Procore Technologies, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; filing dated November 4, 2022. Procore provides cloud-based construction management software, primarily through subscription contracts. Unless otherwise noted, figures below are in U.S. dollars and millions.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $186.4 | $132.0 | $518.2 | $368.7 |
| Gross profit / margin | $148.7 / 80% | $109.3 / 83% | $410.3 / 79% | $300.2 / 81% |
| Operating loss | $(71.8) | $(49.6) | $(215.3) | $(211.5) |
| Net loss | $(71.2) | $(50.7) | $(215.7) | $(214.2) |
| Net loss per share, basic and diluted | $(0.52) | $(0.39) | $(1.59) | $(2.71) |
Q3 revenue increased 41% year over year, driven by existing-customer expansion and new customers; Levelset contributed $8.5 million. Q3 sales and marketing expense rose 56% to $109.6 million, research and development rose 34% to $71.5 million, and general and administrative expense rose 12% to $39.4 million. Nine-month operating cash flow was $(10.1) million, versus $40.3 million provided in the prior-year period. Nine-month investing cash flow was $(338.6) million, including $293.1 million of marketable-security purchases, $24.8 million of capitalized software development, and $16.8 million of materials-financing originations.
At September 30, cash and cash equivalents were $264.6 million and marketable securities were $293.4 million, totaling $558.1 million. Total cash, cash equivalents and restricted cash was $561.2 million. Current assets were $735.4 million and current liabilities $458.9 million. The company reported no outstanding borrowings under its former credit facility, which it terminated in April 2022; $6.5 million of letters of credit remained outstanding unsecured. Non-current finance lease liabilities were $45.8 million. Accumulated deficit was $878.0 million.
Material changes and operating indicators
- Revenue grew 41% in both Q3 and the first nine months. Levelset generated $22.7 million of nine-month revenue; revenue from other 2021 acquisitions was not material in the periods described.
- GAAP gross margin declined to 80% in Q3 and 79% year to date, from 83% and 81%, respectively. The filing attributes higher costs in part to headcount, cloud hosting, and acquired-technology amortization.
- Non-GAAP operating margin was negative 7% in Q3 versus negative 4% a year earlier, and negative 11% for nine months versus negative 3%. These company-defined measures exclude stock-based compensation, acquired-intangible amortization, employee-stock payroll taxes, and acquisition-related expenses.
- Procore had 14,086 customers at September 30, up 21% year over year, excluding Levelset and Esticom customers until specified integration or renewal milestones. It added 683 net new customers in Q3, including 189 from LaborChart.
- Remaining performance obligations were $714.9 million; approximately 70% was expected to be recognized as revenue in the next 12 months, with substantially all of the remainder expected over the following 12–36 months.
Outlook, risks, and unusual items
- No specific quarterly or annual revenue or earnings guidance is provided in the supplied filing text. Management expects continued investment in sales and marketing, research and development, international expansion, and platform infrastructure; expenses may rise, and profitability is not assured.
- Management stated existing cash, cash equivalents, and marketable securities were expected to fund needs for at least 12 months. It also cautioned that future capital needs depend on growth, spending, acquisitions, economic conditions, and the materials-financing program.
- The materials-financing program had $13.6 million of customer receivables outstanding. Procore funds originations from its balance sheet and said it may use up to approximately 10% of its current cash position to support the program while it considers a future capital-provider partnership. Risks include customer defaults, liquidity demands, lien-rights enforcement, and evolving regulation.
- Management cited macroeconomic and construction-sector uncertainty, including inflation, supply-chain constraints, labor shortages, and potential effects of COVID-19. International expansion, competition, customer retention, cybersecurity and privacy, and acquisition integration are also identified risks.
- Stock-based compensation expense was $44.8 million in Q3 and $115.9 million for nine months. Acquired-intangible amortization was $9.6 million in Q3 and $28.9 million for nine months. The filing notes 2021 included a substantial IPO-related RSU compensation catch-up, affecting year-over-year comparisons.
- The filing reports no material pending legal proceedings and no material changes to contractual obligations. Potential indemnification payments are described as indeterminable and not accrued. Management said disclosure controls were effective at a reasonable assurance level; integration of Levelset controls remained ongoing.
Important facts for investors to verify
- Whether revenue growth and customer expansion continue, and how much growth comes from existing customers versus acquisitions.
- Whether gross-margin pressure and operating losses improve as hiring, hosting, and acquisition-related costs evolve.
- Whether operating cash flow turns positive and how cash and marketable securities change, including spending on materials financing.
- Materials-financing receivable performance, defaults, repayment timing, and regulatory or lien-enforcement developments.
- Progress integrating Levelset and LaborChart, including customer-metric treatment and any effects on controls, costs, or anticipated benefits.