Procore Technologies, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Procore provides cloud-based construction management software, primarily through fixed-fee subscriptions. Financial amounts below are in millions of dollars unless noted.
Key financial metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $172.2 | $122.8 | $331.7 | $236.7 |
| Gross profit / GAAP gross margin | $135.5 / 79% | $97.3 / 79% | $261.7 / 79% | $190.9 / 81% |
| Operating loss / margin | $(72.3) / (42%) | $(149.1) / (121%) | $(143.4) / (43%) | $(161.9) / (68%) |
| Net loss | $(73.1) | $(149.7) | $(144.5) | $(163.5) |
| Operating cash flow | Not presented separately | Not presented separately | $(16.7) | $25.2 |
- Q2 revenue grew 40% year over year; Levelset contributed $7.3 million. First-half revenue also grew 40%, including $14.2 million from Levelset.
- Q2 non-GAAP gross margin was 83%, versus 84% a year earlier. Non-GAAP operating loss was $25.3 million, or a 15% negative margin, versus $4.7 million, or a 4% negative margin. For the first half, non-GAAP operating loss was $44.9 million, or a 14% negative margin, versus $5.2 million, or a 2% negative margin.
- Cash and cash equivalents were $563.2 million at June 30, versus $586.1 million at December 31, 2021. Cash, cash equivalents and restricted cash totaled $566.3 million. Current assets were $715.8 million and current liabilities $419.4 million.
- The company terminated its $75 million credit facility on April 29, 2022; it reported no borrowings at December 31, 2021. Non-current finance lease liabilities were $46.5 million. Outstanding $6.5 million letters of credit remained unsecured after facility termination.
- Materials-financing receivables were $12.0 million, up from $4.4 million at year-end; the company reported an immaterial allowance. Six-month investing cash outflow was $30.4 million and financing cash inflow was $25.0 million.
Material changes versus the prior comparable period
- Revenue growth reflected customer additions and expansion, including purchases of additional products or construction volume. Customers excluding acquired-company customers on legacy contracts rose 20% year over year to 13,403; Procore added 594 net new customers in Q2.
- GAAP operating and net losses narrowed substantially year over year, but prior-year results included a large IPO-related RSU compensation catch-up. Stock-based compensation expense was $33.9 million in Q2 2022 versus $137.4 million in Q2 2021, and $71.1 million for the first half versus $147.7 million.
- First-half operating cash flow shifted from $25.2 million provided to $16.7 million used. The filing attributes 2022 cash use to the net loss, partly offset by noncash charges and working-capital inflows.
- First-half GAAP gross margin declined two percentage points, to 79%, reflecting higher cost of revenue, including acquired-technology amortization and cloud hosting costs.
Outlook, commentary, risks and unusual items
- No numerical revenue, earnings or margin guidance is provided in the supplied filing text. Management expects existing cash to cover needs for at least 12 months, while cautioning that profitability may not be achieved in the foreseeable future.
- Management plans continued investment in sales and marketing, research and development, and international expansion, which may weigh on near-term results. Headcount was up year over year across cost of revenue and operating functions.
- The company said materials financing could use up to approximately 10% of current cash while it funds the program itself; it ultimately anticipates working with a capital provider. Risks include customer defaults, liquidity needs, lien-rights enforcement and evolving lending or commercial-financing regulation.
- Key broader risks include construction-industry and macroeconomic weakness, inflation and supply-chain or labor disruptions, competition, international expansion, cybersecurity and data privacy, acquisition integration, and the continuing uncertain effects of COVID-19. The company also identifies potential unauthorized-practice-of-law exposure in Levelset lien-rights services.
- The company reported no material pending legal proceedings and no material adverse litigation matters known to it. It reported effective disclosure controls at a reasonable-assurance level; integration of Levelset controls remains ongoing. Management expected Procore to cease being an emerging growth company on December 31, 2022.
Important facts for investors to verify
- Whether customer growth, renewals and existing-customer expansion sustain 40% revenue growth, and how much growth depends on Levelset or other acquisitions.
- How operating losses and cash use trend after adjusting for stock-based compensation and acquisition-related costs; non-GAAP measures exclude specified expenses and are not substitutes for GAAP results.
- Whether gross margin stabilizes as cloud-hosting costs and acquired-intangible amortization rise.
- Materials-financing receivable growth, repayment and default experience, cash committed to originations, and progress toward third-party funding.
- Integration of Levelset and the company’s readiness for emerging-growth-company reporting and auditor-attestation requirements.