 

 

8,774

 

 

 

6,639

 

Operating lease liabilities

 

 

(1,870

)

 

 

(1,372

)

Net cash flow provided by operating activities

 

 

10,284

 

 

 

28,296

 

Investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(7,525

)

 

 

(2,393

)

Capitalized software development costs

 

 

(7,632

)

 

 

(2,193

)

Purchases of strategic investments

 

 

(2,329

)

 

 

-

 

Settlement of post-close working capital adjustments from business

   combinations

 

 

1,291

 

 

 

-

 

Net cash flow used in investing activities

 

 

(16,195

)

 

 

(4,586

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

6,907

 

 

 

11,627

 

Payments of deferred offering costs

 

 

-

 

 

 

(540

)

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

   incentives

 

 

(365

)

 

 

(314

)

Net cash flow provided by financing activities

 

 

6,542

 

 

 

10,773

 

Net increase in cash, cash equivalents and restricted cash

 

 

631

 

 

 

34,483

 

Effect of exchange rate changes on cash

 

 

175

 

 

 

(629

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

589,212

 

 

 

383,253

 

Cash, cash equivalents and restricted cash, end of period

 

$

590,018

 

 

$

417,107

 

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

 

$

586,914

 

 

$

413,761

 

Restricted cash, current at end of period included in prepaid expenses and other

   current assets

 

 

-

 

 

 

242

 

Restricted cash, non-current at end of period included in other assets

 

 

3,104

 

 

 

3,104

 

Total cash, cash equivalents and restricted cash at end of period shown in the

   condensed consolidated statements of cash flows

 

$

590,018

 

 

$

417,107

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest other than finance leases

 

$

38

 

 

$

40

 

Cash paid for income taxes

 

 

98

 

 

 

-

 

Cash received for lease incentives

 

 

405

 

 

 

93

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

 

Operating cash flows from finance leases

 

 

511

 

 

 

525

 

Operating cash flows from operating leases

 

 

2,518

 

 

 

1,732

 

Financing cash flows from finance leases

 

 

454

 

 

 

407

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable and

   accrued expenses at period end

 

 

1,521

 

 

 

399

 

Capitalized software development costs included in accounts payable and

   accrued expenses at period end

 

 

1,829

 

 

 

591

 

Deferred offering costs included in accounts payable and accrued expenses at

   period end

 

 

270

 

 

 

2,113

 

Stock-based compensation capitalized for software development

 

 

2,166

 

 

 

83

 

Conversion of available-for-sale debt securities into equity securities

 

 

3,292

 

 

 

-

 

Right of use assets obtained in exchange for operating lease liabilities

 

 

6,993

 

 

 

76

 

Noncash net change due to operating lease remeasurement

 

 

(1,676

)

 

 

(14

)

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 single 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 $6.0 million were recorded as other assets on the condensed consolidated balance sheet as of March 31, 2021, and consisted of costs incurred in connection with the sale of the Company’s common stock in the IPO, including certain legal, accounting, printing, and other IPO related costs. Upon the closing of the IPO, deferred offering costs of $7.5 million were reclassified to stockholders’ equity as a reduction from the proceeds of the offering. There are no deferred offering costs as of March 31, 2022.

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 $4.9 million at the option of the investees.

As of March 31, 2022, the Company held investments in equity securities of privately held companies of $9.5 million, including $3.2 million of securities that were converted from certain previously held available-for-sale debt securities. There were no material gains or losses upon the conversion of the previously held debt securities into equity securities. The Company held $3.8 million of investments in equity securities of privately held companies as of December 31, 2021. Investments in equity securities are recorded in other assets in the condensed consolidated balance sheets. There were no impairments, changes in fair value, or realized gains or losses related to the investments in equity securities during the periods presented.

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 $3.5 million of investments in available-for-sale debt securities of privately held companies as of December 31, 2021, included within other assets in the condensed consolidated balance sheet. As of March 31, 2022, investments in available-for-sale debt securities of privately held companies are immaterial. No changes in fair value or impairments have been recorded for available-for-sale debt securities during the periods presented.

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 $518.5 million and $514.9 million, respectively, were held in money market funds.

 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 $128.2 million and $93.9 million during the three months ended March 31, 2022 and 2021, respectively, that was included in deferred revenue balances at the beginning of the respective periods.

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 $626.7 million, of which the Company expects to recognize approximately 71% as revenue in the next 12 months and substantially all of the remainder between 12 and 36 months thereafter.

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 $1.1 million, included in other current liabilities within the condensed consolidated balance sheet.

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 one to 10 years. Some of our leases include an option for the Company to extend the term of the lease for up to 10 years.

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 $7.0 million during the three months ended March 31, 2022. The lease additions during the three months ended March 31, 2022 primarily relate to an office space lease in Sydney, Australia, which was executed prior to December 31, 2021 and commenced in 2022, and an office space lease in New York, which was executed during the first quarter of 2022.

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

 

$

157,959

 

 

$

(22,568

)

 

$

135,391

 

Customer relationships

 

 

66,350

 

 

 

(9,240

)

 

 

57,110

 

Total

 

$

224,309

 

 

$

(31,808

)

 

$

192,501

 

 

 

 

December 31, 2021

 

 

 

Gross Carrying

 

 

Accumulated

 

 

Net Carrying

 

 

 

Amount

 

 

Amortization

 

 

Amount

 

Developed technology

 

$

157,773

 

 

$

(16,013

)

 

$

141,760

 

Customer relationships

 

 

66,350

 

 

 

(6,133

)

 

 

60,217

 

Total

 

$

224,123

 

 

$

(22,146

)

 

$

201,977

 

 


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

 

$

5,654

 

 

$

1,086

 

Sales and marketing

 

 

3,106

 

 

 

479

 

Research and development

 

 

902

 

 

 

183

 

Total amortization of acquired intangible assets

 

$

9,662

 

 

$

1,748

 

 

Goodwill

 As of March 31, 2022, the Company had goodwill of $540.0 million in its condensed consolidated balance sheet. During the three months ended March 31, 2022, goodwill decreased by $0.9 million due to the settlement of post-close working capital adjustments from business combinations which were completed in the fourth quarter of 2021, and the effect of foreign currency translation. There was no impairment of goodwill during the periods presented.

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):