Procore 10Q 2024 Q3 Quarterly report

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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 September 30, 2024


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 October 25, 2024, the registrant had 148,663,906 shares of common stock, $0.0001 par value per share, outstanding.

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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 and investments, including through the evolution of our go-to-market (“GTM”) operating model;

•anticipated performance, trends, growth rates, and challenges in our business and in the markets in which we currently or may in the future operate;

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

•the timing, price, and quantity of repurchases of shares of our common stock under our stock repurchase program, and our ability to fund any such repurchases;

•the future trading price of our common stock; and

•our ability to identify, assess, and manage cybersecurity threats and risks.

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 Part I, Item 1A, “Risk Factors” and elsewhere in our Annual Report on Form 10-K dated February 26, 2024 (our “2023 Form 10-K”), 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

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achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

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 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 rely 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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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)	September 30, 2024		December 31, 2023
Assets
Current assets
Cash and cash equivalents	$	439,298	$	357,790
Marketable securities, current (amortized cost of $316,530 and $320,166 at September 30, 2024 and December 31, 2023, respectively)	317,650		320,161
Accounts receivable, net of allowance for credit losses of $4,550 and $4,791 at September 30, 2024 and December 31, 2023, respectively	173,386		206,644
Contract cost asset, current	32,150		28,718
Prepaid expenses and other current assets	54,248		42,421
Total current assets	1,016,732		955,734
Marketable securities, non-current (amortized cost of $52,283 and $0 at September 30, 2024 and December 31, 2023, respectively)	52,283		—
Capitalized software development costs, net	102,449		83,045
Property and equipment, net	35,952		36,258
Right of use assets - finance leases	32,391		34,375
Right of use assets - operating leases	32,676		44,141
Contract cost asset, non-current	44,593		44,564
Intangible assets, net	131,754		137,546
Goodwill	550,221		539,354
Other assets	19,686		18,551
Total assets	$	2,018,737	$	1,893,568
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	25,006	$	13,177
Accrued expenses	91,227		100,075
Deferred revenue, current	501,599		501,903
Other current liabilities	31,187		27,275
Total current liabilities	649,019		642,430
Deferred revenue, non-current	4,822		7,692
Finance lease liabilities, non-current	41,853		43,581
Operating lease liabilities, non-current	32,070		37,923
Other liabilities, non-current	5,324		6,332
Total liabilities	733,088		737,958
Contingencies (Note 9)
Stockholders’ equity
Preferred stock, $0.0001 par value, 100,000,000 shares authorized at September 30, 2024 and December 31, 2023; 0 shares issued and outstanding at September 30, 2024 and December 31, 2023.	—		—
Common stock, $0.0001 par value, 1,000,000,000 shares authorized at September 30, 2024 and December 31, 2023; 148,663,793 and 144,806,464 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively.	15		15
Additional paid-in capital	2,468,450		2,295,807
Accumulated other comprehensive loss	(314)		(1,375)
Accumulated deficit	(1,182,502)		(1,138,837)
Total stockholders’ equity	1,285,649		1,155,610
Total liabilities and stockholders’ equity	$	2,018,737	$	1,893,568

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 September 30,				Nine Months Ended September 30,
(in thousands, except share and per share amounts)	2024		2023		2024		2023
Revenue	$	295,885	$	247,907	$	849,660	$	689,969
Cost of revenue	54,954		44,125		148,778		126,631
Gross profit	240,931		203,782		700,882		563,338
Operating expenses
Sales and marketing	141,370		129,672		390,286		372,397
Research and development	80,791		72,708		223,698		225,960
General and administrative	55,267		51,753		157,077		143,324
Total operating expenses	277,428		254,133		771,061		741,681
Loss from operations	(36,497)		(50,351)		(70,179)		(178,343)
Interest income	5,962		4,721		17,714		14,612
Interest expense	(488)		(490)		(1,439)		(1,477)
Accretion income, net	3,816		2,952		10,665		6,615
Other income (expense), net	466		(486)		(26)		(1,009)
Loss before (benefit from) provision for income taxes	(26,741)		(43,654)		(43,265)		(159,602)
(Benefit from) provision for income taxes	(353)		193		400		573
Net loss	$	(26,388)	$	(43,847)	$	(43,665)	$	(160,175)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.18)	$	(0.31)	$	(0.30)	$	(1.13)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	148,134,585		142,828,406		146,854,541		141,249,446
Other comprehensive income (loss)
Foreign currency translation adjustment, net of tax	$	509	$	(565)	$	(64)	$	(186)
Unrealized gain on available-for-sale debt and marketable securities, net of tax	1,504		141		1,125		77
Total other comprehensive income (loss)	2,013		(424)		1,061		(109)
Comprehensive loss	$	(24,375)	$	(44,271)	$	(42,604)	$	(160,284)

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) Income		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
Exercise of stock options	311,427	—		4,071		—		—		4,071
Stock-based compensation	—	—		47,516		—		—		47,516
Issuance of common stock upon settlement of restricted stock units	940,568	—		—		—		—		—
Other comprehensive loss	—	—		—		(424)		—		(424)
Net loss	—	—		—		—		(43,847)		(43,847)
Balance as of September 30, 2023	143,452,776	$	14	$	2,235,480	$	(2,425)	$	(1,109,318)	$	1,123,751

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) Income		Accumulated Deficit		Total Stockholders’ Equity
(in thousands, except share amounts)	Shares	Amount
Balance as of December 31, 2023	144,806,464	$	15	$	2,295,807	$	(1,375)	$	(1,138,837)	$	1,155,610
Exercise of stock options	471,310	—		7,140		—		—		7,140
Stock-based compensation	—	—		42,590		—		—		42,590
Issuance of common stock upon settlement of restricted stock units	994,029	—		—		—		—		—
Other comprehensive loss	—	—		—		(693)		—		(693)
Net loss	—	—		—		—		(10,966)		(10,966)
Balance as of March 31, 2024	146,271,803	$	15	$	2,345,537	$	(2,068)	$	(1,149,803)	$	1,193,681
Exercise of stock options	294,901	—		2,779		—		—		2,779
Stock-based compensation	—	—		52,721		—		—		52,721
Issuance of common stock upon settlement of restricted stock units	835,497	—		—		—		—		—
Issuance of common stock for employee stock purchase plan	276,349	—		13,187		—		—		13,187
Other comprehensive loss	—	—		—		(259)		—		(259)
Net loss	—	—		—				(6,311)		(6,311)
Balance as of June 30, 2024	147,678,550	$	15	$	2,414,224	$	(2,327)	$	(1,156,114)	$	1,255,798
Exercise of stock options	195,852	—		2,452		—		—		2,452
Stock-based compensation	—	—		51,774		—		—		51,774
Issuance of common stock upon settlement of restricted stock units	789,391	—		—		—		—		—
Other comprehensive income	—	—		—		2,013		—		2,013
Net loss	—	—		—				(26,388)		(26,388)
Balance as of September 30, 2024	148,663,793	$	15	$	2,468,450	$	(314)	$	(1,182,502)	$	1,285,649

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)


	Nine Months Ended September 30,
(in thousands)	2024		2023
Operating activities
Net loss	$	(43,665)	$	(160,175)
Adjustments to reconcile net loss to net cash provided by operating activities
Stock-based compensation	137,532		132,234
Depreciation and amortization	65,127		51,943
Accretion of discounts on marketable debt securities, net	(10,131)		(6,615)
Abandonment of long-lived assets	818		812
Noncash operating lease expense	7,906		7,932
Unrealized foreign currency loss, net	295		739
Deferred income taxes	4		7
Provision for credit losses	648		6,882
(Increase) decrease in fair value of strategic investments	(457)		155
Changes in operating assets and liabilities, net of effect of asset acquisitions and business combinations
Accounts receivable	34,296		3,144
Deferred contract cost assets	(3,217)		(5,099)
Prepaid expenses and other assets	(12,121)		(1,878)
Accounts payable	11,029		2,258
Accrued expenses and other liabilities	(8,475)		(1,975)
Deferred revenue	(6,268)		29,080
Operating lease liabilities	(6,205)		(8,172)
Net cash provided by operating activities	167,116		51,272
Investing activities
Purchases of property and equipment	(7,510)		(8,073)
Capitalized software development costs	(32,453)		(25,187)
Purchases of strategic investments	(1,917)		(526)
Purchases of marketable securities	(410,619)		(309,282)
Maturities of marketable securities	371,718		287,620
Sales of marketable securities	—		5,452
Originations of materials financing	—		(23,585)
Customer repayments of materials financing	1,571		21,053
Acquisition of a business, net of cash acquired	(25,945)		—
Asset acquisitions, net of cash acquired	(3,792)		(6,011)
Net cash used in investing activities	(108,947)		(58,539)
Financing activities
Proceeds from stock option exercises	12,371		15,094
Proceeds from employee stock purchase plan	13,187		13,006
Payment of deferred business combination consideration	(1,470)		—
Payment of deferred asset acquisition consideration	(81)		—
Principal payments under finance lease agreements, net of proceeds from lease incentives	(1,569)		(1,450)
Net cash provided by financing activities	22,438		26,650
Net increase in cash and cash equivalents	80,607		19,383
Effect of exchange rate changes on cash	901		(881)
Cash and cash equivalents, beginning of period	357,790		299,816
Cash and cash equivalents, end of period	$	439,298	$	318,318

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)


	Nine Months Ended September 30,
(in thousands)	2024		2023




Supplemental disclosure of cash flow information
Cash paid for interest other than finance leases	25		4
Cash paid for income taxes, net of refunds received	$	2,099	$	682
Stock-based compensation capitalized for cloud-computing arrangement costs	95		246
Cash received for lease incentives	394		537
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	1,414		1,473
Operating cash flows from operating leases	8,142		9,710
Financing cash flows from finance leases	1,652		1,536
Noncash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued expenses at period end	2,099		792
Capitalized software development costs included in accounts payable and accrued expenses at period end	3,907		1,693
Stock-based compensation capitalized for software development	9,458		6,743
Deferred asset acquisition payment included in other current liabilities and accrued expenses at period end	1,400		370
Right of use assets obtained or modified in exchange for operating lease liabilities	(3,599)		13,638

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. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP” or “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, 2023. The condensed consolidated balance sheet information as of December 31, 2023 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.

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 or asset acquisition, 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, incremental borrowing rates and estimation of lease terms applied in lease accounting, 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 (“CEO”). 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)

Business combinations

The Company assesses whether an acquisition is a business combination or an asset acquisition. If substantially all of the gross assets acquired are concentrated in a single asset or group of similar assets, then the acquisition is accounted for as an asset acquisition where the purchase consideration is allocated on a relative fair value basis to the assets acquired. Goodwill is not recorded in an asset acquisition. If the gross assets are not concentrated in a single asset or group of similar assets, then the Company determines if the set of assets acquired represents a business. A business is an integrated set of activities and assets capable of being conducted and managed for the purpose of providing a return. Depending on the nature of the acquisition, judgment may be required to determine if the set of assets acquired is a business combination or not.

The Company applies the acquisition method of accounting for a business combination. Under this method of accounting, assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company adjusts the provisional amounts of assets acquired and liabilities assumed with the corresponding offset to goodwill to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded within the Company’s consolidated statements of operations and comprehensive loss.

Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to estimated level of effort and related costs of reproducing or replacing the assets acquired, future cash inflows and outflows, and discount rates, among other items. 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. Market participants are assumed to be buyers and sellers in the principal (most advantageous) market for the asset or liability. Additionally, fair value measurements for an asset assume the highest and best use of that asset by market participants. As a result, the Company may be required to value the acquired assets at fair value measures that do not reflect its intended use of those assets. Use of different estimates and judgments could yield different results.

Although the Company believes the assumptions and estimates it has made are reasonable and appropriate, they are based in part on historical experience and information that may be obtained from management of the acquired company and are inherently uncertain.

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. All marketable securities held as of September 30, 2024 and December 31, 2023 are classified as available-for-sale debt securities, which are recorded at fair value. The Company’s marketable securities are classified as either short-term or long-term in the accompanying condensed consolidated balance sheets based on the security’s contractual maturity at balance sheet date. The Company re-evaluates such classifications at each balance sheet date.

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, 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 nine months ended

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

September 30, 2024 and 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 to help facilitate 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. Prior to the Company ceasing originations under its materials financing program in October 2023, the fulfillment partner was primarily responsible for fulfilling the materials purchases and the Company did not have control over such materials. The Company earned revenues from origination fees and finance charges on the amounts it financed for customers on deferred payment terms, which were typically 120 days. Such fees earned were computed and recognized based on the effective interest method and are presented net of any related reserves and amortization of deferred origination costs. During the nine months ended September 30, 2024, credit losses incurred in connection with the Company’s materials financing program were immaterial. During the nine months ended September 30, 2023, the Company incurred credit losses of $7.0 million in connection with its materials financing program, which are recorded in general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

Gross receivables outstanding from customers under the materials financing program were $5.7 million and the related allowance for expected credit losses for materials financing receivables was $3.8 million as of December 31, 2023. As of September 30, 2024, the entire gross materials financing receivables of $0.6 million were fully reserved. 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 September 30, 2024 and December 31, 2023, the Company’s self-insurance accrual was $2.6 million and $3.3 million, respectively, included within other current liabilities on the accompanying condensed consolidated balance sheets.

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, 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.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

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 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 September 30, 2024 and December 31, 2023, 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.

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

During the three months ended June 30, 2023, $3.1 million of restricted cash relating to corporate credit cards was released from restriction. The Company held no restricted cash as of September 30, 2024 and December 31, 2023.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

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 $238.0 million and $204.3 million during the three months ended September 30, 2024 and 2023, respectively, that was included in deferred revenue balances at the beginning of the respective periods. The Company recognized revenue of $439.8 million and $362.0 million during the nine months ended September 30, 2024 and 2023, respectively, that was included in deferred revenue balances at the beginning of the respective periods.

Remaining performance obligations

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. The Company’s current RPO represents future revenue under existing contracts that is expected to be recognized as revenue in the next 12 months. As of September 30, 2024, the aggregate amount of the transaction price allocated to RPO was $1.1 billion, of which the Company expects to recognize $738.9 million, or approximately 69%, as revenue in the next 12 months, and substantially all of the remaining $334.6 million between 12 and 36 months thereafter.

3.INVESTMENTS

Marketable securities

Marketable securities consisted of the following as of September 30, 2024 (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. treasury securities	$	133,454	$	300	$	—	$	133,754
Commercial paper	36,023		59		(2)		36,080
Corporate notes and obligations	199,336		780		(17)		200,099
Total marketable securities	$	368,813	$	1,139	$	(19)	$	369,933

Marketable securities consisted of the following as of December 31, 2023 (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. treasury securities	$	128,479	$	124	$	(27)	$	128,576
Commercial paper	47,415		1		(35)		47,381
Corporate notes and obligations	139,747		61		(128)		139,680
Time deposits	4,525		—		(1)		4,524
Total marketable securities	$	320,166	$	186	$	(191)	$	320,161

The following table summarizes the estimated fair value of investments classified as marketable securities by contractual maturity date (in thousands):


	September 30, 2024		December 31, 2023
Due within 1 year	$	317,650	$	320,161
Due in 1 to 2 years	52,283		—
Total marketable securities	$	369,933	$	320,161

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

During the nine months ended September 30, 2024 and 2023, there were maturities of marketable securities of $371.7 million and $287.6 million, respectively. During the nine months ended September 30, 2023, there were sales of marketable securities of $5.5 million. There were no sales of marketable securities during the nine months ended September 30, 2024. Realized losses on sales 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 nine months ended September 30, 2023. There were no impairments of marketable securities during the nine months ended September 30, 2024 or 2023.

Strategic investments

Strategic investment activity during the nine months ended September 30, 2024 is summarized as follows (in thousands):


	Equity Securities		Limited Partnerships		Available-for- Sale Debt Securities		Total
Balance as of December 31, 2023	$	7,179	$	3,986	$	362	$	11,527
Interest accrued on available-for-sale debt securities	—		—		6		6
Purchases of strategic investments	498		1,419		—		1,917
Unrealized gain (loss) on strategic investments	671		(30)		—		641
Impairment of strategic investments	(184)		—		—		(184)
Balance as of September 30, 2024	$	8,164	$	5,375	$	368	$	13,907

Strategic investment activity during the nine months ended September 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	—		—		5		5
Purchases of strategic investments	—		526		—		526
Unrealized loss on strategic investments	—		(155)		—		(155)
Balance as of September 30, 2023	$	7,286	$	3,773	$	360	$	11,419

Strategic investments are recorded in other assets on the accompanying condensed consolidated balance sheets. As of September 30, 2024, in connection with the Company’s investments in limited partnerships, it has a contractual obligation to provide additional investment funding of up to $7.2 million at the option of the investees.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

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):


	September 30, 2024
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	326,137	$	—	$	—	$	326,137
U.S. treasury securities	23,106		—		—		23,106
Commercial paper	—		19,348		—		19,348
Corporate notes and obligations	—		6,572		—		6,572
Marketable securities:
U.S. treasury securities	133,754		—		—		133,754
Commercial paper	—		36,080		—		36,080
Corporate notes and obligations	—		200,099		—		200,099
Strategic investments:
Investments in available-for-sale debt securities	—		—		368		368
Total	$	482,997	$	262,099	$	368	$	745,464


	December 31, 2023
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	303,452	$	—	$	—	$	303,452
Marketable securities:
U.S. treasury securities	128,576		—		—		128,576
Commercial paper	—		47,381		—		47,381
Corporate notes and obligations	—		139,680		—		139,680
Time deposits	—		4,524		—		4,524
Strategic investments:
Investments in available-for-sale debt securities	—		—		362		362
Total	$	432,028	$	191,585	$	362	$	623,975

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 12 years. Some of the Company’s leases include an option for it to extend the term of the lease for up to 10 years.

During the nine months ended September 30, 2024, the Company modified its office lease in Austin, Texas to extend the lease terms and adjust the rent obligations, which resulted in an increase of $10.7 million in future rent commitments through 2036. Total operating lease commencements and modifications during the period resulted in net decreases to right of use assets–operating leases and corresponding operating lease liabilities on the accompanying condensed consolidated balance sheets of $3.6 million and $4.0 million, respectively, which primarily relate to the modified lease in Texas. These decreases to the asset and liability

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

were primarily due to higher discount rates in 2024 as compared to the original lease commencement periods, and tenant improvement allowances.

6.BUSINESS COMBINATIONS

Intelliwave

On May 30, 2024, the Company completed the acquisition of all outstanding equity of Intelliwave Technologies Inc. (“Intelliwave”), a construction materials management company, for $29.8 million in cash consideration, of which $1.5 million was paid during the three months ended September 30, 2024. The purpose of this acquisition was to accelerate development of the Company’s Workforce Management solution.

On the acquisition date, $4.3 million in cash was placed in an escrow account held by a third-party escrow agent for potential breaches of representations, warranties, and indemnities. $3.8 million of the escrow amount was included in the purchase consideration and is scheduled to be released from escrow to Intelliwave stockholders 18 months after the acquisition date (subject to any indemnification claims), and $0.5 million of the escrow amount was excluded from the purchase consideration and is scheduled to be released from escrow to Intelliwave stockholders 24 months after the acquisition date (subject to any indemnification claims).

The preliminary purchase consideration was allocated to the following assets and liabilities at the acquisition date (in thousands):


	Fair Value		Useful Life
Assets acquired
Cash and cash equivalents	$	2,390
Accounts receivable	964
Prepaid expenses and other current assets	17
Other non-current assets	388
Developed technology intangible asset	16,000		7 years
Customer relationships intangible asset	4,700		10 years
Goodwill	11,333
Total assets acquired	$	35,792
Liabilities assumed
Deferred revenue, current	(2,210)
Other current liabilities	(2,605)
Other non-current liabilities	(388)
Net deferred tax liabilities	(790)
Total liabilities assumed	$	(5,993)
Net assets acquired	$	29,799

The measurement period for the valuation of assets acquired and liabilities assumed ends as soon as information on the facts and circumstances that existed as of the acquisition date becomes available, but does not exceed 12 months. The purchase price allocation is subject to future adjustments, including to finalize the closing net working capital. During the three months ended September 30, 2024, the Company recorded a measurement period adjustment which did not have a material impact on goodwill.

Developed technology intangible asset represents the fair value of Intelliwave’s technology, which was valued considering both the cost to rebuild and relief from royalty methods. Key assumptions under the cost to rebuild method include the estimated level of effort and related costs of reproducing or replacing the acquired technology. Key assumptions under the relief from royalty method include forecasted revenue to be generated from the developed technology, an estimated royalty rate applicable to the technology, and a discount rate.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Developed technology is amortized on a straight-line basis, which approximates the pattern in which the economic benefits of the technology are consumed, over its estimated useful life of seven years. The amortization expense is recorded in cost of revenue in the accompanying condensed consolidated statements of operations and comprehensive loss.

Customer relationships represent the fair value of the underlying relationships with Intelliwave’s existing customers, which were valued using the excess earnings method. Key assumptions under the excess earnings method include estimated future revenues, costs, cash flows, and a discount rate. The customer relationship intangible asset is amortized on a straight-line basis, which approximates the pattern in which the economic benefits of the customer relationships are consumed, over its estimated useful life of ten years. The amortization expense is recorded in sales and marketing expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.

The $11.3 million goodwill balance is primarily attributable to synergies and expanded market opportunities that are expected to be achieved from the integration of Intelliwave with the Company’s offerings and assembled workforce. Substantially all of the goodwill balance is not deductible for income taxes purposes.

The Company issued 65,269 performance-based restricted stock units (“PSUs”) and 67,807 service-based restricted stock units (“RSUs”) at a grant date fair value of $68.96 per share in order to retain certain employees of Intelliwave. The PSUs issued to Intelliwave employees will vest upon the achievement of certain integration milestones. The total grant date fair value of the PSUs and RSUs was excluded from purchase consideration and is recognized as post-combination expense. See Note 10 to these condensed consolidated financial statements for details on how the Company expenses stock-based compensation.

The Company has not separately presented pro forma results reflecting the acquisition of Intelliwave or revenue and operating losses of Intelliwave for the period from the acquisition date through September 30, 2024, as the impacts were not material to the condensed consolidated financial statements. The acquisition-related transaction costs were not material and were expensed as incurred in the accompanying condensed consolidated statements of operations and comprehensive loss.

7.INTANGIBLE ASSETS AND GOODWILL

Intangible assets

During the nine months ended September 30, 2024, the Company completed the acquisition of Intelliwave, which was accounted for as a business combination, as described above in Note 6. During that period, the Company also acquired another developed technology for $3.9 million, which was accounted for as an asset acquisition. The acquired developed technology has an estimated useful life of four years, and the amortization expense is recorded in cost of revenue on the accompanying condensed consolidated statements of operations and comprehensive loss.

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


	September 30, 2024
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Useful Life (Years)
Developed technology	$	186,183	$	(87,868)	$	98,315	4.1
Customer relationships	71,050		(40,459)		30,591		4.8
Total finite-lived intangible assets	257,233		(128,327)		128,906		4.3
In-process research and development	2,848		—		2,848
Total intangible assets	$	260,081	$	(128,327)	$	131,754

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)


	December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Useful Life (Years)
Developed technology	$	166,453	$	(67,221)	$	99,232	4.3
Customer relationships	66,350		(30,884)		35,466		4.2
Total finite-lived intangible assets	232,803		(98,105)		134,698		4.3
In-process research and development	2,848		—		2,848
Total intangible assets	$	235,651	$	(98,105)	$	137,546

The Company estimates that there is no significant residual value related to its finite-lived intangible assets. Amortization expense recorded on the Company’s finite-lived intangible assets is summarized as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of revenue	$	6,698	$	5,506	$	18,739	$	16,492
Sales and marketing	3,224		3,106		9,475		9,319
Research and development	668		678		2,008		2,087
Total amortization of acquired intangible assets	$	10,590	$	9,290	$	30,222	$	27,898

Goodwill

The following table presents the changes in carrying amount of goodwill during the nine months ended September 30, 2024 (in thousands):


Beginning balance	$	539,354
Additions	11,333
Other adjustments, net(1)	(466)
Ending balance	$	550,221

(1) Includes measurement period adjustments for Intelliwave and the effect of foreign currency translation.

The addition to goodwill was due to the acquisition of Intelliwave, as disclosed in Note 6 to these condensed consolidated financial statements. There was no impairment of goodwill during the periods presented.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

8.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):


	September 30, 2024		December 31, 2023
Accrued bonuses	$	19,058	$	31,786
Accrued commissions	12,655		16,494
Accrued salary, payroll tax, and employee benefit liabilities	43,383		36,171
Other accrued expenses	16,131		15,624
Total accrued expenses	$	91,227	$	100,075

9.CONTINGENCIES

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.

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, breaches of confidentiality or data protection requirements, 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 or be covered by the Company’s insurance programs. 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.

10.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”), RSUs, PSUs, and other forms of awards, to employees, directors, and consultants. As of December 31, 2023, a total of 44,622,937 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, 2024, the number of shares of common stock that may be issued under the 2021 Plan increased by an additional 7,240,323 shares. As a result, as of September 30, 2024, a total of 51,863,260 shares of common stock are authorized for issuance under the 2021 Plan. As of September 30, 2024, a total of 33,973,395 shares of common stock were available for issuance under the 2021 Plan. No stock options have been issued under the 2021 Plan.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Stock options

No stock options were granted during the periods presented.

The following table summarizes the stock option activity during the nine months ended September 30, 2024:


	Number of Shares	Weighted- Average Exercise Price
Outstanding at December 31, 2023	4,340,052	$	12.57
Exercised	(962,063)	12.86
Canceled/Forfeited	(750)	19.16
Outstanding at September 30, 2024	3,377,239	12.48
Exercisable at September 30, 2024	3,377,239	$	12.48

As of September 30, 2024, there is no unrecognized stock-based compensation cost for stock options previously granted by the Company.

Restricted stock units

Service-based restricted stock units

In 2018, the Company began issuing RSUs to certain employees, officers, non-employee consultants, and directors. Other than as described below, 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 nine months ended September 30, 2024:


	Number of Shares	Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2023	7,382,073	$	59.35
Granted	3,612,068	74.43
Vested	(2,603,690)	60.54
Canceled/Forfeited	(1,011,285)	64.78
Outstanding at September 30, 2024	7,379,166	$	65.63

As of September 30, 2024, the total unrecognized stock‑based compensation cost for all RSUs outstanding was $453.8 million, which is expected to be recognized over a weighted‑average vesting period of 2.6 years.

Performance-based restricted stock units

Beginning in 2022, the Company granted PSUs to certain non-executive employees with vesting terms based on the achievement of certain operating performance goals. In March 2024, the Company granted its CEO an aggregate target number of 46,986 PSUs (the “CEO PSUs”) that will vest (if at all) over a three-year period, subject to the achievement of certain financial performance goals and continued service through the applicable vesting date. The actual number of CEO PSUs that become eligible to vest will be determined based on the attainment level of the applicable performance goal, as certified by the Compensation Committee of the Board. A target number of 35,239 CEO PSUs (75% of the CEO PSUs) will become eligible to vest based on the attainment level of a revenue performance goal for fiscal year 2024, which was set at the beginning of fiscal

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

year 2024, with a payout range of 0% to 200% of target. A target number of 11,747 CEO PSUs (25% of the CEO PSUs) will become eligible to vest based on the attainment of a non-GAAP operating margin performance goal for fiscal year 2024, which was set at the beginning of fiscal year 2024, with a payout range of 0% to 150% of target. One third of the CEO PSUs that become eligible to vest will vest on February 20, 2025 (or a subsequent quarterly vesting date, to the extent the number of CEO PSUs eligible to vest have not been certified by such date). The remaining CEO PSUs that become eligible to vest will vest in substantially equal installments quarterly over the two years following February 20, 2025.

The Company recognizes compensation expense for PSUs in the period in which it becomes probable that the underlying performance target will be achieved. Compensation expense for awards that contain performance conditions is calculated using the graded vesting method and the portion of expense recognized in any period may fluctuate depending on changing estimates of the achievement of the performance conditions.

The following table summarizes the PSU activity during the nine months ended September 30, 2024:


	Number of Shares	Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2023	77,971	$	55.63
Granted (1)	112,255	74.49
Vested	(15,227)	63.52

Outstanding at September 30, 2024	174,999	$	67.04

(1) This represents awards granted at 100% attainment of the performance conditions.

As of September 30, 2024, the total unrecognized stock‑based compensation cost for all PSUs outstanding was $4.6 million, which is expected to be recognized over a weighted‑average vesting period of 1.7 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. As of September 30, 2024 and December 31, 2023, all shares had vested, as such there was no stock-based compensation expense recognized during the nine months ended September 30, 2024. During the nine months ended September 30, 2023, the Company recognized stock-based compensation expense of $7.7 million, including $5.5 million related to RSAs whose vesting was accelerated upon the departure of certain employees. During the nine months ended September 30, 2023, the Company also expensed $3.4 million related to the accelerated vesting of cash retention amounts upon such employees’ departure.

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. As of December 31, 2023, a total of 5,332,064 shares of common stock had been 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, 2024, the number of shares of common stock reserved under the ESPP increased by an additional 1,448,064 shares.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

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.

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 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 nine months ended September 30, 2024:


Risk-free interest rate			5.04% to 5.33%
Expected term (in years)			0.5 to 1.0
Estimated dividend yield			0.00%
Estimated weighted-average volatility			29.90% to 39.27%

The term of the ESPP purchase rights is the offering period. Beginning in the fourth quarter of 2023, the Company estimates volatility for ESPP purchase rights based on the historical volatility of its own common stock price. Prior to that, given the Company’s limited trading history, the Company estimated 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 was utilized. The fair value of the Company’s common stock used to value ESPP purchase rights is based on the trading price of its publicly traded common stock.

Employee payroll contributions accrued in connection with the ESPP were $9.8 million and $5.0 million as of September 30, 2024 and December 31, 2023, respectively, and are included within accrued expenses on the accompanying condensed consolidated balance sheets. 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 nine months ended September 30, 2024 and 2023, the Company recognized stock-based compensation expense of $6.6 million and $7.9 million, respectively, in connection with the ESPP. During the nine months ended September 30, 2024 and 2023, 276,349 and 316,042 shares of the Company’s common stock were purchased under the ESPP, respectively.

As of September 30, 2024, unrecognized stock-based compensation expense related to the ESPP was $4.6 million, which is expected to be recognized over a weighted-average period of 0.4 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, PSUs, RSAs, and the ESPP as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of revenue	$	2,079	$	1,931	$	6,015	$	5,509
Sales and marketing	13,924		14,310		42,408		41,781
Research and development	18,311		16,347		49,657		52,395
General and administrative	13,861		12,221		39,452		32,549
Total stock-based compensation expense	$	48,175	$	44,809	$	137,532	$	132,234
Stock-based compensation capitalized for software development and cloud-computing arrangement implementation costs	3,599		2,706		9,553		6,989
Total stock-based compensation cost	$	51,774	$	47,515	$	147,085	$	139,223

11.INCOME TAXES

For the three months ended September 30, 2024 and 2023, income tax (benefits) expenses recorded by the Company were $(0.4) million and $0.2 million, respectively. For the nine months ended September 30, 2024 and 2023, income tax expenses recorded by the Company were $0.4 million and $0.6 million, respectively. As of September 30, 2024, 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.

12.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.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

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 September 30,		Nine Months Ended September 30,
	2024	2023	2024	2023
RSUs, PSUs, and RSAs subject to future vesting	7,797,263	8,536,196	7,718,910	8,706,812
Shares issuable pursuant to the ESPP	462,177	626,176	397,394	506,780
Shares of common stock issuable from stock options	3,477,429	4,691,842	3,772,744	5,147,097
Total	11,736,869	13,854,214	11,889,048	14,360,689

13.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 September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Revenue by geographic region:
U.S.	$	251,806		$	212,902		$	724,273		$	593,135
Rest of the world	44,079			35,005			125,387			96,834
Total revenue	$	295,885		$	247,907		$	849,660		$	689,969
Percentage of revenue by geographic region:
U.S.	85		%	86		%	85		%	86		%
Rest of the world	15		%	14		%	15		%	14		%

14.RESTRUCTURING

In January 2024, the Company executed a reduction of 4% of its global workforce as part of its ongoing evaluation of its operations to ensure alignment of its workforce with, and to enable greater investment in, key growth opportunities. The reduction in force was completed by March 31, 2024.

The following table summarizes the severance and other benefit costs incurred during the nine months ended September 30, 2024 by line item within the condensed consolidated statement of operations and comprehensive loss (in thousands) related to this restructuring event:


Cost of revenue	$	318
Sales and marketing	1,298
Research and development	1,750
General and administrative	819
Total restructuring-related costs	$	4,185

As of September 30, 2024, the remaining liability was immaterial for restructuring-related costs.

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Procore Technologies, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

15.SUBSEQUENT EVENTS

On October 29, 2024, the Board authorized a stock repurchase program to repurchase up to $300.0 million of the Company’s outstanding common stock. The Company intends to opportunistically repurchase shares of its common stock from time to time through the open market, or other transactions in accordance with applicable securities laws, in each case, subject to market conditions, applicable legal requirements, and other relevant factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The Company may also, from time to time, enter into Rule 10b5-1 trading plans to facilitate repurchases of its common stock under this authorization. The timing of stock repurchases and the actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities, and will be subject to the discretion of the Company’s management within its authorization. The stock repurchase program will be funded using the Company's working capital. The stock repurchase program does not obligate the Company to acquire any particular number of shares of the Company’s common stock, or any shares at all. The stock repurchase program expires on October 29, 2025, and may be suspended or discontinued at any time at the Company's discretion and without notice.

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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 2023 Form 10-K. You should review the disclosure under the section titled “Special Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” in our 2023 Form 10-K 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 the 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 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 to which a customer subscribes and the fixed aggregate dollar volume of construction work contracted to run on our platform annually, which we refer to as annual construction volume. 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 believe that the market for our platform is large, and we are highly focused on our long-term growth. Our ability to generate revenue, continue to grow our business, and serve the broader needs of the construction industry depends on our ability to efficiently acquire new customers, retain existing customers and expand their use of our products, services, and platform, and maintain or increase the pricing of our products and services. We drive new customer acquisitions by investing across our sales and marketing engine to engage prospective customers, increase brand awareness, and drive adoption of our products, services, and platform. We drive retention of existing customers and expansion of their use of our products, services, and platform by focusing on our customers’ success.

To support these efforts, in July 2024 we began to evolve our GTM operating model by, among other things, transitioning to a general manager model, with general managers for our North America, Europe, Asia-Pacific, and Middle East regions and our public sector business, each of whom will be empowered to assess and deploy the appropriate strategies and tactics for customers within their respective regions. As another example, we are also adding new product and technical specialists to our GTM teams, who we believe can add value for our customers by matching the evolving needs of our customers’ diverse buyer personas with our products and services, and helping our customers understand and implement the full potential of our platform. Evolving our GTM operating model involves new investment, particularly as we increase our sales headcount, ramp and invest in additional enablement for our sales teams, and add the new specialists to our teams. We believe that these investments will allow us to build stronger and deeper customer relationships and improve our operating efficiency over time which, in turn, will result in better customer experiences and provide additional value to our customers, some of whom continue to face macroeconomic and other pressures that have negatively impacted their spending decisions. We anticipate some disruptions and adverse impacts to our financial and operating results in the near-term as we invest in and implement the evolved GTM operating model. Over the longer term, if we fail to successfully implement, or realize the benefits of, our evolved GTM operating model, or otherwise fail to acquire new customers, retain existing customers, or expand existing customers’ use of our products, services, and platform, our business, financial condition, and operating results will be adversely impacted, potentially materially. Notwithstanding these risks, we believe that implementing the evolved GTM model will improve our long-term operating efficiency, best position us for sustainable long-term growth, and enhance our ability to capture our large market opportunity.

Despite macroeconomic challenges, we have seen an increase in the number of customers that contributed more than $100,000 of annual recurring revenue ("ARR"), which increased from 1,921 as of September 30, 2023 to 2,261 as of September 30, 2024, reflecting a year-over-year growth rate of 18%. The number of customers on our platform has increased from 16,067 as of September 30, 2023 to 16,975 as of September 30, 2024, reflecting a year-over-year growth rate of 6%. All aforementioned customer counts exclude customers acquired from business combinations that do not have standard Procore annual contracts.

In addition, our gross retention rate (“GRR”) was 94% and 95% as of September 30, 2024 and September 30, 2023, respectively. Our 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, 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 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

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the period selected, which we refer to as cancellations. We then divide (a) the total prior period ARR minus cancellations by (b) the total prior period ARR to calculate GRR.

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:


	September 30,				Change
	2024		2023		Dollar		Percent

	(dollars in thousands)
Remaining performance obligations
Current	$	738,856	$	635,000	$	103,856	16	%
Non-current	334,560		255,381		79,179		31	%
Total remaining performance obligations	$	1,073,416	$	890,381	$	183,035	21	%

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 September 30, 2024, cRPO increased by $103.9 million, or 16%, year-over-year. Approximately 5% of the increase was attributable to existing customers and 95% was attributable to new customers acquired during the twelve months ended September 30, 2024. 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 and continue to develop new products and services organically and through our acquisitions.

We intend to continue to invest in building additional products, offerings, features, and functionality that expand our capabilities and facilitate the extension of our platform. For example, in May 2024, we acquired Intelliwave Technologies Inc., a construction materials management company that enhances our Workforce Management solution; in September 2023, we acquired Unearth Technologies Inc., a geographic information systems asset management platform that helps general contractors and infrastructure providers connect assets, data, and field teams; and in September 2023, we launched Procore Pay, a payments solution that handles all aspects of the payment processes between general contractors and subcontractors. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion. While the impact of these developments, including Procore Pay, are not yet material to our business, 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 an international sales and marketing presence with offices in Sydney, Australia; Toronto, Canada; London, England; Paris, France; Dublin, Ireland; and Dubai, United Arab Emirates (“UAE”). 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 15% and 14%

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for the nine months ended September 30, 2024 and 2023, respectively. 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, and commercial markets, as well as differing legal, tax, regulatory, and alternative dispute systems. We have made, and plan to continue to make, significant investments in 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 and geopolitical factors, such as trends within the commercial construction industry, elevated inflation, higher interest rates than we’ve seen in recent history, volatility in capital markets, bank failures, fluctuations in foreign exchange rates, global pandemics (such as the COVID-19 pandemic), and wars and other conflicts (such as the Russia-Ukraine war) may impact our customers’ spending, as well as our operating expenses and cash flows. We believe that macroeconomic factors have resulted in cautious customer spending, contributing to the decline in our cRPO annual growth rate. However, as such factors evolve, we continue to monitor the ways in which they may directly or indirectly impact our business, results of operations, and financial condition. See the section titled “Risk Factors” in Part I, Item 1A, of our 2023 Form 10-K 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. Additionally, cost of revenue includes non-personnel-related expenses, such as third-party hosting costs, amortization of capitalized software development costs related to our platform, amortization of acquired technology intangible assets, software license fees, and allocated overhead. Cost of revenue also includes severance costs incurred related to the restructuring event in January 2024, which is described in Note 14 of our condensed consolidated financial statements. 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, evolve our GTM operating model, and 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, bonuses, and severance expenses as a result of the restructuring event in January 2024, which is described in Note 14 of our condensed consolidated financial statements.

Sales and Marketing

Sales and marketing expenses primarily consist of personnel-related compensation expenses for our sales and marketing organizations. Additionally, sales and marketing expenses include non-personnel-related expenses, such as advertising costs, marketing events, travel, trade shows, and other marketing activities; contractor costs to supplement our staff levels; consulting services; amortization of acquired customer relationship intangible assets; 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 our business continues to grow, as we evolve our GTM operating model, and as we increase our investment in sales and 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. Additionally, research and development expenses include non-personnel-related expenses, such as contractor costs to supplement our staff levels; computer software expenses; 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 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 information technology, human resources, finance, 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; computer software expenses; 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 our business continues to grow, including in relation to our international expansion.

Interest Income

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

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, Net

Other expense, net primarily consists of unrealized gains or losses on equity securities, gains or losses on foreign currency transactions, 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 primarily includes net operating loss 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 September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(in thousands)
Revenue	$	295,885	$	247,907	$	849,660	$	689,969
Cost of revenue(1)(2)(3)	54,954		44,125		148,778		126,631
Gross profit	240,931		203,782		700,882		563,338
Operating expenses
Sales and marketing(1)(2)(3)(4)	141,370		129,672		390,286		372,397
Research and development(1)(2)(3)(4)	80,791		72,708		223,698		225,960
General and administrative(1)(3)(4)	55,267		51,753		157,077		143,324
Total operating expenses	277,428		254,133		771,061		741,681
Loss from operations	(36,497)		(50,351)		(70,179)		(178,343)
Interest income	5,962		4,721		17,714		14,612
Interest expense	(488)		(490)		(1,439)		(1,477)
Accretion income, net	3,816		2,952		10,665		6,615
Other income (expense), net	466		(486)		(26)		(1,009)
Loss before (benefit from) provision for income taxes	(26,741)		(43,654)		(43,265)		(159,602)
(Benefit from) provision for income taxes	(353)		193		400		573
Net loss	$	(26,388)	$	(43,847)	$	(43,665)	$	(160,175)

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(in thousands)
Revenue	100	%	100	%	100	%	100	%
Cost of revenue(1)(2)(3)	19	%	18	%	18	%	18	%
Gross profit	81	%	82	%	82	%	82	%
Operating expenses
Sales and marketing(1)(2)(3)(4)	48	%	52	%	46	%	54	%
Research and development(1)(2)(3)(4)	27	%	29	%	26	%	33	%
General and administrative(1)(3)(4)	19	%	21	%	18	%	21	%
Total operating expenses	94	%	103	%	91	%	107	%
Loss from operations	(12	%)	(20	%)	(8	%)	(26	%)
Interest income	2	%	2	%	2	%	2	%
Interest expense	0	%	0	%	0	%	0	%
Accretion income, net	1	%	1	%	1	%	1	%
Other income (expense), net	0	%	0	%	0	%	0	%
Loss before (benefit from) provision for income taxes	(9	%)	(18	%)	(5	%)	(23	%)
(Benefit from) provision for income taxes	0	%	0	%	0	%	0	%
Net loss	(9	%)	(18	%)	(5	%)	(23	%)

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(in thousands)
Cost of revenue	$	4,188	$	2,981	11,056		8,357
Sales and marketing	14,034		14,390		42,725		41,964
Research and development	18,321		16,350		49,684		52,401
General and administrative	13,912		12,253		39,602		32,637
Total stock-based compensation expense*	$	50,455	$	45,974	$	143,067	$	135,359

*Includes amortization of capitalized stock-based compensation of $2.3 million and $1.2 million, respectively, for the three months ended September 30, 2024 and 2023; and $5.5 million and $3.1 million, respectively, for the nine months ended September 30, 2024 and 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 September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(in thousands)
Cost of revenue	$	6,698	$	5,506	$	18,739	$	16,492
Sales and marketing	3,224		3,106		9,475		9,319
Research and development	668		678		2,008		2,087
Total amortization of acquired intangible assets	$	10,590	$	9,290	$	30,222	$	27,898

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(in thousands)
Cost of revenue	$	113	$	133	$	485	$	439
Sales and marketing	815		766		2,867		2,383
Research and development	521		638		3,089		2,885
General and administrative	281		501		1,820		1,636
Total employer payroll tax on employee stock transactions	$	1,730	$	2,038	$	8,261	$	7,343

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(4)Includes acquisition-related expenses as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(in thousands)
Sales and marketing	$	—	$	548	$	1,448	$	2,002
Research and development	—		136		—		6,324
General and administrative	$	51	19		$	614	19
Total acquisition-related expenses	$	51	$	703	$	2,062	$	8,345

Comparison of the Three Months Ended September 30, 2024 and 2023

Revenue


	Three Months Ended September 30,				Change
	2024		2023		Dollar		Percent

	(dollars in thousands)
Revenue	$	295,885	$	247,907	$	47,978	19	%

During the three months ended September 30, 2024, our revenue increased by $48.0 million, or 19%, compared to the three months ended September 30, 2023, of which approximately 89% was attributable to revenue from existing customers and approximately 11% was attributable to revenue from new customers acquired during the three months ended September 30, 2024. The increase in revenue from existing customers includes the net benefit of a full quarter of subscription revenue in the third quarter of 2024 from customers that were newly acquired or expanded their subscriptions between the beginning of the third quarter of 2023 and the end of the second quarter of 2024 and continued or expanded their subscriptions, as applicable, in the third quarter of 2024.

Cost of Revenue, Gross Profit, and Gross Margin


	Three Months Ended September 30,						Change
	2024			2023			Dollar		Percent

	(dollars in thousands)
Cost of revenue	$	54,954		$	44,125		$	10,829	25	%
Gross profit	240,931			203,782			37,149		18	%
Gross margin	81		%	82		%

The increase in cost of revenue during the three months ended September 30, 2024 was primarily attributable to a $4.9 million increase in amortization of capitalized software development costs. The increase in cost of revenue was also attributable to a $2.6 million increase in third-party cloud hosting and related services as we grow our customer base; a $2.3 million increase in personnel-related expenses, including increases of $2.0 million in salaries and wages and $0.3 million in stock-based compensation expense; and a $1.2 million increase in amortization of developed technology intangible assets. We decreased our cost of revenue headcount by 6% since September 30, 2023, as we continue to focus on improving operating efficiency.

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Operating Expenses


	Three Months Ended September 30,				Change
	2024		2023		Dollar		Percent

	(dollars in thousands)
Sales and marketing	$	141,370	$	129,672	$	11,698	9	%

The increase in sales and marketing expenses during the three months ended September 30, 2024 was primarily attributable to a $4.4 million increase in professional fees for professional services, including contractors to supplement our staff levels. The increase in sales and marketing expense was also attributable to a $4.1 million increase in marketing events and expenses, a $1.5 million increase in travel costs, and a $1.4 million increase in personnel-related expenses, including an increase of $1.9 million in salaries and wages, partially offset by a decrease of $0.5 million in stock-based compensation expense. We decreased our sales and marketing headcount by 5% since September 30, 2023, as we focused on improving operating efficiency. However, we have started to, and expect that we will continue to, increase our sales and marketing headcount as we continue to invest in the evolution of our GTM operating model.


	Three Months Ended September 30,				Change
	2024		2023		Dollar		Percent

	(dollars in thousands)
Research and development	$	80,791	$	72,708	$	8,083	11	%

The increase in research and development expenses during the three months ended September 30, 2024 was primarily attributable to a $3.9 million increase in professional service fees, including contractors to supplement our staff levels. The increase in research and development expenses was also attributable to a $2.6 million increase in personnel-related expenses, including increases of $2.0 million in stock-based compensation expense and $0.7 million in salaries and wages driven by an increase in headcount; and a $0.7 million increase in computer software expenses. We increased our research and development headcount by 20% since September 30, 2023 in order to continue to build, enhance, maintain, and scale our products, services, and platform.


	Three Months Ended September 30,				Change
	2024		2023		Dollar		Percent

	(dollars in thousands)
General and administrative	$	55,267	$	51,753	$	3,514	7	%

The increase in general and administrative expenses during the three months ended September 30, 2024 was primarily due to a $4.4 million increase in personnel-related expenses, including increases of $3.0 million in salaries and wages and $1.6 million in stock-based compensation expense. The increase in general and administrative expenses was also attributable to a $2.4 million increase in professional service fees, including contractors to supplement our staff levels, and a $0.7 million increase in computer software expenses. The increase in general and administrative expenses was partially offset by a $4.2 million decrease in bad debt expenses primarily relating to the receivables from our materials financing business, which we ceased originations under in the fourth quarter of 2023. Our general and administrative headcount has remained consistent since September 30, 2023.

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Interest Income, Interest Expense, Accretion Income, Net, Other Expense, Net, and Provision for Income Taxes


	Three Months Ended September 30,				Change
	2024		2023		Dollar		Percent

	(dollars in thousands)
Interest income	$	5,962	$	4,721	$	1,241	26	%
Interest expense	488		490		(2)		0	%
Accretion income, net	3,816		2,952		864		29	%
Other income (expense), net	466		(486)		952		*
(Benefit from) provision for income taxes	(353)		193		(546)		*

*Percentage not meaningful

During the three months ended September 30, 2024, our interest income increased by $1.2 million due to an increase in the balances of our money market funds, cash savings accounts, and marketable securities.

During the three months ended September 30, 2024, accretion income, net increased by $0.9 million due to an increase both in our purchases of marketable securities and the balance of our marketable securities portfolio year over year.

Comparison of the Nine Months Ended September 30, 2024 and 2023

Revenue


	Nine Months Ended September 30,				Change
	2024		2023		Dollar		Percent

	(dollars in thousands)
Revenue	$	849,660	$	689,969	$	159,691	23	%

During the nine months ended September 30, 2024, our revenue increased by $159.7 million, or 23%, compared to the nine months ended September 30, 2023, of which approximately 73% was attributable to revenue from existing customers and approximately 27% was attributable to revenue from new customers acquired during the nine months ended September 30, 2024. The increase in revenue from existing customers includes the net benefit of a full nine months of subscription revenue in the first nine months of 2024 from customers that were newly acquired or expanded their subscriptions in 2023 and continued or expanded their subscriptions, as applicable, in the first nine months of 2024.

Cost of Revenue, Gross Profit, and Gross Margin


	Nine Months Ended September 30,						Change
	2024			2023			Dollar		Percent

	(dollars in thousands)
Cost of revenue	$	148,778		$	126,631		$	22,147	17	%
Gross profit	700,882			563,338			137,544		24	%
Gross margin	82		%	82		%

The increase in cost of revenue during the nine months ended September 30, 2024 was primarily attributable to a $9.5 million increase in amortization of capitalized software development costs. The increase in cost of revenue was also attributable to a $7.8 million increase in third-party cloud hosting and related services as we grow our customer base; a $3.2 million in personnel-related expenses, including increases of $2.2 million

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in salaries and wages, $0.7 million in stock-based compensation expense, and $0.3 million in severance costs incurred related to the restructuring event in January 2024; and a $2.2 million increase in amortization of developed technology intangible assets. We decreased our cost of revenue headcount by 6% since September 30, 2023, as we continue to focus on improving operating efficiency.

Operating Expenses


	Nine Months Ended September 30,				Change
	2024		2023		Dollar		Percent

	(dollars in thousands)
Sales and marketing	$	390,286	$	372,397	$	17,889	5	%

The increase in sales and marketing expenses during the nine months ended September 30, 2024 was primarily attributable to a $6.6 million increase in professional fees for professional services, including contractors to supplement our staff levels. The increase in sales and marketing expenses was also attributable to a $4.3 million increase in personnel-related expenses, including increases of $2.1 million in salaries and wages, $1.3 million in severance costs incurred related to the restructuring event in January 2024, and $0.5 million in stock-based compensation expense; a $3.3 million increase in marketing events and expenses; a $2.2 million increase in travel costs; and a $1.5 million increase in computer software expenses. We decreased our sales and marketing headcount by 5% since September 30, 2023, as we focused on improving operating efficiency. However, we have started to, and expect that we will continue to, increase our sales and marketing headcount as we continue to invest in the evolution of our GTM operating model.


	Nine Months Ended September 30,				Change
	2024		2023		Dollar		Percent

	(dollars in thousands)
Research and development	$	223,698	$	225,960	$	(2,262)	(1	%)

The decrease in research and development expenses during the nine months ended September 30, 2024 was primarily attributable to a $6.2 million decrease in acquisition-related expenses, including $4.9 million related to the acceleration of cash retention payments in the first quarter of 2023 upon the departure of certain employees from our previous acquisitions. The decrease in research and development expenses was also attributable to a decrease of $5.8 million in personnel-related expenses, including a decrease of $5.0 million in salaries and wages as a higher percentage of our software development costs were capitalized and $2.7 million in stock-based compensation expense, partially offset by an increase of $1.8 million due to severance costs incurred related to the restructuring event in January 2024. The decreases in research and development expenses were partially offset by a $6.4 million increase in professional fees for professional services, including contractors to supplement our staff levels, and a $2.2 million increase in computer software expenses. We increased our research and development headcount by 20% since September 30, 2023 in order to continue to build, enhance, maintain, and scale our products, services, and platform.


	Nine Months Ended September 30,				Change
	2024		2023		Dollar		Percent

	(dollars in thousands)
General and administrative	$	157,077	$	143,324	$	13,753	10	%

The increase in general and administrative expenses during the nine months ended September 30, 2024 was primarily due to a $14.6 million increase in personnel-related expenses, including increases of $6.9 million in stock-based compensation expense, $6.8 million in salaries and wages, and $0.8 million due to severance costs incurred related to the restructuring event in January 2024. The increase in general and administrative

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expenses was also attributable to a $4.5 million increase in professional fees for professional services, including contractors to supplement our staff levels, and a $1.8 million increase in computer software expenses. The increase in general and administrative expenses was partially offset by a $8.5 million decrease in bad debt expenses primarily relating to the receivables from our materials financing business, which we ceased originations under in the fourth quarter of 2023. Our general and administrative headcount has remained consistent since September 30, 2023.

Interest Income, Interest Expense, Accretion Income, Net, Other Expense, Net, and Provision for Income Taxes


	Nine Months Ended September 30,				Change
	2024		2023		Dollar		Percent

	(dollars in thousands)
Interest income	$	17,714	$	14,612	$	3,102	21	%
Interest expense	1,439		1,477		(38)		(3	%)
Accretion income, net	10,665		6,615		4,050		61	%
Other income (expense), net	(26)		(1,009)		983		(97	%)
Provision for income taxes	400		573		(173)		(30	%)

During the nine months ended September 30, 2024, our interest income increased by $3.1 million due to an increase in the balances of our money market funds, cash savings accounts, and marketable securities.

During the nine months ended September 30, 2024, accretion income, net increased by $4.1 million due to an increase both in our purchases of marketable securities and the balance of our marketable securities portfolio year over year.

Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. GAAP, we believe certain non-GAAP measures, as described below, are useful in evaluating our operating performance. We use this non-GAAP financial information, collectively, to evaluate our ongoing operations as well as for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, is helpful to investors because it provides consistency and comparability with past financial performance, and may assist in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.

The non-GAAP financial information is presented for supplemental informational purposes only. Non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP. There are limitations in using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP, non-GAAP financial measures may be different from similarly-titled non-GAAP measures used by other companies since other companies may calculate such non-GAAP financial measures differently, and non-GAAP financial measures exclude expenses that may have a material impact on our reported financial results. Unlike stock-based compensation expense, employer payroll tax related to employee stock transactions is a cash expense that we will continue to incur in the future. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. Investors should not rely on any single financial measure to evaluate our business.

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Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Expenses, Non-GAAP Income from Operations, and Non-GAAP Operating Margin

We define these non-GAAP financial measures as the respective GAAP measures, excluding stock-based compensation expense, amortization of acquired intangible assets, employer payroll tax related to employee stock transactions, and acquisition-related expenses. Non-GAAP gross margin is the ratio calculated by dividing non-GAAP gross profit by total revenue. Non-GAAP operating margin is the ratio calculated by dividing non-GAAP income from operations by total revenue.

Stock-based compensation expense includes the net effects of capitalization and amortization of stock-based compensation expense related to capitalized software and cloud-computing arrangement implementation costs. Stock-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of the compensation provided to our employees. Because of varying available valuation methodologies, subjective assumptions, and the variety of equity instruments that can impact a company’s non-cash expenses, we believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for meaningful comparisons between our operating results from period to period. The expense related to amortization of acquired intangible assets is dependent upon estimates and assumptions, which can vary significantly and are unique to each asset acquired; therefore, we believe that non-GAAP measures that adjust for the amortization of acquired intangible assets provide investors a consistent basis for comparison across accounting periods. The amount of employer payroll tax-related items on employee stock transactions is dependent on restricted stock unit settlements, option exercises, related stock price, and other factors that are beyond our control and that do not correlate to the operation of our business. When evaluating the performance of our business and making operating plans, we do not consider these items (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution than the accounting charges associated with such grants). Since the amount of employer payroll tax-related items on employee stock transactions is highly variable due to factors outside our control, and unrelated to our core operations, operating results, revenue-generating activities, business strategy, industry, or regulatory environment, management does not consider employer payroll tax on employee stock transactions in the evaluation of the business or in making operating plans. Accordingly, we believe this adjustment in arriving at our non-GAAP measures provides investors with a better understanding of the performance of our core business in a manner that is consistent with management’s view of the business. Acquisition-related expenses include external and incremental transaction costs, such as legal and due diligence costs, and retention payments. These expenses are unpredictable and generally would not have otherwise been incurred in the periods presented as part of our continuing operations. In addition, the size and complexity of an acquisition, which often drives the magnitude of acquisition-related expenses, may not be indicative of such future costs. We believe excluding acquisition-related expenses facilitates the comparison of our financial results to our historical operating results and to other companies in our industry. Overall, we believe it is useful to exclude these expenses in order to better understand the long-term performance of our core business and to facilitate comparison of our results period-over-period and to those of peer companies.

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The following tables present reconciliations of our GAAP financial measures to our non-GAAP financial measures for the periods presented:

Reconciliation of gross profit and gross margin to non-GAAP gross profit and non-GAAP gross margin:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023

	(dollars in thousands)
Revenue	$	295,885		$	247,907		$	849,660		$	689,969
Gross profit	240,931			203,782			700,882			563,338
Stock-based compensation expense	4,188			2,981			11,056			8,357
Amortization of acquired technology intangible assets	6,698			5,506			18,739			16,492
Employer payroll tax on employee stock transactions	113			133			485			439
Non-GAAP gross profit	$	251,930		$	212,402		$	731,162		$	588,626
Gross margin	81		%	82		%	82		%	82		%
Non-GAAP gross margin	85		%	86		%	86		%	85		%

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Reconciliation of operating expenses to non-GAAP operating expenses:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023

	(dollars in thousands)
Revenue	$	295,885		$	247,907		$	849,660		$	689,969
GAAP sales and marketing	141,370			129,672			390,286			372,397
Stock-based compensation expense	(14,034)			(14,390)			(42,725)			(41,964)
Amortization of acquired intangible assets	(3,224)			(3,106)			(9,475)			(9,319)
Employer payroll tax on employee stock transactions	(815)			(766)			(2,867)			(2,383)
Acquisition-related expenses	—			(548)			(1,448)			(2,002)
Non-GAAP sales and marketing	$	123,297		$	110,862		$	333,771		$	316,729
GAAP sales and marketing as a percentage of revenue	48		%	52		%	46		%	54		%
Non-GAAP sales and marketing as a percentage of revenue	42		%	45		%	39		%	46		%

GAAP research and development	$	80,791		$	72,708		$	223,698		$	225,960
Stock-based compensation expense	(18,321)			(16,350)			(49,684)			(52,401)
Amortization of acquired intangible assets	(668)			(678)			(2,008)			(2,087)
Employer payroll tax on employee stock transactions	(521)			(638)			(3,089)			(2,885)
Acquisition-related expenses	—			(136)			—			(6,324)
Non-GAAP research and development	$	61,281		$	54,906		$	168,917		$	162,263
GAAP research and development as a percentage of revenue	27		%	29		%	26		%	33		%
Non-GAAP research and development as a percentage of revenue	21		%	22		%	20		%	24		%

GAAP general and administrative	$	55,267		$	51,753		$	157,077		$	143,324
Stock-based compensation expense	(13,912)			(12,253)			(39,602)			(32,637)
Employer payroll tax on employee stock transactions	(281)			(501)			(1,820)			(1,636)
Acquisition-related expenses	(51)			(19)			(614)			(19)
Non-GAAP general and administrative	$	41,023		$	38,980		$	115,041		$	109,032
GAAP general and administrative as a percentage of revenue	19		%	21		%	18		%	21		%
Non-GAAP general and administrative as a percentage of revenue	14		%	16		%	14		%	16		%

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Reconciliation of loss from operations and operating margin to non-GAAP income (loss) from operations and non-GAAP operating margin:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023

	(dollars in thousands)
Revenue	$	295,885		$	247,907		$	849,660		$	689,969
Loss from operations	(36,497)			(50,351)			(70,179)			(178,343)
Stock-based compensation expense	50,455			45,974			143,067			135,359
Amortization of acquired intangible assets	10,590			9,290			30,222			27,898
Employer payroll tax on employee stock transactions	1,730			2,038			8,261			7,343
Acquisition-related expenses	51			703			2,062			8,345
Non-GAAP income from operations	$	26,329		$	7,654		$	113,433		$	602
Operating margin	(12		%)	(20		%)	(8		%)	(26		%)
Non-GAAP operating margin	9		%	3		%	13		%	0		%

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Liquidity and Capital Resources

As of September 30, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $809.2 million, which were held in money market funds, U.S. treasury securities, corporate notes and obligations, commercial paper, checking accounts, and savings accounts. Our investments in marketable securities are exposed to interest rate risk; however, due to the short-term nature of our investments, we do not anticipate being exposed to material risks due to changes in interest rates.

As of September 30, 2024, we had outstanding letters of credit, on an unsecured basis, totaling approximately $4.4 million to secure various leased office facilities in the U.S. and Australia.

Our cash sources primarily consist of cash generated from sales to our customers, maturities of our marketable securities, proceeds from employees through stock option exercises and our employee stock purchase plan (“ESPP”), and interest income on our marketable securities, money market funds, and savings account balances.

Our cash requirements are primarily for operating expenses, which include personnel-related costs, purchase obligations primarily for hosting and software license and other services, lease obligations, and capital expenditures for our employees and offices. We also fund investments which help drive our strategic business growth through acquisitions and investments in equity securities and limited partnership funds.

During the nine months ended September 30, 2024, operating lease commencements and modifications resulted in increases of $10.7 million in future rent commitments through 2036, relating to the office lease in Austin, Texas, which were modified to extend the lease terms and adjust the rent obligations. There have been no other material changes to our contractual obligations from those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Form 10-K. We believe our existing cash, cash equivalents, and marketable securities will be sufficient to meet our needs for at least the next 12 months. While we have generated positive cash flows from operations in recent years, we have continued to generate losses from operations, as reflected in our accumulated deficit of $1.2 billion as of September 30, 2024. We may not achieve profitability in the foreseeable future and may require additional capital resources to execute strategic initiatives to grow our business.

This assessment is a forward-looking statement and involves risks and uncertainties. Our additional future capital requirements will depend on many factors, including our revenue growth rate, new customer acquisition and subscription renewal activity, timing of billing activities, our ability to integrate the companies or technologies we acquire and realize strategic and financial benefits from our investments and acquisitions, other strategic transactions or investments we may enter into, the volume and timing of any stock repurchases under our stock repurchase program, the timing and extent of spending to support further sales and marketing and research and development efforts, general and administrative expenses to support our growth, including international expansion, and inflation. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing to fund these activities. If we are unable to raise additional capital when desired, or on acceptable terms, our business, results of operations, and financial condition could be materially adversely affected.

As of September 30, 2024, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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The following table summarizes our cash flows for the periods presented:


	Nine Months Ended September 30,
	2024		2023

	(in thousands)
Net cash provided by operating activities	$	167,116	$	51,272
Net cash used in investing activities	(108,947)		(58,539)
Net cash provided by financing activities	22,438		26,650

Operating Activities

Our largest source of cash from operating activities is collections from the sales of subscriptions to our customers. Our primary uses of cash from operating activities are for personnel expenses, marketing expenses, hosting and software license expenses, and overhead.

Net cash provided by operating activities was $167.1 million during the nine months ended September 30, 2024 which resulted from a net loss of $43.7 million, adjusted for non-cash charges of $201.7 million and a net cash inflow of $9.0 million from changes in operating expenses and liabilities. The $9.0 million of net cash inflows provided as a result of changes in our operating assets and liabilities primarily reflected the following:

•a $34.3 million decrease in accounts receivable primarily due to timing of billings and cash receipts from customers; and

•a $11.0 million increase in accounts payable primarily due to timing of cash payments to our vendors.

These changes in our operating assets and liabilities were partially offset by the following:

•a $12.1 million increase in prepaid expenses and other assets primarily due to timing of cash payments to our vendors;

•a $8.5 million decrease in accrued expenses and other liabilities primarily due to the size and timing of bonus and commission accruals and payouts, accrued ESPP contributions, payroll, and cash payments to our vendors;

•a $6.3 million decrease in deferred revenue primarily due to timing of billings and seasonality;

•a $6.2 million decrease in operating lease liabilities related to lease payments; and

•a $3.2 million increase in deferred contract cost assets related to commissions as a result of additional customer contracts closed during the period.

Net cash provided by operating activities was $51.3 million during the nine months ended September 30, 2023, which resulted from a net loss of $160.2 million, adjusted for non-cash charges of $194.1 million and net cash inflows of $17.4 million from changes in operating assets and liabilities. The $17.4 million of net cash inflows provided as a result of changes in our operating assets and liabilities primarily reflected the following:

•a $29.1 million increase in deferred revenue primarily due to the growth of our business and timing of billings;

•a $3.1 million decrease in accounts receivable primarily due to timing of billings and cash receipts from customers; and

•a $2.3 million increase in accounts payable primarily due to timing of cash payments to our vendors.

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These changes in our operating assets and liabilities were partially offset by the following:

•a $8.2 million decrease in operating lease liabilities related to lease payments;

•a $5.1 million increase in deferred contract cost assets related to commissions as a result of additional customer contracts closed during the period;

•a $2.0 million decrease in accrued expenses and other liabilities primarily due to the size and timing of bonus and commission accruals and payouts, accrued ESPP contributions, payroll, and cash payments to our vendors; and

•a $1.9 million increase in prepaid expenses and other assets primarily due to the acceleration of acquisition-related expenses associated with cash retention payments, which had been paid in advance, upon the departure of certain employees from our previous acquisitions;

Investing Activities

Net cash used in investing activities of $108.9 million during the nine months ended September 30, 2024 consisted of cash outflows for purchases of marketable securities of $410.6 million, capitalized software development costs of $32.5 million, business combinations of $25.9 million, purchases of property and equipment of $7.5 million primarily related to computer equipment purchases and improvements to our leased offices, asset acquisitions of $3.8 million, and purchases of strategic investments of $1.9 million. Such outflows were partially offset by $371.7 million in maturities of marketable securities and $1.6 million of customer repayments for materials financing.

Net cash used in investing activities of $58.5 million during the nine months ended September 30, 2023 consisted of purchases of marketable securities of $309.3 million, capitalized software development costs of $25.2 million, originations for materials financing of $23.6 million, purchases of property and equipment of $8.1 million primarily related to improvements to our leased offices and computer equipment purchases, and asset acquisitions of $6.0 million partially offset by $287.6 million in maturities of marketable securities, $21.1 million of customer repayments for materials financing, and $5.5 million in sales of marketable securities.

Financing Activities

Net cash provided by financing activities of $22.4 million during the nine months ended September 30, 2024 consisted of $13.2 million in proceeds from employee purchases under the ESPP and $12.4 million in proceeds from stock option exercises, partially offset by $1.6 million in payments on our finance lease obligations, $1.5 million in payments for deferred business combination consideration, and $0.1 million in payments for deferred asset acquisition consideration.

Net cash provided by financing activities of $26.7 million during the nine months ended September 30, 2023 consisted of $13.0 million in proceeds from employee purchases under the ESPP and $15.1 million in proceeds from stock option exercises, partially offset by $1.5 million in payments on our finance lease obligations.

Stock Repurchase Program

On October 29, 2024, our board of directors (the “Board”) authorized a stock repurchase program to repurchase up to $300.0 million of our outstanding common stock. We intend to opportunistically repurchase shares of our common stock from time to time through the open market (including via pre-set trading plans), or other transactions in accordance with applicable securities laws, in each case, subject to market conditions, applicable legal requirements, and other relevant factors. The timing of stock repurchases and the actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities, and will be subject to the discretion of our management within its authorization. The stock repurchase program will be funded using our working capital. The stock repurchase program does not obligate us to acquire any particular number of shares of our common stock, or any shares at all. The stock repurchase program expires on October 29, 2025, and may be suspended or discontinued at any time at our discretion and without notice.

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Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those accounting policies and estimates that are both the most important to the portrayal of our net assets and results of operations and require the most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates are developed based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Critical accounting estimates are accounting estimates where the nature of the estimates is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and the impact of the estimates on financial condition or operating performance is material.

Our significant accounting policies are described in Note 2 of our condensed consolidated financial statements. Our critical accounting policies and more significant judgments and estimates used in the preparation of our financial statements are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Form 10-K. There have been no significant changes to these policies for the nine months ended September 30, 2024.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency and Exchange Risk

The vast majority of our cash generated from revenue is denominated in U.S. Dollars, with the remainder denominated in Australian Dollars, Canadian Dollars, Great British Pounds, Euros, Singapore Dollars, and UAE Dirham. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the U.S., Australia, Canada, England, Egypt, Singapore, France, Ireland, Czech Republic, Costa Rica, India, and the UAE. Our results of current and future operations and cash flows are, therefore, subject to the risk of fluctuations in foreign currency exchange rates. This exposure is the result of selling in multiple currencies and payment of personnel-related expenses and other operating expenses in countries where the functional currency is the local currency. Changes in foreign currency exchange rates could have an adverse impact on our financial results and cash flow. These exposures may change over time as business practices evolve and economic conditions change. As the impact of foreign currency exchange rates has not been material to our historical operating results, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant.

Interest Rate Risk

We had cash, cash equivalents, and marketable securities of $809.2 million as of September 30, 2024. Cash, cash equivalents, and marketable securities consist of money market funds, U.S. treasury securities, corporate notes and obligations, commercial paper, checking accounts, and savings accounts. The cash and cash equivalents are held for working capital and general corporate purposes. Interest-earning instruments carry a degree of interest rate risk. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. As of September 30, 2024, a hypothetical 100 basis points increase or decrease in interest rates would not have a material impact on the fair market value of our portfolio. We therefore do not expect our results of operations or cash flows to be materially affected by a sudden change in market interest rates.

Inflation Risk

Inflation can have a positive impact on our pricing since increased construction costs may increase construction volume purchased by customers. However, supply chain challenges and labor shortages can result in delayed construction project starts, which may negatively impact construction volume purchased. Inflation can also result in higher personnel-related costs. We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations, or financial condition.

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Item 4. Controls and Procedures.

(a)Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of September 30, 2024, the end of the period covered by this report.

Based on the Company’s evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures.

(b)Changes in Internal Control Over Financial Reporting.

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. There have not been any changes in internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

(c)Limitations on Effectiveness of Controls and Procedures

Our management, including our chief executive officer and chief financial officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in legal proceedings arising in the ordinary course of business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together reasonably be expected to have a material adverse effect on our business, results of operations, financial condition, or cash flow.

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties set forth below and described in Part I, Item 1A, “Risk Factors” in our 2023 Form 10-K, together with all of the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes thereto, before making a decision to invest in our common stock. Except as set forth below, there have been no material changes described in Part I, Item 1A, “Risk Factors” in our 2023 Form 10-K. The risks and uncertainties set forth below and described in Part I, Item 1A, “Risk Factors” in our 2023 Form 10-K are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. If any of such risks occur, our business, financial condition, results of operations, and prospects could be materially adversely affected. In that event, the price of our common stock could decline, and you could lose part or all of your investment.

We cannot guarantee that our stock repurchase program will enhance stockholder value, stock repurchases could affect the price of our common stock and diminish our cash reserves, and any failure to repurchase our common stock after we have announced our intention to do so may negatively affect the price of our common stock.

On October 29, 2024, the Board authorized a stock repurchase program to repurchase up to $300.0 million of our outstanding common stock. We intend to opportunistically repurchase shares of our common stock from time to time through the open market (including via pre-set trading plans), or other transactions in accordance with applicable securities laws, in each case, subject to market conditions, applicable legal requirements, and other relevant factors. The timing of stock repurchases and the actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities, and will be subject to the discretion of our management within its authorization. The stock repurchase program will be funded using our working capital. The stock repurchase program does not obligate us to acquire any particular number of shares of our common stock, or any shares at all. The stock repurchase program expires on October 29, 2025, and may be suspended or discontinued at any time at our discretion and without notice.

Although our stock repurchase program is intended to enhance long-term stockholder value, there is no assurance that it will do so because the market price of our common stock may increase above the levels at which we deem it prudent to repurchase shares, and short-term stock price fluctuations could reduce our ability to properly manage the program and the overall effectiveness of the program. The stock repurchase program could also affect the price of our common stock and increase volatility. The existence of our stock repurchase program could cause our stock price to be higher than it otherwise would be and could potentially reduce the market liquidity for our stock. Repurchasing our common stock reduces the amount of cash we have available to fund working capital, capital expenditures, strategic acquisitions or investments, other business opportunities, and other general corporate projects. We cannot guarantee that the stock repurchase program will be fully or partially consummated. Any failure to repurchase stock after we have announced our intention to do so may negatively impact our reputation, investor confidence in us, or our stock price. For these and other reasons, we may fail to realize the anticipated value of the stock repurchase program or enhance long-term stockholder value as a result of the stock repurchase program.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

None.

Items 3 and 4 are not applicable and have been omitted.

Item 5. Other Information.

Stock Repurchase Program

On October 29, 2024, the Board authorized a stock repurchase program to repurchase up to $300.0 million of our outstanding common stock. We intend to opportunistically repurchase shares of our common stock from time to time through the open market, or other transactions in accordance with applicable securities laws, in each case, subject to market conditions, applicable legal requirements, and other relevant factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 of the Exchange Act. We may also, from time to time, enter into Rule 10b5-1 trading plans to facilitate repurchases of our common stock under this authorization. The timing of stock repurchases and the actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities, and will be subject to the discretion of our management within its authorization. The stock repurchase program will be funded using our working capital. The stock repurchase program does not obligate us to acquire any particular number of shares of our common stock, or any shares at all. The stock repurchase program expires on October 29, 2025, and may be suspended or discontinued at any time at our discretion and without notice.

Insider Trading Arrangements

During the quarterly period ended September 30, 2024, our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated the contracts, instructions, or written plans for the purchase of sale of our securities as set forth in the table below.

Type of Trading Arrangement

Name and Position

Action

Adoption/Termination Date

Rule 10b5-1*

Non-Rule 10b5-1**

Total Shares of Common Stock to be Sold***

Expiration Date

Benjamin C. Singer, Chief Legal Officer & Corporate Secretary

Adoption

August 15, 2024

76,928****

November 30, 2025

* Contract, instruction, or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.

** “Non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K under the Exchange Act.

***Represents the maximum number of shares that may be sold pursuant to the Rule 10b5-1 trading arrangement. The number of shares actually sold may be lower and will depend on the satisfaction of certain conditions as set forth in the written plan.

**** The actual number of shares that will be sold under this Rule 10b5-1 trading arrangement will be based in part on the number of shares sold to satisfy tax withholding obligations arising from the vesting of certain shares subject to the trading arrangement, which number is not yet determinable.

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Item 6. Exhibits

EXHIBIT INDEX

Incorporated by Reference

Exhibit

Number

Description of Exhibit

Form

File Number

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation of the Registrant

8-K

001-40396

3.1

May 24, 2021

3.2

Amended and Restated Bylaws of the Registrant

8-K

001-40396

3.2

May 24, 2021

31.1*

Section 302 Certification of Principal Executive Officer

31.2*

Section 302 Certification of Principal Financial Officer

32.1*#

Section 906 Certification of Principal Executive Officer

32.2*#

Section 906 Certification of Principal Financial Officer

101.INS

Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*

Inline XBRL Taxonomy Extension Schema Document

101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

Filed herewith.

The certifications attached as Exhibit 32.1 and Exhibit 32.2 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Exchange Act, and are not to be incorporated by reference into any of the Registrant’s filings under the Securities Act, irrespective of any general incorporation language contained in any such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.


	Procore Technologies, Inc.

Date: October 31, 2024	By:	/s/ Craig F. Courtemanche, Jr.
		Craig F. Courtemanche, Jr.
		President and Chief Executive Officer (Principal Executive Officer)

Date: October 31, 2024	By:	/s/ Howard Fu
		Howard Fu
		Chief Financial Officer and Treasurer (Principal Financial Officer)

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Procore (PCOR) 10-Q2024 Q3 Quarterly report

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