Procore Technologies, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Procore provides cloud-based construction management software and earns substantially all revenue from subscriptions, generally priced by product mix and contracted annual construction volume. The company completed its IPO in May 2021.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $514.8 million | $400.3 million | +29% |
| Gross profit / gross margin | $416.5 million / 81% | $328.6 million / 82% | Margin down 1 percentage point |
| Operating loss | $285.9 million | $58.5 million | Loss widened |
| Net loss | $265.2 million | $96.2 million | Loss widened |
| Net cash from operating activities | $36.7 million | $21.9 million | Increased |
| Net cash used in investing activities | $541.8 million | $33.5 million | Higher, primarily due to acquisitions |
| Net cash from financing activities | $711.8 million | $272.1 million | Included IPO proceeds |
- Cash and cash equivalents were $586.1 million at year-end; cash, cash equivalents and restricted cash totaled $589.2 million. Total assets were $1.69 billion and total liabilities were $501.4 million.
- No borrowings were outstanding under the $75 million Silicon Valley Bank credit facility. After $6.5 million of letters of credit, $68.5 million was available; the facility was due to mature May 7, 2022.
- Finance and operating lease liabilities totaled $96.8 million. Management said existing cash and cash equivalents were expected to cover anticipated needs for at least 12 months.
- Remaining performance obligations were $602.6 million; approximately 70% was expected to be recognized as revenue in the next 12 months.
Material changes and unusual items
- Revenue growth reflected expansion among existing customers and new customers; Levelset contributed $4.2 million after its November acquisition. Customer count, excluding certain acquired-company customers on legacy contracts, rose 20% to 12,193.
- Operating expenses grew sharply: sales and marketing increased 63%, research and development 90%, and general and administrative 113%. The company attributed much of the increase to hiring and IPO-related stock compensation.
- Stock-based compensation expense rose to $227.2 million from $44.0 million. This included a $115.3 million cumulative catch-up charge when IPO-related performance conditions on previously granted RSUs were met.
- FY2021 acquisitions included Levelset for $484.1 million (including $426.1 million cash and $58.0 million stock), LaborChart for $76.2 million, and Indus for $24.3 million. Acquisitions, net of cash acquired, used $509.8 million in investing cash flow. Goodwill increased to $540.9 million from $126.0 million.
- The company raised $665.1 million in net IPO proceeds. A $23.8 million income tax benefit largely reflected a valuation-allowance release associated with deferred tax liabilities from acquisitions.
- GAAP gross margin was 81%, versus 82% in 2020; non-GAAP gross margin was 84%, versus 83%. Non-GAAP operating loss was $29.2 million, compared with $3.0 million in 2020; these non-GAAP measures exclude specified items, including stock compensation and acquired-intangible amortization.
Outlook, commentary and risks
The filing provides no specific revenue or earnings guidance. Management intends to invest in product development, sales and marketing, customer support, and international expansion, and expects expenses to increase. It sees international growth as an opportunity, while noting that such investment may weigh on near-term operating results. COVID-19’s continuing effects on construction activity and the company’s results remained uncertain.
- Key business risks include sustained losses, potentially slower growth, construction-sector downturns or lower construction volume, competition, and the ability to acquire and retain customers and expand product adoption.
- Management highlighted risks from acquisitions and integration, including Levelset and LaborChart; Levelset’s materials-finance activity also exposes the company to customer credit and liquidity risk.
- Other material exposures include cybersecurity and privacy compliance, service availability and reliance on AWS, international regulation and foreign-exchange movements, and legal or regulatory challenges involving Levelset lien-rights services.
- The company reported no pending legal proceedings expected to have a material adverse effect. It was an emerging growth company and did not include management’s assessment or auditor attestation of internal control over financial reporting in this filing; management reported disclosure controls were effective at a reasonable assurance level.
Important facts for investors to verify
- Whether customer growth, renewals, and expansion can sustain revenue growth as the company scales.
- How much of the FY2021 loss and expense increase reflects recurring operating costs versus IPO-related stock compensation and acquisition-related items.
- Whether acquisitions deliver expected customer, product, and cost benefits, and how acquired customers are incorporated into reported customer and ARR metrics.
- Liquidity and financing plans, including the credit facility’s maturity, acquisition commitments, lease obligations, and growth of Levelset’s materials-finance business.
- Progress toward profitability and cash generation, given the $265.2 million net loss and substantial planned investment.