PROCORE TECHNOLOGIES, INC. [PCOR] Filings

10-Q 1 pcor-20230630.htm 10-Q pcor-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________________________

FORM 10-Q

_________________________________________________________________

(Mark One)


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

For the quarterly period ended June 30, 2023


o			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 x No o

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 x No o

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	x	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	o

Emerging growth company	o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of July 28, 2023, the registrant had 142,384,209 shares of common stock, $0.0001 par value per share, outstanding.

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		Page
PART I.	FINANCIAL INFORMATION	5
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION	45
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 5 .	Other Information	71
Item 6.	Exhibits	73
Signatures		74

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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 fact contained in this Quarterly Report on Form 10-Q are forward-looking statements regarding our future operating results and financial position, our business strategy and plans, market growth and trends, and our objectives for future 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 ability to effectively manage our growth;

•anticipated performance, trends, growth rates, and challenges in our business and in the markets in which we operate or anticipate entering into;

•economic and industry trends, in particular the rate of adoption of construction management software and digitization of the construction industry, inflation, and challenging geopolitical conditions;

•our ability to attract new customers and retain and increase sales to existing customers;

•our ability to expand internationally;

•the effects of increased competition in our markets and our ability to compete effectively;

•our estimated total addressable market;

•our expectations regarding our ability to successfully integrate our recent acquisitions into our business and receive the anticipated benefits from such transactions;

•our ability to develop new products, services, and features, and whether our customers and prospective customers will adopt these new products, services, 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, including our strategic investments and investments in marketable securities;

•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;

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

•the future trading price of our common stock.

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.

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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.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “Procore,” “we,” “us,” and “our” refer to Procore Technologies, Inc. and its consolidated subsidiaries.

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RISK FACTORS SUMMARY

Investing in our common stock involves a high degree of risk. Below is a summary of factors material to our business 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 performance. 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 in spending across the construction industry;

•the construction management software industry is evolving rapidly and may not develop in ways we expect. If we fail to respond adequately to changes in the industry, our business, financial condition, results of operations, and prospects could be materially adversely affected;

•we are continuing to expand our operations outside the U.S., where we may be subject to increased business, regulatory, and economic risks (including fluctuations in currency exchange rates) 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 retain and expand our customer base may be impaired, and our business may be harmed;

•our ability to increase our customer base and achieve broader market acceptance of our products, services, and platform will significantly depend on our ability to develop and expand our sales and marketing capabilities, the failure of which could materially adversely affect our business, financial condition, results of operations, and prospects;

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

•interruptions or performance issues associated with our products, services, and platform, including the interoperability of our platform across devices, operating systems, and third-party applications, could materially adversely affect our business, financial condition, results of operations, and prospects;

•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;

•if we cannot maintain our company culture as we grow, we could lose the innovation, teamwork, passion, and focus on execution that we believe contribute to our success;

•we are subject to stringent, changing, and sometimes potentially inconsistent obligations related to data privacy and security, both domestically and internationally, 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;

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•our failure to protect our intellectual property rights and proprietary information could diminish our brand and other intangible assets and otherwise materially adversely affect our business, financial condition, results of operations, and prospects;

•we may be unsuccessful in making, integrating, and maintaining acquisitions, joint ventures, and strategic investments, which could materially adversely affect our business, financial condition, results of operations, and prospects; and

•if we fail to maintain an effective system of disclosure controls and internal control over our financial reporting, including our acquired companies, 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.

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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)	June 30, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	312,518	$	296,712
Marketable securities (amortized cost of $291,017 and $286,001 at June 30, 2023 and December 31, 2022, respectively)	290,445		285,493
Accounts receivable, net of allowances for credit losses of $3,564 and $4,113 at June 30, 2023 and December 31, 2022, respectively	125,577		148,683
Contract cost asset, current	25,655		23,600
Prepaid expenses and other current assets	43,711		44,731
Total current assets	797,906		799,219
Capitalized software development costs, net	70,397		58,577
Property and equipment, net	37,121		39,193
Right of use assets - finance leases	35,681		37,026
Right of use assets - operating leases	40,223		41,934
Contract cost asset, non-current	42,112		40,477
Intangible assets, net	144,517		162,953
Goodwill	539,355		539,128
Other assets	18,640		21,903
Total assets	$	1,725,952	$	1,740,410
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	15,539	$	14,282
Accrued expenses	60,090		99,182
Deferred revenue, current	416,788		396,535
Other current liabilities	27,468		21,639
Total current liabilities	519,885		531,638
Deferred revenue, non-current	5,145		5,278
Finance lease liabilities, non-current	44,574		45,578
Operating lease liabilities, non-current	35,630		38,087
Other liabilities, non-current	4,283		3,049
Total liabilities	609,517		623,630
Commitments and contingencies (Note 8)
Stockholders’ equity
Preferred stock, $0.0001 par value, 100,000,000 shares authorized at June 30, 2023 and December 31, 2022; 0 shares issued and outstanding at June 30, 2023 and December 31, 2022.	—		—
Common stock, $0.0001 par value, 1,000,000,000 shares authorized at June 30, 2023 and December 31, 2022; 142,200,781 and 139,159,534 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively.	14		14
Additional paid-in capital	2,183,893		2,068,225
Accumulated other comprehensive loss	(2,001)		(2,316)
Accumulated deficit	(1,065,471)		(949,143)
Total stockholders’ equity	1,116,435		1,116,780
Total liabilities and stockholders’ equity	$	1,725,952	$	1,740,410

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Procore Technologies, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share and per share amounts)	2023		2022		2023		2022
Revenue	$	228,536	$	172,205	$	442,062	$	331,721
Cost of revenue	42,304		36,735		82,506		70,067
Gross profit	186,232		135,470		359,556		261,654
Operating expenses
Sales and marketing	125,362		103,283		242,725		197,198
Research and development	73,216		63,822		153,252		124,076
General and administrative	46,383		40,667		91,571		83,819
Total operating expenses	244,961		207,772		487,548		405,093
Loss from operations	(58,729)		(72,302)		(127,992)		(143,439)
Interest income	4,943		678		9,891		753
Interest expense	(491)		(567)		(987)		(1,133)
Accretion income, net	2,031		—		3,663		—
Other expense, net	(313)		(890)		(523)		(347)
Loss before provision for income taxes	(52,559)		(73,081)		(115,948)		(144,166)
Provision for income taxes	322		42		380		376
Net loss	$	(52,881)	$	(73,123)	$	(116,328)	$	(144,542)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.37)	$	(0.54)	$	(0.83)	$	(1.07)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	141,238,489		135,927,677		140,446,873		135,232,404
Other comprehensive income (loss)
Foreign currency translation adjustment, net of tax	$	395	$	(791)	$	379	$	(446)
Unrealized loss on available-for-sale debt and marketable securities, net of tax	(388)		—		(64)		—
Total other comprehensive income (loss)	7		(791)		315		(446)
Comprehensive loss	$	(52,874)	$	(73,914)	$	(116,013)	$	(144,988)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Procore Technologies, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
(in thousands, except share amounts)	Shares	Amount
Balance 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	—		—		—		—		—
Other comprehensive income	—	—		—		345		—		345
Net loss	—	—		—		—		(71,419)		(71,419)
Balance as of March 31, 2022	135,451,587	$	13	$	1,898,241	$	(238)	$	(733,631)	$	1,164,385
Exercise of stock options	509,505	—		8,220		—		—		8,220
Stock-based compensation	—	—		35,790		—		—		35,790
Issuance of common stock upon settlement of restricted stock units	552,401	1		—		—		—		1
Issuance of common stock for employee stock purchase plan	286,997	—		11,513		—		—		11,513
Adjustment of holdback share release for business combination	(605)	—		—		—		—		—
Other comprehensive loss	—	—		—		(791)		—		(791)
Net loss	—	—		—		—		(73,123)		(73,123)
Balance as of June 30, 2022	136,799,885	$	14	$	1,953,764	$	(1,029)	$	(806,754)	$	1,145,995

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Procore Technologies, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
(in thousands, except share amounts)	Shares	Amount
Balance as of December 31, 2022	139,159,534	$	14	$	2,068,225	$	(2,316)	$	(949,143)	$	1,116,780
Exercise of stock options	272,032	—		3,651		—		—		3,651
Stock-based compensation	—	—		47,060		—		—		47,060
Issuance of common stock upon settlement of restricted stock units	940,122	—		—		—		—		—
Other comprehensive income	—	—		—		308		—		308
Net loss	—	—		—		—		(63,447)		(63,447)
Balance as of March 31, 2023	140,371,688	$	14	$	2,118,936	$	(2,008)	$	(1,012,590)	$	1,104,352
Exercise of stock options	549,328	—		7,304		—				7,304
Stock-based compensation	—	—		44,647		—				44,647
Issuance of common stock upon settlement of restricted stock units	963,723	—		—		—				—
Issuance of common stock for employee stock purchase plan	316,042	—		13,006		—				13,006
Other comprehensive income	—	—		—		7				7
Net loss	—	—		—		—		(52,881)		(52,881)
Balance as of June 30, 2023	142,200,781	$	14	$	2,183,893	$	(2,001)	$	(1,065,471)	$	1,116,435

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Procore Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Six Months Ended June 30,
(in thousands)	2023		2022
Operating activities
Net loss	$	(116,328)	$	(144,542)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Stock-based compensation	87,425		71,104
Depreciation and amortization	34,210		30,550
Accretion of discounts on marketable debt securities, net	(3,662)		—
Abandonment of long-lived assets	535		887
Noncash operating lease expense	5,232		4,808
Unrealized foreign currency loss, net	557		355
Deferred income taxes	5		(638)
Provision for credit losses	3,730		642
Increase (decrease) in fair value of strategic investments	6		(81)
Changes in operating assets and liabilities
Accounts receivable	23,577		24,357
Deferred contract cost assets	(3,630)		(7,361)
Prepaid expenses and other assets	1,701		(5,116)
Accounts payable	1,149		5,926
Accrued expenses and other liabilities	(31,110)		(8,909)
Deferred revenue	19,582		15,706
Operating lease liabilities	(5,381)		(4,359)
Net cash provided by (used in) operating activities	17,598		(16,671)
Investing activities
Purchases of property and equipment	(4,694)		(9,433)
Capitalized software development costs	(17,351)		(16,252)
Purchases of strategic investments	(442)		(3,018)
Purchases of marketable securities	(229,282)		—
Maturities of marketable securities	222,726		—
Sales of marketable securities	5,452		—
Originations of materials financing	(17,007)		(9,259)
Customer repayments of materials financing	12,996		6,261
Settlement of post-close working capital adjustments from business combinations	—		1,291
Net cash used in investing activities	(27,602)		(30,410)
Financing activities
Proceeds from stock option exercises	10,939		14,604
Proceeds from employee stock purchase plan	13,006		11,513
Payments of deferred offering costs	—		(270)
Principal payments under finance lease agreements, net of proceeds from lease incentives	(930)		(844)
Net cash provided by financing activities	23,015		25,003
Net increase in cash, cash equivalents and restricted cash	13,011		(22,078)
Effect of exchange rate changes on cash	(309)		(806)
Cash, cash equivalents and restricted cash, beginning of period	299,816		589,212
Cash, cash equivalents and restricted cash, end of period	$	312,518	$	566,328

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Procore Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Six Months Ended June 30,
(in thousands)	2023		2022
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents at end of period	$	312,518	$	563,224
Restricted cash, non-current at end of period included in other assets	—		3,104
Total cash, cash equivalents and restricted cash at end of period shown in the condensed consolidated statements of cash flows	$	312,518	$	566,328
Supplemental disclosure of cash flow information
Cash paid for interest other than finance leases	$	—	$	74
Cash paid for income taxes, net of refunds received	685		832
Stock-based compensation capitalized for cloud-computing arrangement costs	155		115
Cash received for lease incentives	386		568
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	987		1,017
Operating cash flows from operating leases	6,389		5,595
Financing cash flows from finance leases	1,016		935
Noncash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued expenses at period end	698		3,024
Capitalized software development costs included in accounts payable and accrued expenses at period end	749		1,365
Stock-based compensation capitalized for software development	4,128		3,946
Conversion of available-for-sale debt securities into equity securities	—		3,550
Right of use assets obtained in exchange for operating lease liabilities	3,515		11,237
Noncash net change due to operating lease remeasurement	—		(1,671)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1.ORGANIZATION AND DESCRIPTION OF BUSINESS

Description of business

Procore Technologies, Inc. (together with its subsidiaries, “Procore” or the “Company”) provides a cloud-based construction management platform and related products and services 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. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“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, 2022. The condensed consolidated balance sheet information as of December 31, 2022 has been derived from the Company’s 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, 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, provision for credit losses, 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 the Company’s estimates.

Segments

The Company operates 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. The Company’s CODM is its Chief Executive Officer. In recent years, the Company has completed a number of acquisitions which have allowed it to expand its platform capabilities and related product and service offerings.

While the Company provides different product and service offerings, including as a result of its acquisitions, its business operates as one operating segment because its CODM evaluates the Company’s financial information for purposes of assessing financial performance and allocating resources on a consolidated basis.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Marketable securities

Investments with stated maturities of greater than three months are classified as marketable securities, which consist of United States (“U.S.”) treasury securities, commercial paper, corporate notes and obligations, and time deposits. The Company determines the appropriate classification of each investment at the time of purchase and re-evaluates such classification at each balance sheet date. The Company classifies each marketable debt security as either short-term or long-term at each balance sheet date based on the underlying investment’s contractual maturity date. Short-term investments are investments with an original maturity date of less than one year when purchased. All marketable securities held as of June 30, 2023 and December 31, 2022 are classified and accounted for as short-term available-for-sale debt securities, which are carried at fair value.

The Company periodically assesses its portfolio of marketable securities for impairment. The Company evaluates each investment in an unrealized loss position to determine if any portion of the unrealized loss is related to credit losses. In determining whether a credit loss may exist, the Company considers the extent of the unrealized loss position, any adverse conditions specifically related to the security or the issuer’s operating environment, the pay structure of the security, the issuer’s payment history, and any changes in the issuer’s credit rating. Unrealized losses on marketable securities due to expected credit losses are recognized in other (expense) income, net in the accompanying condensed consolidated statements of operations and comprehensive loss, and any excess unrealized gains and losses, net of tax, that are not due to expected credit losses are included in accumulated other comprehensive loss, a component of stockholders’ equity. During the three and six months ended June 30, 2023, there were no credit losses recorded on marketable securities. Interest recorded on marketable securities is recorded in interest income, with accretion of discounts, net of amortization of premiums, recorded in accretion income, net, on the accompanying condensed consolidated statements of operations and comprehensive loss.

Materials financing revenues and receivables

In connection with its acquisition of Express Lien, Inc. (d/b/a Levelset) (“Levelset”), in November 2021, the Company assumed a materials financing program, which facilitates the purchase of construction materials from fulfillment partners (the Company’s suppliers) on behalf of its customers, allowing such customers to finance their materials purchases from the Company on deferred payment terms. The fulfillment partner is primarily responsible for fulfilling the materials purchases and the Company does not have control over such materials. The Company earns revenues from origination fees and finance charges on the amounts it finances for customers on deferred payment terms, which are typically 120 days. Such fees earned are computed and recognized based on the effective interest method and are presented net of any related reserves and amortization of deferred origination costs.

Gross receivables outstanding from customers under the materials financing program were $16.7 million and $13.6 million as of June 30, 2023 and December 31, 2022, respectively. The related allowance for expected credit losses for materials financing receivables was $3.9 million and $2.1 million as of June 30, 2023 and December 31, 2022, respectively. Materials financing receivables, net of allowances, are recorded within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

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 June 30, 2023 and December 31, 2022, the Company’s net self-insurance accrual was $2.4 million and $1.9 million, respectively, included within other current liabilities on the condensed consolidated balance sheet.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Strategic investments

Investments in equity securities

The Company holds investments in equity securities of certain privately held companies, which do not have readily determinable fair values. The Company does not have a controlling interest or significant influence in these companies. The Company has 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 the security would no longer be eligible for this election. All gains and losses on such equity securities, realized and unrealized, are recorded in other (expense) income, net on the accompanying condensed consolidated statements of operations and comprehensive loss. The Company evaluates its 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 accompanying condensed consolidated statements of operations and comprehensive loss for the amount by which the carrying value exceeds the fair value of the investment.

Investments in limited partnership funds

The Company also holds investments in certain limited partnership funds. The Company does not hold a controlling interest or significant influence in these limited partnerships. The fair value of such investments is valued using the Net Asset Value (“NAV”) provided by the fund administrator as a practical expedient.

Available-for-sale debt securities

The Company also holds certain investments in debt securities of privately held companies, which are classified as available-for-sale debt securities. Such available-for-sale debt securities are recorded at fair value with changes in fair value recorded in other comprehensive income or loss. The Company periodically reviews its 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 (expense) income, 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.

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.

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 June 30, 2023 and December 31, 2022, 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 measures its cash held in money market funds, marketable securities, and investments in available-for-sale debt securities at fair value each reporting period. The estimation of fair value for available-for-sale debt securities in private companies requires the use of significant unobservable inputs, and as a result, the Company classifies these assets as Level 3 within the fair value hierarchy.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company’s investments in equity securities of privately held companies are recorded at fair value on a non-recurring basis. 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 uses them to estimate the fair value of the investments. The Company’s investments in limited partnerships are valued using NAV as a practical expedient and therefore excluded from the fair value hierarchy.

Restricted cash

As of December 31, 2022, the Company held $3.1 million of restricted cash to secure corporate credit cards. During the three months ended June 30, 2023, $3.1 million of restricted cash was released from restriction, based on negotiations with the related bank.

Deferred revenue

Contract liabilities consist of revenue that is deferred when the Company has the contractual right to invoice in advance of transferring services to its customers. The Company recognized revenue of $185.1 million and $140.7 million during the three months ended June 30, 2023 and 2022, respectively, that was included in deferred revenue balances at the beginning of the respective periods. The Company recognized revenue of $286.2 million and $214.3 million during the six months ended June 30, 2023 and 2022, 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 (“RPO”) 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. Our current RPO represents future revenue under existing contracts that is expected to be recognized as revenue in the next 12 months. As of June 30, 2023, the aggregate amount of the transaction price allocated to RPO was $849.5 million, of which the Company expects to recognize $622.6 million, or 73%, as revenue in the next 12 months, and substantially all of the remaining $226.9 million between 12 and 36 months thereafter.

3.INVESTMENTS

Marketable securities

Marketable securities consisted of the following as of June 30, 2023 (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. treasury securities	$	77,608	$	1	$	(133)	$	77,476
Commercial paper	74,524		1		(148)		74,377
Corporate notes and obligations	99,975		1		(264)		99,712
Time deposits	38,910		19		(49)		38,880
Total marketable securities	$	291,017	$	22	$	(594)	$	290,445

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Marketable securities consisted of the following as of December 31, 2022 (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. treasury securities	$	86,666	$	7	$	(196)	$	86,477
Commercial paper	73,234		6		(326)		72,914
Corporate notes and obligations	65,150		—		—		65,150
Time deposits	60,951		1		—		60,952
Total marketable securities	$	286,001	$	14	$	(522)	$	285,493

All marketable securities held as of June 30, 2023 and December 31, 2022 had a contractual maturity of less than one year. During the six months ended June 30, 2023, there were maturities and sales of marketable securities of $222.7 million and $5.5 million, respectively. Realized losses on the sale of marketable securities are recorded in other expense, net on the condensed consolidated statements of operations and comprehensive loss. Such losses were immaterial during the six months ended June 30, 2023. There were no impairments of marketable securities in any period presented.

Strategic investments

Strategic investment activity during the six months ended June 30, 2023 is summarized as follows (in thousands):


	Equity Securities		Limited Partnerships		Available-for- Sale Debt Securities		Total
Balance as of December 31, 2022	$	7,286	$	3,402	$	355	$	11,043
Interest accrued on available-for-sale debt securities	—		—		4		4
Purchases of strategic investments	—		442		—		442
Unrealized loss on strategic investments	—		(6)		—		(6)
Balance as of June 30, 2023	$	7,286	$	3,838	$	359	$	11,483

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Strategic investment activity during the six months ended June 30, 2022 is summarized as follows (in thousands):


	Equity Securities		Limited Partnerships		Available-for- Sale Debt Securities		Total
Balance as of December 31, 2021	$	3,882	$	-	$	3,450	$	7,332
Interest accrued on available-for-sale debt securities	—		—		101		101
Purchases of strategic investments	—		2,668		350		3,018
Conversion of available-for-sale debt securities into equity securities	3,550		—		(3,550)		—
Unrealized gain (loss) on strategic investments	186		(105)		130		211
Balance as of June 30, 2022	$	7,618	$	2,563	$	481	$	10,662

Strategic investments are recorded in other assets in the condensed consolidated balance sheets. As of June 30, 2023, in connection with the Company’s investments in limited partnerships, it has a contractual obligation to provide additional investment funding of up to $5.9 million at the option of the investees. No impairment losses were recorded in any period presented.

4.FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial assets measured at fair value on a recurring basis within the fair value hierarchy are summarized as follows (in thousands):


	June 30, 2023
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	279,731			$	—	$	279,731
Marketable securities:
U.S. treasury securities	77,476				—		77,476
Commercial paper	—		74,377		—		74,377
Corporate notes and obligations	—		99,712		—		99,712
Time deposits	—		38,880		—		38,880
Strategic investments:
Investments in available-for-sale debt securities	—		—		359		359
Total	$	357,207	$	212,969	$	359	$	570,535

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	30,200	$	—	$	—	$	30,200
Marketable securities:
U.S. treasury securities	86,477		—		—		86,477
Commercial paper	—		72,914		—		72,914
Corporate notes and obligations	—		65,150		—		65,150
Time deposits	—		60,952		—		60,952
Strategic investments:
Investments in available-for-sale debt securities	—		—		355		355
Total	$	116,677	$	199,016	$	355	$	316,048

5.LEASES

The Company has primarily entered into lease arrangements for office space, in addition to other miscellaneous equipment. The Company’s leases have initial non-cancelable lease terms ranging from one to 10 years. Some of the Company’s leases include an option for it 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 the Company’s condensed consolidated balance sheet of $3.5 million and $11.2 million during the six months ended June 30, 2023 and 2022, respectively.

6.INTANGIBLE ASSETS AND GOODWILL

Intangible assets

The Company’s finite-lived intangible assets are summarized as follows (in thousands):


	June 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Useful Life (Years)
Developed technology	$	157,302	$	(54,364)	$	102,938	4.7
Customer relationships	66,350		(24,771)		41,579		4.5
Total	$	223,652	$	(79,135)	$	144,517	4.7


	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Useful Life (Years)
Developed technology	$	157,130	$	(41,968)	$	115,162	5.1
Customer relationships	66,350		(18,559)		47,791		4.9
Total	$	223,480	$	(60,527)	$	162,953	5.1

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company estimates that there is no significant residual value related to its intangible assets. Intangible assets amortization expense is summarized as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cost of revenue	$	5,493	$	5,654	$	10,986	$	11,308
Sales and marketing	3,106		3,106		6,213		6,212
Research and development	675		895		1,409		1,797
Total amortization of acquired intangible assets	$	9,274	$	9,655	$	18,608	$	19,317

Goodwill

As of June 30, 2023, the Company had goodwill of $539.4 million on its condensed consolidated balance sheet. The change in the Company’s goodwill balance during the three and six months ended June 30, 2023 was due to the effect of foreign currency translation. There was no impairment of goodwill during the periods presented.

7.ACCRUED EXPENSES

The following represents the components of accrued expenses contained within the Company’s condensed consolidated balance sheets at the end of each period (in thousands):


	June 30, 2023		December 31, 2022
Accrued bonuses	$	16,906	$	28,357
Accrued commissions	13,486		20,389
Accrued salary, payroll tax, and employee benefit liabilities	16,759		34,113
Other accrued expenses	12,939		16,323
Total accrued expenses	$	60,090	$	99,182

8.COMMITMENTS AND CONTINGENCIES

Purchase commitments

The Company’s purchase commitments relate to non-cancelable multi-year agreements with third parties to purchase software service subscriptions and other services. During the six months ended June 30, 2023, the Company executed a renewal agreement for hosting services for a total minimum commitment of $45.0 million, to be paid from February 2023 through February 2025. As of June 30, 2023, there was $40.1 million of minimum purchase commitments outstanding under the renewal agreement. Outside of this renewal agreement, there were no further material changes to the Company’s purchase commitments from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Litigation

From time to time, the Company may be subject to various litigation matters arising in the ordinary course of business. However, the Company is not aware of any currently pending legal matters or claims that could have a material adverse effect on its financial position, results of operations, or cash flows should such litigation be resolved unfavorably.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Indemnifications

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to customers, vendors, investors, directors, and officers with respect to certain matters, including, but not limited to, losses arising out of its breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable.

The Company has never paid a material claim, nor has the Company been sued in connection with these indemnification arrangements. To date, the Company has not accrued a liability for these guarantees because the likelihood of incurring a payment obligation, if any, in connection with these guarantees is not probable or reasonably estimable.

9.STOCK-BASED COMPENSATION

2021 Equity Incentive Plan

In May 2021, the Company’s board of directors (the “Board”) adopted, and the stockholders approved, the 2021 Equity Incentive Plan (the “2021 Plan”) with the purpose of granting stock-based awards, including stock options, stock appreciation rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance awards, and other forms of awards, to employees, directors, and consultants. As of December 31, 2022, a total of 37,664,961 shares of common stock were authorized for issuance under the 2021 Plan. The number of shares of the Company’s common stock reserved for issuance under the 2021 Plan automatically increases on January 1 of each calendar year, starting on January 1, 2022 through January 1, 2031, in an amount equal to either (i) 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the fiscal year before the date of each automatic increase, or (ii) a lesser number of shares determined by the Board prior to the applicable January 1. Accordingly, on January 1, 2023, the number of shares of common stock that may be issued under the 2021 Plan increased by an additional 6,957,976 shares. As a result, as of June 30, 2023, a total of 44,622,937 shares of common stock are authorized for issuance under the 2021 Plan. As of June 30, 2023, a total of 32,659,849 shares of common stock were available for issuance under the 2021 Plan. No stock options have been issued under the 2021 Plan.

Stock options

No stock options were granted during the periods presented.

The following table summarizes the stock option activity during the six months ended June 30, 2023:


	Number of Shares	Weighted- Average Exercise Price
Outstanding at December 31, 2022	5,723,772	$	12.65
Exercised	(821,360)	13.34
Canceled/Forfeited	(5,078)	21.36
Outstanding at June 30, 2023	4,897,334	12.53
Exercisable at June 30, 2023	4,879,584	$	12.48

As of June 30, 2023, the total unrecognized stock‑based compensation cost for unvested stock options was $0.1 million, which is expected to be recognized over a weighted-average period of 0.2 years.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Restricted stock units

In 2018, the Company began issuing RSUs to certain employees, officers, non-employee consultants, and directors. Substantially all of the RSUs granted subsequent to the Company’s initial public offering (“IPO”) vest based solely on continued service, which is generally over four years, on either a quarterly or annual vesting schedule.

The following table summarizes the RSU activity during the six months ended June 30, 2023:


	Number of Shares	Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2022	8,495,298	$	57.94
Granted	3,072,207	59.22
Vested	(1,903,845)	53.16
Canceled/Forfeited	(772,044)	67.57
Outstanding at June 30, 2023	8,891,616	$	58.57

As of June 30, 2023, the total unrecognized stock‑based compensation cost for all RSUs outstanding was $451.9 million, which is expected to be recognized over a weighted‑average vesting period of 2.7 years.

Restricted stock awards

In November 2021, the Company issued 199,670 RSAs to certain key employees in connection with the acquisition of Levelset that vest based on their continued service over a two-year period. The fair value of the RSAs issued was $95.05 per share, which was the closing trading stock price of the Company’s common stock on the acquisition date. These shares are released from restriction quarterly over a two-year period assuming the continued service of the employees. During the six months ended June 30, 2023, the Company recognized $5.3 million in stock-based compensation related to RSAs whose vesting was accelerated upon the departure of certain employees. The Company also expensed $3.4 million during the six months ended June 30, 2023 related to the accelerated vesting of cash retention amounts upon such employees’ departures, which were recorded in prepaid expenses and other current assets as of December 31, 2022.

As of June 30, 2023 and December 31, 2022, 188,149 and 99,833 shares have vested, respectively. During the six months ended June 30, 2023 and 2022, the Company recognized stock-based compensation expense of $7.1 million and $4.7 million, respectively, relating to these shares.

Employee Stock Purchase Plan

In May 2021, the Board adopted, and the stockholders approved, the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective immediately prior to the effective date of the Company’s IPO. A total of 2,600,000 shares of common stock were initially reserved for issuance under the ESPP. The number of shares of the Company’s common stock reserved for issuance under the ESPP automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2022 and continuing through January 1, 2031, by the lesser of (i) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year; and (ii) 3,900,000 shares, except before the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (i) and (ii). Accordingly, on January 1, 2023, the number of shares of common stock reserved under the ESPP increased by an additional 1,391,595 shares.

The offering periods are scheduled to start in May and November of each year. The ESPP provides for consecutive offering periods that will typically have a duration of 12 months in length and comprise two purchase periods of six months in length, subject to reset and rollover provisions.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The ESPP provides eligible employees with an opportunity to purchase shares of the Company’s common stock through payroll deductions of up to 15% of their eligible compensation, subject to a maximum of $25,000 of stock per calendar year. A participant may purchase a maximum of 2,500 shares of common stock during a purchase period. Amounts deducted and accumulated by the participant are used to purchase shares of common stock at the end of each six-month purchase period. The purchase price of the shares will be 85% of the lower of the fair market value of the common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the related offering period. However, in the event the fair value of the common stock on the purchase date is lower than the fair value on the first trading day of the offering period, the offering period is terminated immediately following the purchase and a new offering period begins the following day. Participants may generally end their participation at any time prior to the last 15 days of a purchase period and will be repaid their accrued contributions that have not yet been used to purchase shares of common stock. Participation ends automatically upon termination of employment.

The fair value of the ESPP purchase rights on the date of grant using the Black-Scholes option pricing model was estimated using the following assumptions during the six months ended June 30, 2023:


Risk-free interest rate			4.68% to 5.17%
Expected term (in years)			0.5 to 1.0
Estimated dividend yield			0.00%
Estimated weighted-average volatility			58.00% to 64.76%

The term for the ESPP purchase rights is the offering period. Given the Company's limited trading history, the Company continues to estimate volatility using the historical volatilities of a group of public companies in a similar industry and stage of life cycle, selected by management, in addition to considering the Company's own historical volatility, for a period commensurate with the term of the ESPP purchase rights. The interest rate is derived from government bonds with a similar term to the ESPP purchase right granted. The Company has not declared, nor does it expect to declare, dividends in the foreseeable future. Consequently, an expected dividend yield of zero is utilized. The fair value of the Company’s common stock used to value ESPP purchase rights is based on the trading price of our publicly traded common stock.

Employee payroll contributions accrued in connection with the ESPP were $4.9 million and $4.7 million as of June 30, 2023 and December 31, 2022, respectively, and are included within accrued expenses in the condensed consolidated balance sheet. Employee payroll contributions ultimately used to purchase shares will be reclassified to stockholders’ equity on the purchase date. Stock-based compensation expense related to the ESPP is recognized on a straight-line basis over the offering period. During the six months ended June 30, 2023 and 2022, the Company recorded stock-based compensation of $4.7 million and $6.7 million, respectively, in connection with the ESPP and 316,042 and 286,997 shares of the Company’s common stock, respectively, were purchased under the ESPP.

As of June 30, 2023, unrecognized stock-based compensation expense related to the ESPP was $10.5 million, which is expected to be recognized over a weighted-average period of 0.6 years.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Stock-based compensation

The Company recorded total stock-based compensation cost from stock options, RSUs, RSAs, and the ESPP as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cost of revenue	$	1,927	$	2,046	$	3,578	$	3,504
Sales and marketing	14,411		12,572		27,471		22,868
Research and development	16,269		13,144		36,048		26,152
General and administrative	9,880		6,133		20,328		18,580
Total stock-based compensation expense	$	42,487	$	33,895	$	87,425	$	71,104
Stock-based compensation capitalized for software development and cloud-computing arrangement implementation costs	2,161		1,895		4,283		4,061
Total stock-based compensation cost	$	44,648	$	35,790	$	91,708	$	75,165

10.INCOME TAXES

For the three months ended June 30, 2023 and 2022, income tax expenses recorded by the Company were $0.3 million and less than $0.1 million, respectively. For the six months ended June 30, 2023 and 2022, income tax expenses recorded by the Company were $0.4 million and $0.4 million, respectively. As of June 30, 2023, the Company maintained a full valuation allowance on its U.S. federal and state net deferred tax assets as it was more likely than not that those deferred tax assets would not be realized.

In determining quarterly provisions for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date income or loss, adjusted for discrete items, if any, arising in that quarter. The Company’s annual estimated effective tax rate differs from the U.S. federal statutory rate of 21% primarily as a result of state taxes, foreign taxes, and changes in the Company’s valuation allowance.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

11.NET LOSS PER SHARE

Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities. Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

As the Company has reported net losses attributable to common stockholders for all periods presented, all potentially dilutive securities are anti-dilutive and accordingly, basic net loss per share attributable to common stockholders equals diluted net loss per share attributable to common stockholders.

The following weighted-average potentially dilutive shares are excluded from the calculation of diluted earnings per share as they are anti-dilutive:


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Restricted stock units and restricted stock awards subject to future vesting	9,364,444	8,580,940	8,793,177	7,611,792
Shares issuable pursuant to the ESPP	498,366	513,973	446,222	596,071
Shares of common stock issuable from stock options	5,171,003	6,578,716	5,378,499	6,912,550
Total	15,033,813	15,673,629	14,617,898	15,120,413

12.GEOGRAPHIC INFORMATION

The following table sets forth the Company’s revenues by geographic region, which is determined based on the billing location of the customer (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenue by geographic region:
U.S.	$	196,308		$	147,174		$	380,233		$	283,378
Rest of the world	32,228			25,031			61,829			48,343
Total revenue	$	228,536		$	172,205		$	442,062		$	331,721
Percentage of revenue by geographic region:
U.S.	86		%	85		%	86		%	85		%
Rest of the world	14		%	15		%	14		%	15		%

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K dated March 1, 2023. You should review the disclosure under “Part II, Item 1A - Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. These statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments, except as required by law.

Overview

Our mission is to connect everyone in construction on a global platform.

We are a leading global provider of cloud-based construction management software, and are helping transform one of the oldest, largest, and least digitized industries in the world. We focus exclusively on connecting and empowering the construction industry’s key stakeholders, such as owners, general contractors, specialty contractors, architects, and engineers, to collaborate and access our capabilities from any location, on any internet-connected device. Our platform is modernizing and digitizing construction management by enabling real-time access to critical project information, simplifying complex workflows, and facilitating seamless communication among key stakeholders, all of which we believe positions us to serve as the system of record for the construction industry. We are also continuing to develop other programs and services, such as our materials financing program, to address related challenges faced by the construction industry’s key stakeholders. Adoption of our products, services, and platform helps our customers increase productivity and efficiency, reduce rework and costly delays, improve safety and compliance, and enhance financial transparency and accountability.

In short, we build the software for the people that build the world.

We serve customers ranging from small businesses managing a few million dollars of annual construction volume to global enterprises managing billions of dollars of annual construction volume. Our core customers are owners, general contractors, and specialty contractors operating across the commercial, residential, industrial, and infrastructure segments of the construction industry. We primarily sell subscriptions to access our products through our direct sales team, which is specialized by stakeholder, region, size, and type.

Our products are offered on our cloud-based platform and are designed to be easy to configure and deploy. Our users can access our products on computers, smartphones, and tablets through any web browser or from our mobile application available for both the iOS and Android platforms.

We generate substantially all of our revenue from subscriptions to access our products and have an unlimited user model that is designed to facilitate adoption and maximize usage of our platform by all project stakeholders. We primarily sell our products on a subscription basis for a fixed fee with pricing generally based on the number and mix of products and the annual construction volume contracted to run on our platform. As our customers subscribe to additional products or increase the annual construction volume contracted to run on our platform, we generate more revenue. We do not provide refunds for unused construction volume, or charge customers based on consumption or on a per project basis. Subscriptions to access our products include customer support and allow for unlimited users as we do not charge a per-seat or per-user fee. Customers can invite all project participants to engage with our platform as part of a project team, including customers’ employees and collaborators, who are other project participants who engage with our platform but do not pay us for such use. Further, multiple stakeholders can be customers on the same project and retain access to project information for the duration of their subscription.

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Certain Factors Affecting Our Performance

Acquiring New Customers and Retaining and Expanding Existing Customers’ Use of Our Platform

We are highly focused on continuing to acquire new customers to support our long-term growth. We intend to efficiently drive new customer acquisitions by continuing to invest across our sales and marketing engine to engage our prospective customers, increase brand awareness, and drive adoption of our products, services, and platform. The number of customers on our platform has increased from 13,403 as of June 30, 2022 to 15,704 as of June 30, 2023, including 189 customers from LaborChart, Inc. (“LaborChart”) when it was integrated into the sales process in the third quarter of 2022, reflecting a year-over-year growth rate of 17%. All aforementioned customer counts exclude customers acquired from Express Lien, Inc. (d/b/a Levelset) (“Levelset”) and Esticom, Inc. (“Esticom”) that have not yet been renewed onto standard Procore annual contracts. Remaining Levelset and Esticom legacy customers will be included in our customer metrics once they are renewed onto standard Procore annual contracts or upon integration of the sales process.

Our ability to generate revenue depends on maintaining our relationships with our customers. Our gross retention rate (“GRR”) reflects only customer losses and does not reflect customer expansion or contraction. We believe our high GRR demonstrates that we serve a vital role in our customers’ operations, as the vast majority of our customers continue to use our products and platform and to renew their subscriptions. We believe that GRR is a key metric to understand our ability to retain our customer base and to evaluate whether our products and platform are addressing our customers’ needs throughout the year.

To calculate GRR at the end of a particular period, we first calculate our annual recurring revenue (“ARR”) from the cohort of active customers at the end of the period 12 months prior to the end of the period selected. We define ARR at the end of a particular period as the annualized dollar value of our subscriptions from customers as of such period end date. For multi-year subscriptions, ARR at the end of a particular period is measured by using the stated contractual subscription fees as of the period end date on which ARR is measured. For example, if ARR is measured during the first year of a multi-year contract, the first-year subscription fees are used to calculate ARR. ARR at the end of a particular period includes the annualized dollar value of subscriptions for which the term has not ended, and subscriptions for which we are negotiating a subscription renewal. ARR should be viewed independently of revenue determined in accordance with accounting principles generally accepted in the U.S. (“GAAP” or “U.S. GAAP”) and does not represent our U.S. GAAP revenue on an annualized basis. ARR is not intended to be a replacement or forecast of revenue. We then calculate the value of ARR from any customers whose subscriptions terminated and were not renewed during the 12 months preceding the end of the period selected, which we refer to as churn. We then divide (a) the total prior period ARR minus churn by (b) the total prior period ARR to calculate the GRR. Our GRR was 94% and 95% as of June 30, 2023 and 2022, respectively.

Our ability to continue to grow our business and serve the broader needs of the construction industry depends on acquiring new customers, customers purchasing new products or signing up for new services, customers renewing and expanding their use of existing products and services, and maintaining or increasing the price of our existing products and services.

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Remaining Performance Obligations

Our subscriptions typically have a term of one to three years. The transaction price allocated to remaining performance obligations (“RPO”) under our subscriptions represents the contracted transaction price that has not yet been recognized as revenue, which includes deferred revenue and amounts under non-cancelable subscriptions that will be invoiced and recognized as revenue in future periods. Our current RPO (“cRPO”) represents future revenue under existing contracts that is expected to be recognized as revenue in the next 12 months.

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


	June 30,				Change
	2023		2022		Dollar		Percent

	(dollars in thousands)
Remaining performance obligations
Current	$	622,639	$	469,341	$	153,298	33	%
Non-current	226,877		184,593		42,284		23	%
Total remaining performance obligations	$	849,516	$	653,934	$	195,582	30	%

We believe that cRPO is a key metric to track our ability to win fixed revenue commitments from new customers and to expand and retain existing customers. As of June 30, 2023, cRPO increased by $153.3 million, or 33%, year-over-year. Approximately 45% of the increase was attributable to existing customers and 55% was attributable to new customers acquired during the twelve months ended June 30, 2023. We expect RPO to change from period to period primarily due to the size, timing, and duration of new customer contracts and customer renewals.

Continued Technology Innovation and Strategic Expansion of Our Products and Services

We plan to continue to invest in technology innovation and product development to enhance the capabilities of our platform. Additional features and products will also enable customers and collaborators to manage new workflows on our platform and allow us to attract a broader set of stakeholders. We have introduced new products and services developed in-house and through our acquisitions of Zimfly, Inc., Honest Buildings, Inc., Construction BI, LLC, Esticom, LaborChart, and Levelset.

In connection with our acquisition of Levelset, we assumed, and continue to develop, a materials financing program for our customers. Purchasers of construction materials, typically specialty contractors, generally pay their materials suppliers on 30-day payment terms but typically do not recoup their costs for such materials for 60 to 120 days after they submit invoices for those materials to the general contractors. This disconnect between payment terms set by suppliers and when specialty contractors receive payment for those materials can pose risk and uncertainty to specialty contractors and their ability to manage their cash flow. Our materials financing program facilitates the purchase of construction materials from fulfillment partners (our suppliers) on behalf of our customers, allowing such customers to pay us for the materials on deferred payment terms. We typically charge an origination fee upon purchase of the materials and a weekly finance charge until receipt of deferred payment in full. We use internal data where available on the performance and payment history of other project participants (like the property owner and general contractor) who are involved in the construction project to help determine whether to provide materials financing for a given project, and we secure such financing with mechanic’s lien rights. In circumstances of customer non-payment, our lien rights help enforce payment collections from property owners, lenders, and general contractors who are involved in such project, which in turn strengthens the collectability of amounts we finance for our customers. We are currently using capital from our balance sheet for our materials financing program. Ultimately, we anticipate partnering with a capital provider at the appropriate time to dedicate the financing needed to scale this program. Until that time, we may use up to approximately 10% of our current cash, cash equivalents, and marketable securities position to support the program.

We intend to continue to invest in building additional products, financial offerings, features, and functionality that expand our capabilities and facilitate the extension of our platform. For example, in March

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2023, we launched Procore Risk Advisors, a modern construction brokerage that offers insurance and surety solutions. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion. Our future success is dependent on our ability to successfully develop or acquire, market, and sell existing and new products and services to both new and existing customers.

International Growth

We see international expansion as a major, and largely greenfield, opportunity for growth as we look to capture a larger part of the worldwide construction market. We have started to grow our presence internationally with the opening of sales and marketing offices in Sydney, Australia and Vancouver and Toronto, Canada in 2017; London, England in 2018; Mexico City, Mexico in 2019; and Singapore, Republic of Singapore; Paris, France; Dublin, Ireland; and Dubai, United Arab Emirates (“UAE”) in 2022. We have also developed focused sales and marketing efforts in Germany, where we do not maintain an office location. As a result of our international efforts, we support multiple languages and currencies. Non-U.S. revenue as a percentage of our total revenue was 14% as of June 30, 2023 and 15% as of June 30, 2022. We determine the percentage of non-U.S. revenue based on the billing location of each customer. Fluctuations in foreign currencies may positively or negatively impact the amount of revenue that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars.

Furthermore, we believe global demand for our products, services, and platform will continue to increase as we expand our international sales and marketing efforts, and the awareness of our products, services, and platform grows. However, our ability to conduct our operations internationally will require considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, currencies, cultures, customs, legal, tax and regulatory systems, alternative dispute systems, and commercial markets. We have made, and plan to continue to make, significant investments in existing and select additional international markets. While these investments may adversely affect our operating results in the near term, we believe they will contribute to our long-term growth.

Macroeconomic Factors

Macroeconomic factors such as rising inflation, rising interest rates, volatility in capital markets, bank failures, and fluctuations in foreign exchange rates, may impact our operating expenses, customers’ spending, and cash flows. We do not currently believe that these macroeconomic factors have had a material impact on our business; however, as they develop, we continue to monitor the ways in which such factors may directly or indirectly impact our business, results of operations, and financial condition. See the section titled “Risk Factors” in Part II of this Quarterly Report on Form 10-Q for further discussion.

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Components of Results of Operations

Revenue

We generate substantially all of our revenue from subscriptions to access our products and related support. Subscriptions are sold for a fixed fee and revenue is recognized ratably over the term of the subscription. Our subscriptions generally have annual or multi-year terms, are typically subject to renewal at the end of the subscription term, and are non-cancelable. To the extent we invoice our customers in advance of revenue recognition, we record deferred revenue. Consequently, a portion of the revenue that we report each period is attributable to the recognition of revenue previously deferred related to subscriptions that we entered into during previous periods.

Cost of Revenue

Cost of revenue primarily consists of personnel-related compensation expenses for our customer support team, including salaries, benefits, stock-based compensation, payroll taxes, commissions, and bonuses. Cost of revenue also includes third-party hosting costs, amortization of acquired technology intangible assets, amortization of capitalized software development costs related to our platform, software license fees, and allocated overhead. We expect our cost of revenue to increase on an absolute dollar basis as our revenue and acquisition activities increase. We intend to continue to invest additional resources in platform hosting, customer support, and software development as we grow our business and to ensure that our customers are realizing the full benefit of our products. The level and timing of investment in these areas could affect our cost of revenue in the future.

Costs related to the development of internal-use software for new products and major platform enhancements are capitalized until the software is substantially complete and ready for its intended use. Capitalized software development costs are amortized on a straight-line basis over the developed software’s estimated useful life of two years and the amortization is recorded in cost of revenue.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development, and general and administrative expenses. For each of these categories of expense, personnel-related compensation expenses are the most significant component, which include salaries, stock-based compensation, commissions, benefits, payroll taxes, and bonuses. To support the growth of our business, we also increased our headcount in each of these categories.

Sales and Marketing

Sales and marketing expenses primarily consist of personnel-related compensation expenses for our sales and marketing organizations, advertising costs, marketing events, travel, trade shows and other marketing activities, amortization of acquired customer relationship intangible assets, contractor costs to supplement our staff levels, consulting services, and allocated overhead. We expense advertising and other promotional expenditures as incurred. We expect sales and marketing expenses to increase on an absolute dollar basis and vary from period to period as a percentage of revenue, as we increase our investment in sales and marketing efforts over the foreseeable future, primarily from increased headcount in sales and marketing as well as investment in marketing to drive customer growth.

Research and Development

Research and development expenses primarily consist of personnel-related compensation expenses for our engineering, product, and design teams, contractor costs to supplement our staff levels, consulting services, amortization of certain acquired intangible assets used in research and development activities, and allocated overhead. We expect research and development expenses to increase on an absolute dollar basis and vary from period to period as a percentage of revenue for the foreseeable future as we continue to invest in headcount to build, enhance, maintain, and scale our products, services, and platform.

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General and Administrative

General and administrative expenses primarily consist of personnel-related compensation expenses for our human resources, finance, information technology, legal, executive, and other administrative functions. Additionally, general and administrative expenses include non-personnel-related expenses, such as professional fees for audit, legal, tax, and other external consulting services; costs associated with operating as a public company, including insurance costs, professional services, investor relations, and other compliance costs; property and use taxes; licenses; travel and entertainment costs; and allocated overhead. We expect general and administrative expenses to increase on an absolute dollar basis and vary from period to period as a percentage of revenue, as we continue to increase the size of our general and administrative functions to support the growth of our business, including our international expansion.

Interest Income

Interest income consists primarily of interest income earned on our marketable securities, money market funds, and cash savings accounts.

Interest Expense

Interest expense consists primarily of costs associated with our finance leases.

Accretion Income, Net

Accretion income, net consists of accretion of discounts, net of amortization of premiums, related to our available-for-sale marketable debt securities.

Other (Expense) Income, Net

Other (expense) income, net primarily consists of gains or losses on foreign currency transactions, unrealized gains or losses on equity securities, and miscellaneous other income and expenses.

Provision for Income Taxes

Provision for income taxes consists primarily of income taxes of U.S. state franchise taxes and certain foreign jurisdictions in which we conduct business. As we expand our international operations, we expect to incur increased foreign tax expenses. We have a full valuation allowance for net U.S. deferred tax assets. The U.S. valuation allowance includes net operating loss carryforwards (“NOL carryforwards”) and tax credits related primarily to research and development for our operations in the U.S. We expect to maintain this full valuation allowance for our net U.S. deferred tax assets for the foreseeable future.

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Results of Operations

The following tables set forth our condensed consolidated statements of operations data and such data as a percentage of revenue for each of the periods indicated. Certain percentages below may not sum due to rounding.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Revenue	$	228,536	$	172,205	$	442,062	$	331,721
Cost of revenue(1)(2)(3)	42,304		36,735		82,506		70,067
Gross profit	186,232		135,470		359,556		261,654
Operating expenses
Sales and marketing(1)(2)(3)(4)	125,362		103,283		242,725		197,198
Research and development(1)(2)(3)(4)	73,216		63,822		153,252		124,076
General and administrative(1)(3)(4)	46,383		40,667		91,571		83,819
Total operating expenses	244,961		207,772		487,548		405,093
Loss from operations	(58,729)		(72,302)		(127,992)		(143,439)
Interest income	4,943		678		9,891		753
Interest expense	(491)		(567)		(987)		(1,133)
Accretion income, net	2,031		—		3,663		—
Other expense, net	(313)		(890)		(523)		(347)
Loss before provision for income taxes	(52,559)		(73,081)		(115,948)		(144,166)
Provision for income taxes	322		42		380		376
Net loss	$	(52,881)	$	(73,123)	$	(116,328)	$	(144,542)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Revenue	100	%	100	%	100	%	100	%
Cost of revenue(1)(2)(3)	19	%	21	%	19	%	21	%
Gross profit	81	%	79	%	81	%	79	%
Operating expenses
Sales and marketing(1)(2)(3)(4)	55	%	60	%	55	%	59	%
Research and development(1)(2)(3)(4)	32	%	37	%	35	%	37	%
General and administrative(1)(3)(4)	20	%	24	%	21	%	25	%
Total operating expenses	107	%	121	%	110	%	122	%
Loss from operations	(26	%)	(42	%)	(29	%)	(43	%)
Interest income	2	%	0	%	2	%	0	%
Interest expense	0	%	0	%	0	%	0	%
Accretion income, net	1	%	0	%	1	%	0	%
Other expense, net	0	%	(1	%)	0	%	0	%
Loss before provision for income taxes	(23	%)	(42	%)	(26	%)	(43	%)
Provision for income taxes	0	%	0	%	0	%	0	%
Net loss	(23	%)	(42	%)	(26	%)	(44	%)

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Cost of revenue	$	2,880	$	2,046	5,376		3,504
Sales and marketing	14,470		12,572		27,574		22,868
Research and development	16,270		13,144		36,051		26,152
General and administrative	9,909		6,133		20,384		18,580
Total stock-based compensation expense*	$	43,529	$	33,895	$	89,385	$	71,104

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

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Cost of revenue	$	5,493	$	5,654	$	10,986	$	11,308
Sales and marketing	3,106		3,106		6,213		6,212
Research and development	675		895		1,409		1,797
Total amortization of acquired intangible assets	$	9,274	$	9,655	$	18,608	$	19,317

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Cost of revenue	$	139	$	68	306		149
Sales and marketing	618		317		1,617		925
Research and development	891		523		2,247		1,550
General and administrative	503		182		1,135		727
Total employer payroll tax on employee stock transactions	$	2,151	$	1,090	$	5,305	$	3,351

(4)Includes acquisition-related expenses as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)
Sales and marketing	$	548	$	208	$	1,454	$	415
Research and development	204		1,090		6,188		2,191
General and administrative	—		1,081		—		2,119
Total acquisition-related expenses	$	752	$	2,379	$	7,642	$	4,725

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Comparison of the Three Months Ended June 30, 2023 and 2022

Revenue


	Three Months Ended June 30,				Change
	2023		2022		Dollar		Percent

	(dollars in thousands)
Revenue	$	228,536	$	172,205	$	56,331	33	%

During the three months ended June 30, 2023, our revenue increased by $56.3 million, or 33%, compared to the three months ended June 30, 2022, of which approximately 92% was attributable to revenue from existing customers and approximately 8% was attributable to revenue from new customers acquired during the three months ended June 30, 2023. The increase in revenue from existing customers includes the net benefit of a full quarter of subscription revenue in the second quarter of 2023 from customers that were newly acquired in the first quarter of 2023 and continued their subscriptions in the second quarter of 2023, and customers that expanded their subscriptions in the second quarter of 2023 through the purchase of additional construction volume or products and services.

Cost of Revenue, Gross Profit, and Gross Margin


	Three Months Ended June 30,						Change
	2023			2022			Dollar		Percent

	(dollars in thousands)
Cost of revenue	$	42,304		$	36,735		$	5,569	15	%
Gross profit	186,232			135,470			50,762		37	%
Gross margin	81		%	79		%

The increase in cost of revenue during the three months ended June 30, 2023 was primarily attributable to an increase of $3.8 million in personnel-related expenses from salaries and wages driven by headcount and merit increases. The increase in cost of revenue was also attributable to a $1.7 million increase in amortization of capitalized software development costs. We increased our cost of revenue headcount by 18% since June 30, 2022 in order to continue to support the growth of our business.

Operating Expenses


	Three Months Ended June 30,				Change
	2023		2022		Dollar		Percent

	(dollars in thousands)
Sales and marketing	$	125,362	$	103,283	$	22,079	21	%

The increase in sales and marketing expenses during the three months ended June 30, 2023 was primarily attributable to an increase of $21.2 million in personnel-related expenses, including increases of $19.1 million in salaries and wages and $1.8 million in stock-based compensation expense driven by headcount and merit increases. The increase in sales and marketing expenses was also attributable to a $1.6 million increase in marketing events and expenses. The increases in sales and marketing expenses were partially offset by a decrease of $1.2 million in professional fees due to the transition of certain contractors to full-time employees. We increased our sales and marketing headcount by 23% since June 30, 2022 in order to continue to drive customer growth.

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	Three Months Ended June 30,				Change
	2023		2022		Dollar		Percent

	(dollars in thousands)
Research and development	$	73,216	$	63,822	$	9,394	15	%

The increase in research and development expenses during the three months ended June 30, 2023 was primarily attributable to an increase of $10.7 million in personnel-related expenses, including increases of $7.2 million in salaries and wages and $3.1 million in stock-based compensation expense driven by headcount and merit increases. The increase in research and development expenses was also attributable to a $1.5 million increase in computer software expenses. We increased our research and development headcount by 7% since June 30, 2022 in order to continue to build, enhance, maintain, and scale our products, services, and platform.


Three Months Ended June 30,		Change
2023	2022

PROCORE TECHNOLOGIES, INC. [PCOR] Filings
10-Q	[2023-08-04]
10-Q	[2023-05-05]
10-K	[2023-03-01]
10-Q	[2022-11-04]
10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-03-04]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
S-1	[2020-02-28]