PROCORE(PCOR) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This part details Procore's unaudited financial statements and management's analysis of its financial condition and operations Item 1. Financial Statements (Unaudited) This section presents Procore's unaudited consolidated financial statements, covering balance sheets, operations, equity, cash flows, and detailed notes Condensed Consolidated Balance Sheets This section provides a snapshot of Procore's financial position, detailing assets, liabilities, and stockholders' equity at specific dates | (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total Assets | $2,004,101 | $2,101,371 | | Total Liabilities | $786,502 | $813,018 | | Total Stockholders' Equity | $1,217,599 | $1,288,353 | - Total assets decreased by approximately $97.3 million from December 31, 2024, to June 30, 2025, primarily driven by a decrease in cash and cash equivalents and current marketable securities[17] Condensed Consolidated Statements of Operations and Comprehensive Loss This section outlines Procore's financial performance over specific periods, detailing revenues, expenses, and net loss | (in thousands, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $323,919 | $284,347 | $634,551 | $553,775 | | Gross profit | $256,187 | $236,246 | $501,893 | $459,951 | | Loss from operations | $(30,267) | $(14,776) | $(66,512) | $(33,682) | | Net loss | $(21,089) | $(6,311) | $(54,078) | $(17,277) | | Net loss per share (basic and diluted) | $(0.14) | $(0.04) | $(0.36) | $(0.12) | - Revenue increased by 14% for the three months ended June 30, 2025, and by 15% for the six months ended June 30, 2025, compared to the respective prior-year periods, while net loss significantly widened for both periods year-over-year[20] Condensed Consolidated Statements of Stockholders' Equity This section details changes in Procore's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit | (in thousands, except share amounts) | Balance as of Dec 31, 2024 | Balance as of June 30, 2025 | | :----------------------------------- | :------------------------- | :-------------------------- | | Common Stock (Shares) | 149,853,135 | 150,189,021 | | Additional Paid-in Capital | $2,535,868 | $2,517,880 | | Accumulated Deficit | $(1,244,793) | $(1,298,871) | | Total Stockholders' Equity | $1,288,353 | $1,217,599 | - Total stockholders' equity decreased by $70.75 million from December 31, 2024, to June 30, 2025, primarily due to net loss and common stock repurchases, partially offset by stock-based compensation and proceeds from stock option exercises and ESPP[26] Condensed Consolidated Statements of Cash Flows This section presents Procore's cash inflows and outflows from operating, investing, and financing activities over specific periods | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $96,856 | $127,840 | | Investing activities | $(80,462) | $(151,296) |\ | Financing activities | $(131,804) | $22,433 | | Net decrease in cash | $(115,410) | $(1,023) | | Cash and cash equivalents, end of period | $324,262 | $356,239 | - Net cash provided by operating activities decreased by $30.98 million year-over-year[29] - Net cash used in financing activities significantly increased to $131.8 million in 2025, primarily due to common stock repurchases and tax withholding payments for net share settlement, contrasting with net cash provided in 2024[29] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the figures presented in the condensed consolidated financial statements 1. ORGANIZATION AND DESCRIPTION OF BUSINESS This note describes Procore Technologies, Inc.'s core business as a cloud-based construction management platform provider - Procore Technologies, Inc. provides a cloud-based construction management platform and related products and services, enabling collaboration among key stakeholders in the construction industry globally[33] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles and estimation methods used in preparing Procore's financial statements - The financial statements are prepared in accordance with U.S. GAAP and are unaudited, with certain disclosures condensed or omitted, and management makes estimates and assumptions affecting reported amounts, which are evaluated periodically[35][36] - The Company operates as a single operating segment, with the CEO evaluating financial performance and allocating resources on a consolidated basis[37][38][40] - Remaining Performance Obligations (RPO) totaled $1.3 billion as of June 30, 2025, with approximately 65% ($879.5 million) expected to be recognized as revenue in the next 12 months[58] 3. INVESTMENTS This note details Procore's marketable and strategic investments, including their fair values and changes over time | (in thousands) | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :----------------------------- | :----------------------- | :--------------------------- | | Marketable Securities | $382,487 | $383,715 | | U.S. treasury securities | $135,764 | $127,045 | | Commercial paper | $5,270 | $18,433 | | Corporate notes & obligations | $241,453 | $238,237 | | Strategic Investments | $15,073 | $14,354 | - Marketable securities remained relatively stable, with a slight decrease of $1.2 million[62][63] - Strategic investments increased by $0.7 million, primarily due to purchases in limited partnerships and unrealized gains[62][63] 4. FAIR VALUE OF FINANCIAL INSTRUMENTS This note details the fair value measurements of Procore's financial instruments, such as cash equivalents and marketable securities | (in thousands) | June 30, 2025 Total Fair Value | December 31, 2024 Total Fair Value | | :----------------------------- | :----------------------------- | :------------------------------- | | Cash Equivalents | $260,602 | $385,172 | | Money market funds | $240,155 | $384,648 | | U.S. treasury securities | $19,983 | — | | Time deposits | $145 | — | | Commercial paper | $424 | — | | Corporate notes & obligations | — | $524 | | Marketable Securities | $382,487 | $383,715 | | Total | $643,194 | $768,887 | - Total financial assets measured at fair value decreased by $125.69 million from December 31, 2024, to June 30, 2025, primarily driven by a reduction in money market funds[67] 5. BUSINESS COMBINATIONS This note describes Procore's recent acquisitions, including Novorender AS and Intelliwave Technologies Inc., and their financial impact - On January 28, 2025, Procore acquired Novorender AS for $44.3 million in cash, enhancing its capabilities for large-scale construction projects with advanced building information modeling rendering technology[68] Novorender Acquisition (January 28, 2025): | Asset/Liability Category | Fair Value (in thousands) | | :----------------------- | :------------------------ | | Developed technology | $19,100 | | Customer relationships | $4,900 | | Goodwill | $23,706 | | Net assets acquired | $43,183 | - On May 30, 2024, Procore acquired Intelliwave Technologies Inc. for $29.8 million in cash, accelerating the development of its Workforce Management solution[78] Intelliwave Acquisition (May 30, 2024): | Asset/Liability Category | Fair Value (in thousands) | | :----------------------- | :------------------------ | | Developed technology | $16,000 | | Customer relationships | $4,700 | | Goodwill | $11,333 | | Net assets acquired | $29,799 | 6. LEASES This note provides details on Procore's operating and finance leases, including right-of-use assets and lease liabilities - During the six months ended June 30, 2025, Procore modified office leases in Carpinteria, CA (reclassified to operating lease) and Austin, TX (expanded premises, extended terms, increased future rent commitments by $39.5 million)[89] | (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Operating right of use assets | $33,093 | $28,790 | | Total operating lease liabilities | $43,204 | $36,443 | | Finance right of use assets | $20,521 | $31,727 | | Total finance lease liabilities | $29,163 | $43,580 | 7. INTANGIBLE ASSETS AND GOODWILL This note details Procore's intangible assets, including developed technology and customer relationships, and goodwill from acquisitions | (in thousands) | June 30, 2025 Net Carrying Amount | December 31, 2024 Net Carrying Amount | | :----------------------------- | :-------------------------------- | :------------------------------------ | | Developed technology | $100,360 | $90,731 | | Customer relationships | $25,614 | $27,367 | | Total finite-lived intangible assets | $125,974 | $118,098 | | Goodwill | $574,105 | $549,651 | - Goodwill increased by $24.45 million, primarily due to the acquisition of Novorender[94][98] - Developed technology intangible assets increased, while customer relationships slightly decreased[94][98] Amortization Expense of Acquired Intangible Assets: | Category | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :------------------ | :---------------------------------------------- | :-------------------------------------------- | | Cost of revenue | $8,015 | $15,617 | | Sales and marketing | $3,346 | $6,651 | | R&D | $658 | $1,290 | | Total | $12,019 | $23,558 | 8. ACCRUED EXPENSES This note provides a breakdown of Procore's accrued expenses, including bonuses, salaries, payroll taxes, and employee benefits | (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Total accrued expenses | $97,561 | $88,740 | | Accrued bonuses | $24,840 | $28,878 | | Accrued salary, payroll tax, and employee benefit liabilities | $40,051 | $25,210 | - Total accrued expenses increased by $8.82 million, primarily driven by a significant increase in accrued salary, payroll tax, and employee benefit liabilities, partially offset by a decrease in accrued bonuses[100] 9. COMMITMENTS AND CONTINGENCIES This note outlines Procore's contractual commitments, such as hosting agreements, and discusses potential legal contingencies - The Company executed a new hosting services agreement with a total commitment of $94.0 million from March 2025 through February 2028[101] - Procore 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[102] 10. STOCKHOLDERS' EQUITY This note details changes in Procore's stockholders' equity, including stock-based compensation, repurchases, and equity plans - The 2021 Equity Incentive Plan authorized an additional 7,492,656 shares on January 1, 2025, bringing the total authorized to 59,355,916 shares, with 38,890,813 shares available for issuance as of June 30, 2025[107] Stock-based Compensation Expense: | Category | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :------------------------ | :---------------------------------------------- | :-------------------------------------------- | | Cost of revenue | $3,204 | $5,956 | | Sales and marketing | $17,473 | $32,307 | | Research and development | $21,230 | $39,602 | | General and administrative | $13,670 | $25,991 | | Total | $55,577 | $103,856 | - During the six months ended June 30, 2025, the Company repurchased and retired 1,499,094 shares of common stock for an aggregate of $103.2 million under its $300.0 million stock repurchase program, which expires on October 29, 2025[125][221] 11. INCOME TAXES This note provides information on Procore's income tax provisions, benefits, and the factors affecting its effective tax rate Income Tax (Benefit from) Provision: | Period | Amount (in thousands) | | :------------------------- | :-------------------- | | Three Months Ended June 30, 2025 | $(411) | | Three Months Ended June 30, 2024 | $490 | | Six Months Ended June 30, 2025 | $4,883 | | Six Months Ended June 30, 2024 | $753 | - The Company recorded an income tax benefit of $0.4 million for the three months ended June 30, 2025, but an income tax expense of $4.9 million for the six months ended June 30, 2025, primarily due to a foreign tax on the transfer of intellectual property acquired from Novorender[127][196] 12. NET LOSS PER SHARE This note explains the calculation of basic and diluted net loss per share, including potentially dilutive securities - Basic and diluted net loss per share are equal due to net losses, making all potentially dilutive securities anti-dilutive[132] Weighted-Average Potentially Dilutive Shares Excluded from Diluted EPS: | Category | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | | RSUs and PSUs subject to future vesting | 8,267 | 7,639 | | Shares issuable pursuant to the ESPP | 444 | 444 | | Shares of common stock issuable from stock options | 2,800 | 2,883 | | Total | 11,511 | 10,966 | 13. GEOGRAPHIC INFORMATION This note provides a breakdown of Procore's revenue by geographic region, highlighting U.S. versus international contributions Revenue by Geographic Region: | Region | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :-------------- | :---------------------------------------------- | :-------------------------------------------- | | U.S. | $276,144 (85%) | $540,741 (85%) | | Rest of the world | $47,775 (15%) | $93,810 (15%) | | Total Revenue | $323,919 | $634,551 | - U.S. revenue consistently accounted for 85% of total revenue for both the three and six months ended June 30, 2025 and 2024, indicating stable geographic distribution[133] 14. RESTRUCTURING This note details Procore's restructuring activities, including workforce reductions and associated costs incurred - In January 2024, the Company reduced its global workforce by 4% to align with key growth opportunities, incurring $4.185 million in restructuring-related costs, which were fully expensed by March 31, 2024[135][136] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of Procore's financial condition, operational results, liquidity, and critical accounting policies Overview This section introduces Procore's business model as a cloud-based construction management software provider and its revenue generation - Procore is a leading global provider of cloud-based construction management software, aiming to digitize and modernize the construction industry by connecting stakeholders on a single platform[141] - Revenue is primarily generated from subscriptions, with pricing based on the number/mix of products and the annual construction volume managed on the platform, encouraging unlimited users per project[145] Certain Factors Affecting Our Performance This section discusses key internal and external factors influencing Procore's financial performance and strategic direction Acquiring New Customers and Retaining and Expanding Existing Customers' Use of Our Platform This section details Procore's strategies and metrics for acquiring new customers, retaining existing ones, and expanding platform usage - The number of customers contributing over $100,000 in annual recurring revenue (ARR) increased by 15% year-over-year, from 2,191 to 2,517 as of June 30, 2025[149] - Total customers increased by 4% year-over-year, from 16,750 to 17,501 as of June 30, 2025[149] - Gross retention rate (GRR) was 95% as of June 30, 2025, up from 94% as of June 30, 2024, indicating strong customer retention[150] Remaining Performance Obligations This section provides an analysis of Procore's remaining performance obligations, indicating future revenue to be recognized Remaining Performance Obligations: | Category | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (Dollar in thousands) | Change (Percent) | | :---------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------- | | Current RPO (cRPO) | $879,489 | $724,832 | $154,657 | 21% | | Non-current RPO | $464,268 | $310,381 | $153,887 | 50% | | Total RPO | $1,343,757 | $1,035,213 | $308,544 | 30% | - Current RPO (cRPO) increased by 21% year-over-year, with approximately 36% of the increase from existing customers and 64% from new customers[154] Continued Technology Innovation and Strategic Expansion of Our Products and Services This section details Procore's ongoing technology innovation, strategic acquisitions, and product development to enhance its platform - Procore acquired Novorender AS (3D viewer/BIM platform) in January 2025 and Intelliwave Technologies Inc. (construction materials management) in May 2024 to expand platform capabilities[157] - The company launched Procore Pay in September 2023, a payment solution for general contractors and subcontractors[157] International Growth This section discusses Procore's international revenue contribution and its global sales and marketing presence - Non-U.S. revenue remained consistent at 15% of total revenue for the six months ended June 30, 2025 and 2024[158] - Procore maintains an international sales and marketing presence with offices in Australia, Canada, England, Ireland, and UAE, supporting multiple languages and currencies[158] Macroeconomic Factors This section analyzes the impact of broader economic conditions, such as inflation and interest rates, on Procore's business - Macroeconomic factors like inflation, higher interest rates, and recession risk have led to cautious customer spending and increased pricing sensitivity, impacting cRPO annual growth[160] Components of Results of Operations This section defines and explains the key revenue and expense categories contributing to Procore's operational results - Revenue is primarily from fixed-fee subscriptions, recognized ratably over the term, with a portion of current revenue attributable to previously deferred amounts[162] - Cost of revenue includes personnel-related expenses for customer support, third-party hosting, amortization of capitalized software development, and acquired technology intangible assets[163] - Operating expenses (Sales & Marketing, R&D, G&A) are primarily driven by personnel-related compensation, with R&D expenses expected to increase as the company continues to enhance its platform[165][166][167] Results of Operations This section provides a detailed comparison of Procore's financial performance across different reporting periods Comparison of the Three Months Ended June 30, 2025 and 2024 This section compares Procore's financial results for the three-month periods ended June 30, 2025, and 2024 Three Months Ended June 30: | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($ in thousands) | Change (%) | | :---------------------- | :------------------ | :------------------ | :---------------------- | :--------- | | Revenue | $323,919 | $284,347 | $39,572 | 14% | | Cost of Revenue | $67,732 | $48,101 | $19,631 | 41% | | Gross Profit | $256,187 | $236,246 | $19,941 | 8% | | Gross Margin | 79% | 83% | -4% | | | Sales and Marketing | $141,897 | $127,922 | $13,975 | 11% | | Research and Development| $88,902 | $72,308 | $16,594 | 23% | | General and Administrative| $55,655 | $50,792 | $4,863 | 10% | | Loss from Operations | $(30,267) | $(14,776) | $(15,491) | 105% | | Net Loss | $(21,089) | $(6,311) | $(14,778) | 234% | - Revenue growth was primarily driven by existing customers (82%) and new customers (18%)[182] - The increase in cost of revenue was due to higher personnel-related expenses, capitalized software amortization, and cloud hosting costs[183] - Operating expenses increased across all categories, with R&D showing the largest percentage increase (23%) due to a 49% increase in headcount for platform development[184][185] Comparison of the Six Months Ended June 30, 2025 and 2024 This section compares Procore's financial results for the six-month periods ended June 30, 2025, and 2024 Six Months Ended June 30: | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($ in thousands) | Change (%) | | :---------------------- | :------------------ | :------------------ | :---------------------- | :--------- | | Revenue | $634,551 | $553,775 | $80,776 | 15% | | Cost of Revenue | $132,658 | $93,824 | $38,834 | 41% | | Gross Profit | $501,893 | $459,951 | $41,942 | 9% | | Gross Margin | 79% | 83% | -4% | | | Sales and Marketing | $280,581 | $248,916 | $31,665 | 13% | | Research and Development| $176,511 | $142,907 | $33,604 | 24% | | General and Administrative| $111,313 | $101,810 | $9,503 | 9% | | Loss from Operations | $(66,512) | $(33,682) | $(32,830) | 97% | | Net Loss | $(54,078) | $(17,277) | $(36,801) | 213% | - Revenue growth was primarily from existing customers (70%) and new customers (30%)[189] - Cost of revenue increased due to higher personnel, capitalized software amortization, and cloud hosting costs, with headcount up 22%[190] - R&D expenses increased by 24%, driven by a 49% increase in headcount to support product development and platform scaling[192] - Provision for income taxes increased significantly by $4.1 million, mainly due to a foreign tax on the transfer of intellectual property from Novorender[194][196] Non-GAAP Financial Measures This section presents Procore's non-GAAP financial measures, providing alternative insights into its operating performance - Procore uses non-GAAP measures (excluding stock-based compensation, amortization of acquired intangibles, employer payroll tax on stock transactions, and acquisition-related expenses) to provide consistent and comparable insights into operating performance[197][199][200][201] Non-GAAP Gross Profit and Margin: | Metric | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :------------------ | :---------------------------------------------- | :-------------------------------------------- | | Non-GAAP Gross Profit | $270,270 | $529,107 | | Non-GAAP Gross Margin | 83% | 83% | Non-GAAP Income from Operations and Margin: | Metric | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :---------------------- | :---------------------------------------------- | :-------------------------------------------- | | Non-GAAP Income from Operations | $43,676 | $76,075 | | Non-GAAP Operating Margin | 13% | 12% | Liquidity and Capital Resources This section analyzes Procore's ability to meet its short-term and long-term financial obligations and fund operations - As of June 30, 2025, Procore's liquidity sources included $706.7 million in cash, cash equivalents, and marketable securities[206] - Cash requirements include operating expenses, purchase obligations (hosting, software licenses), lease obligations, capital expenditures, and funding strategic investments and stock repurchases[208] - Net cash provided by operating activities decreased to $96.9 million for the six months ended June 30, 2025, from $127.8 million in the prior year, primarily due to a larger net loss and changes in operating assets and liabilities[212][214] - Net cash used in financing activities was $131.8 million for the six months ended June 30, 2025, driven by $103.2 million in common stock repurchases and $49.9 million in tax withholding payments for net share settlement[218] Critical Accounting Policies and Estimates This section discusses Procore's accounting policies and estimates that require significant management judgment - No significant changes to critical accounting policies and estimates were reported for the six months ended June 30, 2025, from those discussed in the 2024 Form 10-K[225] PART II. OTHER INFORMATION This part includes additional information such as legal proceedings, risk factors, equity sales, exhibits, and signatures Item 1. Legal Proceedings Procore is not currently a party to any legal proceedings that are expected to have a material adverse effect on its business, results of operations, financial condition, or cash flow - The Company is not involved in any material legal proceedings that could adversely affect its financial position[234] Item 1A. Risk Factors This section outlines key risks, focusing on AI integration challenges like flawed outputs, data misuse, costs, and regulatory compliance - Failure to successfully incorporate AI into products and operations, or non-compliance with evolving AI regulations, could materially adversely affect the business[236] - Risks associated with AI include flawed/inaccurate outputs, potential for data leaks or misuse by third-party AI technologies, increased operating costs, and exposure to legal liability for intellectual property infringement[237][238] - The rapidly evolving legal and regulatory landscape for AI (e.g., EU's AI Act) could impose significant compliance obligations, fines (up to 35 million euros or 7% of global turnover), and require changes to business practices[239][240] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities. It details the Company's stock repurchase activity for the three months ended June 30, 2025, under its authorized program - No unregistered sales of equity securities occurred during the period[241] Stock Repurchase Activity (Three Months Ended June 30, 2025): | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------- | :------------------------------- | :--------------------------- | | April 1 - April 30 | — | — | | May 1 - May 31 | 31,111 | $64.51 | | June 1 - June 30 | 17,392 | $64.65 | | Total | 48,503 | | - As of June 30, 2025, approximately $197.0 million remained available for repurchases under the $300.0 million stock repurchase program[242] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, executive agreements, certifications (Section 302 and 906), and Inline XBRL documents - The exhibit index includes key corporate documents, executive severance agreements, and required certifications (Section 302 and 906) for the filing[245] Signatures This section contains the required signatures of the registrant's principal executive officer (President and CEO) and principal financial officer (CFO and Treasurer), certifying the filing of the Quarterly Report on Form 10-Q - The report is signed by Craig F. Courtemanche, Jr., President and CEO, and Howard Fu, Chief Financial Officer and Treasurer, on August 1, 2025[249]