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What changed in PROCORE TECHNOLOGIES, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PROCORE TECHNOLOGIES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+423 added−429 removedSource: 10-K (2024-02-26) vs 10-K (2023-03-01)

Top changes in PROCORE TECHNOLOGIES, INC.'s 2023 10-K

423 paragraphs added · 429 removed · 322 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

68 edited+21 added−7 removed92 unchanged
Biggest changeOur success in building our customer base, expanding usage for existing customers, and helping digitize the industry has allowed us to achieve significant growth. We generated revenue of $400.3 million in 2020, $514.8 million in 2021, and $720.2 million in 2022, representing year-over-year growth of 29% in 2021 and 40% in 2022.
Biggest changeFor a description of how we calculate ARR, see the sub-heading titled “Acquiring New Customers and Retaining and Expanding Existing Customers’ Use of Our Platform,” under the heading “Certain Factors Affecting Our Performance” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our success in building our customer base, expanding usage for existing customers, and helping digitize the industry has allowed us to achieve significant growth.
Item 1. Business. Overview Our mission is to connect everyone in construction on a global platform. We are a leading provider of cloud-based construction management software, and are helping transform one of the oldest, largest, and least digitized industries in the world.
Item 1. Business. 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.
If the MEP contractors fail to complete their tasks as scheduled and that delay is not properly communicated to all affected stakeholders, then not only could the project fall behind schedule but the concrete may still arrive at the jobsite as originally scheduled, become unusable, and need to be disposed of, 5 driving up costs and impacting profit margins.
If the MEP contractors fail to complete their tasks as scheduled and that delay is not properly communicated to all affected stakeholders, then not only could the project fall behind schedule but the concrete may still arrive at the jobsite as originally scheduled, become unusable, and need to be disposed of, driving up costs and impacting profit margins.
Where technology has been adopted, it has generally had a limited impact because of a lack of modern, cloud-based tools, limited breadth and depth of functionality, or a lack of integrations between point solutions. 12 We believe our competitors primarily exist across the following four categories : • aggregated construction management tools , including products offered by Oracle, Autodesk, and Trimble.
Where technology has been adopted, it has generally had a limited impact because of a lack of modern, cloud-based tools, limited breadth and depth of functionality, or a lack of integrations between point solutions. We believe our competitors primarily exist across the following four categories: • aggregated construction management tools , including products offered by Oracle, Autodesk, and Trimble.
Construction projects require collaboration across a wide range of stakeholders who often have a different set of interests and lack familiarity and trust with one another, yet all are interdependent and ultimately share project risks. Similarly, all project participants are adversely impacted when a project is delayed, runs over budget, or does not meet quality or safety requirements.
Construction projects require collaboration across a wide range of stakeholders who often have a different set of interests and lack familiarity and trust with one another, yet are all interdependent and ultimately share project risks. All project participants are adversely impacted when a project is delayed, runs over budget, or does not meet quality or safety requirements.
Not only is this information crucial for 8 ongoing projects, but it is also necessary for long-term asset management, as the underlying data allows for more efficient, effective, and predictive maintenance. General contractors General contractors operate under immense pressure, with little room for error, as they often manage their businesses with small profit margins.
Not only is this information crucial for ongoing projects, but it is also necessary for long-term asset management, as the underlying data allows for more efficient, effective, and predictive maintenance. General contractors General contractors operate under immense pressure, with little room for error, as they often manage their businesses with small profit margins.
Our platform services are designed around four 7 defining attributes that increase the breadth and depth of our offering, improve usability, and enable a unified experience . These include: • UI Customization. Our platform is designed to be flexible and adaptable, providing native mobile and desktop user interfaces (“UI”) to both our internal and third-party developers.
Our platform services are designed around four defining attributes that increase the breadth and depth of our offering, improve usability, and enable a unified experience. These include: • UI Customization. Our platform is designed to be flexible and adaptable, providing native mobile and desktop user interfaces (“UI”) to both our internal and third-party developers.
Procore Quality & Safety allows field teams to continuously record, monitor, evaluate, and improve procedures in order to maximize compliance with safety regulations and quality specifications. Additionally, the product helps users identify, understand, and proactively resolve the causes of issues and risky behaviors before they result in an injury or accident. • Design Coordination.
Procore Quality & Safety allows field teams to continuously record, monitor, evaluate, and improve procedures in order to maximize compliance with safety regulations and quality specifications. Additionally, the product helps users identify, understand, and proactively resolve the causes of issues and risky behaviors before they result in an injury or accident. • Design Coordination and BIM.
This means developers can accelerate design and development efforts by accessing Procore’s core UI components and design guidelines, helping to ensure a consistent user experience. We also offer third-party developers the ability to create embedded applications, which we call Embedded Apps, a feature that allows developers to insert their apps directly into our UI.
This means developers can accelerate design and development efforts by accessing our core UI components and design guidelines, helping to ensure a consistent user experience. We also offer third-party developers the ability to create embedded applications, which we call Embedded Apps, a feature that allows developers to insert their apps directly into our UI.
These real-time insights help customers facilitate more accurate communication, generate faster approvals, and reduce financial risk. • Invoice Management. Procore Invoice Management expedites the invoice creation, collection, review, and approval process across stakeholders. Our products allow customers to automate the creation of invoices while helping to 11 ensure accuracy and reduce delays in payment.
These real-time insights help customers facilitate more accurate communication, generate faster approvals, and reduce financial risk. • Invoice Management. Procore Invoice Management expedites the invoice creation, collection, review, and approval process across stakeholders. Our products allow customers to automate the creation of invoices while helping to ensure accuracy and reduce delays in payment.
Project Execution • Project Management. Procore Project Management provides every team member on a construction project with real-time access to the information they need via a single, accurate, up-to-date source. Project Management centralizes and facilitates collaboration on schedules, specifications, submittals, drawings, requests for information (“RFIs”), and outstanding tasks.
Procore Project Management provides every team member on a construction project with real-time access to the information they need via a single, accurate, up-to-date source. Project Management centralizes and facilitates collaboration on schedules, specifications, submittals, drawings, requests for information (“RFIs”), and outstanding tasks.
Our products are designed to help reduce financial and operational risk across key stakeholders before construction begins. 6 • Project Execution. Construction teams struggle with poor communication between the field and office, time-consuming processes, and getting updated and accurate information to all project stakeholders.
Our products are designed to help reduce financial and operational risk across key stakeholders before construction begins. • Project Execution. Construction teams struggle with poor communication between the field and office, time-consuming processes, and getting updated and accurate information to all project stakeholders.
Some of these companies’ products integrate with our platform and are available in our App Marketplace. • accounting software vendors, including providers that offer accounting software and supplement their solutions with project management tools and other offerings, which are often bundled with their accounting solutions as lower-value add-ons. • point solution vendors in various categories, including analytics, bidding, BIM, compliance, scheduling, and materials financing, among others.
Some of these companies’ products integrate with our platform and are available in our App Marketplace. • accounting software vendors , including providers that offer accounting software and supplement their solutions with project management tools and other offerings, which are often bundled with their accounting solutions as lower-value add-ons. • point solution vendors in various categories, including analytics, bidding, BIM, compliance, and scheduling, among others.
Construction Intelligence is a set of holistic solutions that offers advanced analytics and business intelligence capabilities, allowing customers to capture, manage, and learn from data for streamlined and robust project and portfolio reporting, analytics, and artificial intelligence (“AI”)-guided workflows, as well as to monitor projects and drive more informed decision-making for their business needs.
Construction Intelligence is a set of holistic products that offers advanced analytics and business intelligence capabilities, allowing customers to capture, manage, and learn from data for streamlined and robust project and portfolio reporting, analytics, and artificial intelligence (“AI”)-guided workflows, as well as to monitor projects and drive more informed decision-making for their business needs.
We primarily sell our products on a subscription basis for a fixed fee with pricing generally based on the number and mix of products and the annual construction volume contracted to run on our platform. As we grow, we believe that the value of our business will increase across three key dimensions: • Ecosystem.
We primarily sell our products on a subscription basis for a fixed fee with pricing generally based on the number and mix of products and the annual construction volume contracted to run on our platform. As we grow, we believe that the value of our business will increase across three key dimensions: • Network.
Sales and Marketing We primarily sell subscriptions to access our products through our direct sales team, which is specialized by stakeholder region, size, and type, and is serviced regionally by offices in the U.S., Canada, Australia, England, Mexico, Singapore, the United Arab Emirates (“UAE”), France, and Ireland, and by our focused sales and marketing efforts in Germany, where we do not yet maintain an office location.
Sales and Marketing We primarily sell subscriptions to access our products through our direct sales team, which is specialized by stakeholder region, size, and type, and is serviced regionally by offices in the U.S., Canada, Australia, England, the United Arab Emirates (“UAE”), France, and Ireland, and by our focused sales and marketing efforts in Germany, where we do not maintain an office location.
Our Workforce Management product helps customers address these problems by allowing contractors to better schedule, track and forecast labor productivity, improve time management, communicate more efficiently with their workforces, and better manage profitability on construction projects. By using our products, customers are also creating detailed productivity records that can be referenced during the bidding process. • Financial Management.
Our Workforce Management products help customers address these problems by allowing contractors to better schedule, track, and forecast labor productivity, improve time management, communicate more efficiently with their workforces, and better manage profitability on construction projects. By using our products, customers are also creating detailed productivity records that can be referenced during the bidding process. • Financial Management.
For example, general contractors must often collect and consolidate dozens of invoices from their specialty contractors each month before invoicing the owner. This process can require days or even weeks of effort, depending upon a project’s complexity and the number of specialty contractors. With our platform, that process can be greatly condensed.
For example, general 10 Table of Contents contractors must often collect and consolidate dozens of invoices from their specialty contractors each month before invoicing the owner. This process can require days or even weeks of effort, depending upon a project’s complexity and the number of specialty contractors. With our platform, that process can be greatly condensed.
Procore Design Coordination helps users identify and resolve design and constructability issues prior to construction, thereby minimizing the cost of RFIs, change orders, and rework. Our product allows users to coordinate documents and 3-D models, bringing stakeholders together in a collaborative tool to validate a project design and achieve predictable results in the field. • Building Information Model.
Procore Design Coordination helps users identify and resolve design and constructability issues prior to construction, thereby minimizing the cost of RFIs, change orders, and rework. Our product allows users to coordinate documents and 3-D models, bringing stakeholders together in a collaborative tool to validate a project design and achieve predictable results in the field.
Customers typically invite participants to join our platform, including their employees and collaborators, which are other project participants that engage with our platform but do not pay us for such use.
Customers typically invite participants to join our platform, including their employees and collaborators, who are other project participants that engage with our platform but do not pay us for such use.
We also offer additional resources to the construction community, including certified continuing education courses, training programs, online content libraries, and free software to universities, schools, trade unions, and non-profits through our in-house social impact team, Procore.org. • We put our customers first.
We also offer additional resources to the construction community, including certified continuing education courses, training programs, online content libraries, and free software to universities, schools, trade unions, and nonprofits through our in-house social impact team, Procore.org. • We put our customers first.
We make our products intuitive and easy-to-use, whether from a computer, smartphone, or tablet, in the field or in the back office, so that everyone can adopt and benefit from the power of our products. A core part of our strategy is our user-centric development culture.
We make our products intuitive and easy to use, whether from a computer, smartphone, or tablet, in the field or in the back office, so that everyone can adopt and benefit from the power of our products. A core part of our strategy is our user-centric development 7 Table of Contents culture.
For additional information, see the sections titled “Risk Factors—Risks Related to Our Intellectual Property—Our failure to protect our intellectual property rights and proprietary information could diminish our brand and other intangible assets and otherwise materially adversely affect our business, financial condition, results of operations, and prospects.” Corporate Information We were incorporated as Butterfly Lane, Inc. in California in January 2002, and changed our name to Procore Technologies, Inc. in May 2002.
For additional information, see the section titled “Risk Factors—Risks Related to Our Intellectual Property—Our failure to protect our intellectual property rights and proprietary information could diminish our brand and other intangible assets and otherwise materially adversely affect our business, financial condition, results of operations, and prospects.” 16 Table of Contents Corporate Information We were incorporated as Butterfly Lane, Inc. in California in January 2002, and changed our name to Procore Technologies, Inc. in May 2002.
Typically, architects are responsible for designing the aesthetic look and feel of a structure, while engineers focus on safety and functionality, materials, and structural design. The construction industry has four defining characteristics: • Construction is a custom business .
Typically, architects are 6 Table of Contents responsible for designing the aesthetic look and feel of a structure, while engineers focus on safety and functionality, materials, and structural design. The construction industry has four defining characteristics: • Construction is a custom business.
Our Construction Intelligence products provide access to 12 pre-built reports and over 145 pre-built report pages and the ability to build custom visualizations leveraging their enterprise data in Microsoft Power BI. Cross-tool reporting, configurable dashboards, and advanced data visualization all help turn project data into business insights.
Our Construction Intelligence products provide access to 13 pre-built reports and over 160 pre-built report pages and the ability to build custom visualizations leveraging their enterprise data in Microsoft Power BI. Cross-tool reporting, configurable dashboards, and advanced data visualization all help turn project data into business insights.
Key stakeholders in the construction ecosystem are: • Owners. Owners initiate construction projects, secure financing, work with architects, engineers, and consultants on building design, hire general contractors to manage the construction process, and are the ultimate decision-makers throughout a project. Owners include corporations, universities, government entities, and commercial and residential real estate developers.
Owners initiate construction projects, secure financing, work with architects, engineers, and consultants on building design, hire general contractors to manage the construction process, and are the ultimate decision-makers throughout a project. Owners include corporations, universities, government entities, and commercial and residential real estate developers.
Our platform streamlines communication and facilitates compliance with safety and other regulatory standards, which helps increase productivity and efficiency, reduces rework and costly delays, improves safety and compliance, and enhances collaboration and accountability among key stakeholders. Product Categories • Preconstruction. Selecting the right specialty contractors and vendors for a construction project is critical to the successful outcome of the project.
Our platform streamlines communication and facilitates compliance with safety and other regulatory standards, which helps increase productivity and efficiency, reduce rework and costly delays, improve safety and compliance, and enhance collaboration and accountability among key stakeholders. Product Categories • Preconstruction. Selecting the right specialty contractors and vendors for a construction project is critical to the successful outcome of the project.
Our products improve cost management, invoice collection and review, lien rights management, and budget forecasting and tracking. Our platform also supports integrations with a majority of the industry’s preferred accounting systems. • Construction Intelligence.
Our products improve cost management, invoice collection and review, payments, lien rights management, and budget 8 Table of Contents forecasting and tracking. Our platform also supports integrations with a majority of the industry’s preferred accounting systems. • Construction Intelligence.
In the future, we have the potential to monetize additional adjacent stakeholders, including a broad set of industry participants who are potential customers of our existing products and services and those whom we plan to address with targeted new products and services, such as our materials financing program, over time.
In the future, we have the potential to monetize additional adjacent stakeholders, including a broad set of industry participants who are potential customers of our existing products and services and those whom we plan to address with targeted new products and services over time.
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. Our customers rely on our platform to help run their businesses more efficiently.
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.
We believe our unique access to data through our platform will allow our team to assess construction risk faster and 9 more accurately than traditional methods, and our goal is to use such data to scale and automate our product offerings, including our materials financing program .
We believe our unique access to data through our platform will allow our team to assess construction risk faster and more accurately than traditional methods, and our goal is to use such data to scale and automate our product offerings.
We plan to open offices and hire sales and customer experience teams and expand our presence in the countries where we already operate, as applicable. • Extend our industry connectivity and our position as a trusted brand.
We plan to hire sales and customer experience teams and expand our presence in certain countries where we already operate. • Extend our industry connectivity and our position as a trusted brand.
As of December 31, 2022, we had 3,568 full-time employees, with 3,080 based in the U.S. and 488 based in our international locations. Our Commitment to the Construction Industry We have taken steps to promote a more diverse and inclusive construction industry. Through our long-standing Women in Construction initiative, we advocate for improved gender equality.
As of December 31, 2023, we had 3,694 full-time employees, with 3,119 based in the U.S. and 575 based in our international locations. Our Commitment to the Construction Industry and Our Communities We have taken steps to promote a more diverse and inclusive construction industry. Through our long-standing Women in Construction initiative, we advocate for improved gender equality.
We also expect to leverage data to build AI and machine learning functionality into the Procore platform in order to provide customers with ways to automate repetitive tasks, uncover hidden information, and glean actionable insights to drive better outcomes on projects, in addition to other next-generation features.
We have also begun leveraging data to build AI and machine learning functionality into our platform in order to provide customers with ways to automate repetitive tasks, uncover hidden information, and glean actionable insights to drive better outcomes on projects, in addition to other next-generation features.
We are also developing risk modeling to price risk in offerings such as our materials financing program and utilize predictive data to tailor those offerings to fit our customers’ needs.
We are also developing risk modeling to price risk in offerings such as our insurance brokerage and utilize predictive data to tailor those offerings to fit our customers’ needs.
Our Competition The market for construction management software is competitive and rapidly evolving. We believe the market is in its early phases of maturity and technology adoption as many companies in the construction industry still rely on a combination of rudimentary workflows, including manual paper-based methods, email, fax, and spreadsheet-based processes.
We believe the market is in its early phases of maturity and technology adoption as many companies in the construction industry still rely on a combination of rudimentary workflows, including manual paper-based methods, email, fax, and spreadsheet-based processes.
The product improves decision-making and reduces rework by ensuring that work is coordinated and installed correctly the first time. Workforce Management • Field Productivity. Procore Field Productivity enables contractors to manage their labor with real-time time data for payroll, manage out-of-scope work, as well as communication, certification, forecasting, and productivity tracking.
The product improves decision-making and reduces rework by ensuring that work is coordinated and installed correctly the first time. Workforce Management • Field Productivity. Procore Field Productivity enables contractors to manage their labor with real-time data for payroll, document out-of-scope work, as well as communicate, certify, forecast, and track productivity.
We are also developing other programs and services, such as our materials financing program, to address related challenges faced by the construction industry’s key stakeholders. Adoption of our products and services helps our customers increase productivity and efficiency, reduce rework and costly delays, improve safety and compliance, and enhance financial transparency and accountability.
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.
We encourage investors and others to review the information we make public in these locations, as such information could be deemed to be material information. 14
We encourage investors and others to review the information we make public in these locations, as such information could be deemed to be material information. 17 Table of Contents
We also have registered domain names for websites that we use in our business. We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost-effective. Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged.
We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost-effective. Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged.
As data is generated on our platform, it is securely stored in centralized databases. Our platform enables our customers to search across their data, empowering real-time analytics and customizable reporting. Users have access to insights that can be derived from data generated by their account usage across our platform.
Our platform enables our customers to search across their data, empowering real-time analytics and customizable reporting. Users have access to insights that can be derived from data generated by their account usage across our platform.
Our products feature intuitive, easy-to-use tools that allow specialty contractors to leverage accurate, real-time information, reduce unnecessary data entry, visualize productivity trends, document completed work, and get paid the correct amounts faster. We are also developing other programs and services to address related challenges faced by specialty contractors.
Our products feature intuitive, easy-to-use tools that allow specialty contractors to leverage accurate, real-time information, reduce unnecessary data entry, visualize productivity trends, document completed work, and get paid the correct amounts faster.
Procore Bid Management organizes the complex bidding process, from bid package creation to bid award, allowing customers to track and assess the significant volume of bids that are typically submitted to work on a given construction project. Bid Management also provides vendors with a single location to access bid package details, files, and communications to simplify the bid submission process.
Procore Bid Management organizes the complex bidding process, from bid package creation to bid award, allowing customers to track and assess the significant volume of bids that are typically submitted to work on a given construction project.
Accounting integrations sync project information between the field and office so informed decisions can be made using up-to-date project and cost data. • Lien Rights Management.
Accounting 13 Table of Contents integrations sync project information between the field and office so that users can make informed decisions using up-to-date project and cost data. • Lien Rights Management.
Customers can easily send out requests for documentation to potential partners, which are then collected, standardized, and aggregated within the Prequalification product, making sure all project stakeholders have access to the right information at the right 10 time. From there, customers can evaluate which partners have the capability, capacity, and resources to be hired for their project.
Customers can send out requests for documentation to potential partners, which are then collected, standardized, and aggregated within the Prequalification product. From there, customers can evaluate which partners have the capability, capacity, and resources to be hired for their project. Project Execution • Project Management.
Our issued patents in the U.S. will expire between 2034 and 2041. We continually review our development efforts to assess the existence and patentability of new intellectual property. We have trademark rights in our name, our logo, and other brand indicia, and have trademark registrations for select marks in the U.S. and many other jurisdictions around the world.
We continually review our development efforts to assess the existence and patentability of new intellectual property. We have trademark rights in our name, our logo, and other brand indicia, and have trademark registrations for select marks in the U.S. and many other jurisdictions around the world. We also have registered domain names for websites that we use in our business.
As of December 31, 2022, we had 34 issued patents in the U.S. and 53 pending patent applications in the U.S. Additionally, we had 16 pending patent applications in foreign countries, as well as nine pending international patent applications that preserve our right to file additional foreign patent applications in the future, as of such date.
Additionally, we had 18 pending patent applications in foreign countries, as well as 10 pending international patent applications that preserve our right to file additional foreign patent applications in the future, as of such date. Our issued patents in the U.S. will expire between 2034 and 2042.
Through our in-house social impact team, Procore.org, we support the advancement of the construction industry by providing an array of resources, including certified continuing education courses, training programs, online content libraries, and in-kind donations of software and training to universities, K-12 school programs, training centers, trade associations, disadvantaged business enterprises, and non-profits. 13 Our Intellectual Property We rely on trademarks, patents, copyrights, trade secrets, license agreements, intellectual property assignment agreements, confidentiality procedures, non-disclosure agreements, and employee invention assignment agreements to establish and protect our proprietary rights.
Through our in-house social impact team, Procore.org, we support the advancement of the construction industry by providing an array of resources, including certified continuing education courses, training programs, online content libraries, and in-kind donations of software and training to universities, K-12 school programs, training centers, trade associations, disadvantaged business enterprises, and nonprofits.
Our business model is designed to encourage rapid, widespread adoption by allowing for unlimited users, meaning 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.
Our business model is designed to encourage rapid, widespread adoption by allowing for unlimited users, meaning that we do not charge a per-seat or per-user fee.
Users can exchange and collaborate around payment documents such as lien waivers, payment applications, and preliminary notices, enabling contractors, suppliers, and other industry stakeholders to have better visibility, more streamlined documentation, and faster payments. Construction Intelligence • Procore Analytics.
Users can exchange and collaborate around payment documents such as lien waivers, payment applications, and preliminary notices, enabling contractors, suppliers, and other industry stakeholders to have better visibility, more streamlined documentation, and faster payments. • Procore Pay . Procore Pay is a payment solution that handles all aspects of the payment process between general contractors and subcontractors.
This includes customers’ employees and collaborators, who are other project participants who engage with our platform but do not pay us for such use.
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.
We have also seen an increase in the number of customers that contributed more than $100,000 of annual recurring revenue (“ARR”), which grew from 843 as of December 31, 2020, to 1,111 as of December 31, 2021, to 1,576 as of December 31, 2022, reflecting year-over-year growth rates of 32% in 2021 and 42% in 2022.
As a result of our focus on acquiring new customers and expansion of existing customers’ use of our platform, we have also seen an increase in the number of customers that contributed more than $100,000 of annual recurring revenue (“ARR”), which was 2,008, 1,576, and 1,111 as of December 31, 2023, 2022, and 2021, respectively, reflecting year-over-year growth rates of 27% in 2023 and 42% in 2022.
We believe that the investments we have made in research and development to build our technology have been core differentiators of our products and platform. We plan to continue to invest in technology innovation and product development, and we believe that our customers will benefit from new features and products on our centralized platform. • Acquire new customers.
We plan to continue to invest in technology innovation and product development, and we believe that our customers will benefit from new features and products on our centralized platform. • Acquire new customers. We believe the market for construction technology and collaboration tools is in its early phases of adoption.
The portion of our current user base made up of collaborators invited to participate in our customers’ projects represents a significant opportunity to increase our revenue. These users are incentivized to become customers in order to gain visibility and control across their projects with actionable insights from a single system.
These users are incentivized to become customers in order to gain visibility and control across their projects with actionable insights from a single system.
Our teams partner with our customers and collaborators to understand their needs through focus groups at our innovation labs, trade shows, and conferences, and with customers and collaborators on the jobsite. Our research and development teams are largely based in our Carpinteria, California headquarters, and our Austin, Texas, New York, New York, Cairo, Egypt, and Toronto, Canada offices.
Our teams partner with our customers and collaborators to understand their needs through focus groups at our innovation labs, trade shows, and conferences, and with customers and collaborators on the jobsite.
Our open application programming interfaces (“APIs”) and our application marketplace (“App Marketplace”) allow customers to integrate our products with their internal systems and over 400 integrations including accounting, document management, and scheduling software, providing our users with choice and flexibility, and demonstrably increasing the stickiness of our platform as we aim to become the construction industry’s system of record.
We offer over 500 integrations, including accounting, document management, and scheduling software, which provide our users with choice and flexibility, and demonstrably increase the stickiness of our platform as we aim to become the construction industry’s system of record.
By default, we provide customers with several role-based permission templates, and these permissions are configurable down to the tool access level by user. • APIs. Our platform features developer-friendly open APIs and tools that are designed to empower our customers and third-party developers to build their own integrations or customized applications, thereby expanding the functionality of our products. • Data.
Our platform features developer-friendly open APIs and tools that are designed to empower our customers and third-party developers to build their own integrations or customized applications, thereby expanding the functionality of our products. • Data. As data is generated on our platform, it is securely stored in centralized databases.
These stakeholders engage in financing, budgeting, designing, building, and maintaining commercial, residential, industrial, and infrastructure projects while navigating varying responsibilities, risk profiles, and motives. Completing a project safely, on time, and within budget requires effective collaboration between stakeholders across workstreams, sharing information in a timely and effective manner, and navigating increasing contractual and regulatory complexity.
Completing a project safely, on time, and within budget requires effective collaboration between stakeholders across workstreams, sharing information in a timely and effective manner, and navigating increasing contractual and regulatory complexity. Key stakeholders in the construction ecosystem are: • Owners.
We believe the market for construction technology and collaboration tools is in its early phases of adoption. We plan to continue to expand our sales and marketing efforts to drive awareness of our products and services and grow our customer base, focusing on owners, general contractors, and specialty contractors.
We plan to continue to expand our sales and marketing efforts to drive awareness of our products and services and grow our customer base, focusing on owners, general contractors, and specialty contractors. The portion of our current user base made up of collaborators invited to participate in our customers’ projects represents a significant opportunity to increase our revenue.
In 2020, we acquired Esticom, another App Marketplace partner and provider of a leading estimating solution. In 2021, we acquired Levelset, a lien rights management solution, and LaborChart, a labor management solution, both of which were also existing App Marketplace partners.
Our App Marketplace provides us with visibility into our customers’ interactions with many third-party integrations. For example, in 2021, we acquired Levelset, a lien rights management solution, and LaborChart, Inc. (“LaborChart”), a labor management solution, both of which were existing App Marketplace partners. We also acquired Unearth Technologies, Inc. (“Unearth”), an existing App Marketplace partner, in 2023.
Once collaborators have used our platform, they may potentially become customers and evangelize Procore on future projects.
Once collaborators have used our platform, they may potentially become customers and evangelize Procore on future projects. 5 Table of Contents We are highly focused on continuing to acquire new customers and expand existing customers’ use of our platform to support our long-term growth.
Customers can also access and store financial data, increasing project team visibility without compromising confidentiality . • Estimating. Procore’s estimating solution offers quantity takeoff and estimating capabilities that streamline the takeoff, estimating, and bidding process, allowing customers to bid and win more projects in less time.
Our customers typically purchase subscriptions to access our products on a product-by-product basis. Preconstruction • Estimating. Procore Estimating offers quantity takeoff and estimating capabilities that streamline the takeoff, estimating, and bidding process, allowing customers to bid and win more projects in less time.
We have worked hard to create and maintain a culture based on three core values: • Openness.
We are also proud to have been able to maintain our culture, which is based on three core values: • Openness.
Thereafter, collaborators have an incentive to become customers, as collaborators do not control what information they get access to, may not be able to access project information after a project is complete, and cannot run their complete portfolio of projects on our platform. • Products.
Thereafter, collaborators have an incentive to become customers so that they can manage their complete portfolio of projects on our platform, use our products to improve their business processes, and maintain ownership of project data. • Products.
We had net losses of $96.2 million in 2020, $265.2 million in 2021, and $286.9 million in 2022. Our Industry The construction ecosystem is highly fragmented and specialized. The construction process relies on coordination among highly fragmented and specialized groups, including key stakeholders such as owners, general contractors, specialty contractors, architects, and engineers.
We generated revenue of $514.8 million in 2021, $720.2 million in 2022, and $950.0 million in 2023, representing year-over-year growth of 40% in 2022 and 32% in 2023. We had net losses of $265.2 million in 2021, $286.9 million in 2022, and $189.7 million in 2023. Our Industry The construction ecosystem is highly fragmented and specialized.
Users can compare bids across different general contractors and manage budgets, change orders, and invoices all in one place. • Accounting Integrations. Procore Accounting Integrations integrates with our customers’ accounting systems to minimize manual data entry and reduce errors created through double entry.
By streamlining the payment process, Invoice Management helps to reduce schedule delays arising from disruptions in cash flow. • Accounting Integrations. Procore Accounting Integrations integrates with our customers’ accounting systems to minimize manual data entry and reduce errors created through double entry.
We generate substantially all of our revenue from subscriptions to access our products.
Our customers rely on our platform to help run their businesses more efficiently and safely, with enhanced collaboration and accountability among key stakeholders. We generate substantially all of our revenue from subscriptions to access our products.
We believe that our business model creates a flywheel effect that has helped increase our customer count, from 10,166 as of December 31, 2020, to 12,193 as of December 31, 2021, to 14,488 as of December 31, 2022, reflecting a year-over-year growth rate of 20% and 19% in 2021 and 2022, respectively.
As of December 31, 2023, 2022, and 2021, the number of customers on our platform was 16,367, 14,488, and 12,193, respectively, reflecting year-over-year growth rates of 13% in 2023 and 19% in 2022.
Removed
The increase of 2,295 net new customers in 2022 includes 189 customers from LaborChart, Inc. (“LaborChart”) when it was fully integrated into the sales process in the third quarter of 2022.
Added
Our open application programming interfaces (“APIs”) and our application marketplace (“App Marketplace”) allow customers to integrate our products with their internal systems.
Removed
All customer counts aforementioned exclude customers acquired from Levelset and Esticom, Inc. (“Esticom”), which have not yet been renewed onto standard Procore 4 annual contracts. Remaining Levelset and Esticom legacy customers will be included in our customer and ARR metrics once they are renewed onto standard Procore annual contracts or upon integration of Levelset and Esticom into Procore’s sales process.
Added
To help our customers address the variable nature of their construction volume, we offer (a) annual subscription contracts with construction volume over a one-year period; (b) multi-year subscription contracts with construction volume measured over successive one-year periods; and (c) pooled volume contracts with fixed flat annual fees based on construction volume measured over multiple years (typically, two- or three-year periods).
Removed
For example, our materials financing program aims to help specialty contractors manage cash flow concerns by facilitating the purchase of construction materials from fulfillment partners on our customers’ behalf, allowing those customers to finance their materials purchases from us on deferred payment terms that better match construction payment timelines.
Added
We intend to efficiently drive new customer acquisitions by continuing to invest across our sales and marketing engine to engage our prospective customers, increase brand awareness, and drive adoption of our products, services, and platform.
Removed
Our App Marketplace provides us with visibility into our customers’ interactions with many third-party integrations. For example, in 2019, we acquired Honest Buildings, Inc. (“Honest Buildings”), an existing App Marketplace partner and a provider of financial and project management software for owners, allowing us to further extend our products and platform to this key stakeholder group.
Added
We intend to expand existing customers’ use of our platform by capturing more projects, which increases annual construction volume, selling additional existing products and services, and offering new products and services that address additional customer needs.
Removed
Our customers typically purchase subscriptions to access our products on a product-by-product basis. Preconstruction • Prequalification. Procore Prequalification streamlines the process of selecting specialty contractors and vendors for construction projects, connecting all stakeholders involved in the process in one place.
Added
Customers that contributed more than $100,000 of ARR represented 60%, 57%, and 52% of total ARR in each of the annual periods ending December 31, 2023, 2022, and 2021, respectively.
Removed
By streamlining the payment process, Invoice Management helps to reduce schedule delays arising from disruptions in cash flow . • Portfolio Financials. Procore Portfolio Financials is purpose-built for owners, enabling these stakeholders to track and approve expenditures across their portfolio of construction projects.
Added
The number of customers that contributed more than $1,000,000 of ARR was 62, 47, and 30 as of December 31, 2023, 2022, and 2021, respectively, reflecting year-over-year growth rates of 32% in 2023 and 57% in 2022.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

163 edited+49 added−43 removed210 unchanged
Biggest changeOur materials financing program may subject us to additional and changing legal, regulatory, and compliance requirements, and failure to comply with such requirements could materially adversely affect our business, financial condition, results of operations, and prospects. Our materials financing program may be subject to regulation in the jurisdictions in which we operate this program.
Biggest changeAny of the foregoing could materially adversely affect our business, financial condition, results of operations, and prospects, and we may be required to incur additional material costs and expenditure to ensure compliance with any such rules in each of the relevant jurisdictions within which we carry on our business. 37 Table of Contents Our ability to use our net operating loss carryforwards (“NOL carryforwards”) and certain other tax attributes may be limited.
Ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds.
Severe ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds.
The details and effective dates of these collection requirements vary from state to state. As a result, it may be necessary for us to reevaluate whether our activities give rise to sales, use, and other indirect taxes as a result of any 31 nexus in those states in which we are not currently registered to collect and remit taxes.
The details and effective dates of these collection requirements vary from state to state. As a result, it may be necessary for us to reevaluate whether our activities give rise to sales, use, and other indirect taxes as a result of any nexus in those states in which we are not currently registered to collect and remit taxes.
For example, our corporate headquarters are located near Santa Barbara, California, a region known for seismic activity and severe fires, and a catastrophic event in this region could materially adversely affect our business, financial condition, results of operations, and prospects. The impact of climate change could result in an increase in the frequency or 35 severity of such events.
For example, our corporate headquarters are located near Santa Barbara, California, a region known for seismic activity and severe fires, and a catastrophic event in this region could materially adversely affect our business, financial condition, results of operations, and prospects. The impact of climate change could result in an increase in the frequency or severity of such events.
In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
In such an instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
To the extent that we do not effectively scale 19 our infrastructure to meet the needs of our growing customer base and maintain performance as our customers expand their use of our products, or if our cloud-based server costs were to increase, our business, financial condition, results of operations, and prospects could be materially adversely affected.
To the extent that we do not effectively scale our infrastructure to meet the needs of our growing customer base and maintain performance as our customers expand their use of our products, or if our cloud-based server costs were to increase, our business, financial condition, results of operations, and prospects could be materially adversely affected.
If proceedings or investigations targeted at other companies result in determinations that certain practices are unlawful, we could be required to change our products and services or alter our business operations, which could harm our business. Legislators and regulators also have proposed new laws and regulations intended to restrain the activities of technology companies.
If proceedings or investigations targeted at other companies result in determinations that certain practices are unlawful, we could be required to change our products and services or alter our business operations, which could harm our business. Legislators and regulators also have proposed new laws and regulations intended to restrain the activities of some technology companies.
Likewise, it may result in the management of our company in ways with which other stockholders disagree. Certain provisions in our organizational documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove members of our board of directors or current management, and adversely affect our stock price.
Likewise, it may result in the management of our company in ways with which other stockholders disagree. Certain provisions in our organizational documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove members of our Board or current management, and adversely affect our stock price.
These actions are in violation of our policies. However, our efforts to defeat spamming attacks, illegal robocalls, and other fraudulent activity will not prevent all such attacks and activity. Such use of our platform could damage our reputation and we could face claims for damages, regulatory enforcement, copyright or trademark infringement, defamation, negligence, or fraud.
These actions are in violation of our policies. Our efforts to defeat spamming attacks, illegal robocalls, and other fraudulent activity will not prevent all such attacks and activity. Such use of our platform could damage our reputation and we could face claims for damages, regulatory enforcement, copyright or trademark infringement, defamation, negligence, or fraud.
If our current and new systems, controls, or standards and any associated process changes do not give rise to the benefits that we expect or do not operate as intended, our financial reporting systems and processes, our ability to produce timely and accurate financial reports, or the effectiveness of our internal control over financial reporting could be adversely affected.
If our current and new systems, controls, or standards and any associated process changes do not give rise to the benefits that we expect or do not operate as intended, our financial reporting systems and processes, our ability to produce timely and accurate financial reports or disclosures, or the effectiveness of our internal control over financial reporting could be adversely affected.
Risks Related to Capital Requirements and Our Marketable Securities Portfolio We may need to raise additional capital to grow our business, and such capital may not be available on terms acceptable to us, or at all, which could reduce our ability to compete and could materially adversely affect our business, financial condition, results of operations, and prospects.
Risks Related to Capital Requirements, Our Marketable Securities Portfolio, and Liquidity We may need to raise additional capital to grow our business, and such capital may not be available on terms acceptable to us, or at all, which could reduce our ability to compete and could materially adversely affect our business, financial condition, results of operations, and prospects.
As a result, such persons or their appointees to our board of directors (our “Board”), acting together, will have the ability to control or significantly influence all matters submitted to our Board or stockholders for approval, including the appointment of our management, the election and removal of directors, and the approval of any significant transactions, as well as our management and business affairs.
As a result, such persons or their appointees to our board of directors of the Company (our “Board”), acting together, will have the ability to control or significantly influence all matters submitted to our Board or stockholders for approval, including the appointment of our management, the election and removal of directors, and the approval of any significant transactions, as well as our management and business affairs.
Failure by our employees, representatives, contractors, partners, agents, intermediaries, or other third parties to comply with applicable laws and regulations in the collection of this information also could have negative consequences to us, including reputational harm, government investigations, and penalties.
Failure by our customers, employees, representatives, contractors, partners, agents, intermediaries, or other third parties to comply with applicable laws and regulations in the collection of this information also could have negative consequences to us, including reputational harm, government investigations, and penalties.
The application of indirect taxes, such as sales and use, value added, goods and services, business, and gross receipts taxes, to businesses that transact online, such as ours, is a complex and evolving area. Following the U.S. Supreme Court decision in South Dakota v.
The application of indirect taxes, such as sales and use, value added, goods and services, business, and gross receipts taxes, to businesses that transact online, such as ours, is a complex and evolving area. Following the 2018 U.S. Supreme Court decision in South Dakota v.
For example, we may not be able to expand further in some markets if we are not able to adapt our products, services, and platform to fit the needs of prospective customers in those markets or if we are unable to satisfy certain government- and industry-specific laws or regulations.
For example, we may not be able to expand further our operations in some markets if we are not able to adapt our products, services, and platform to fit the needs of prospective customers in those markets or if we are unable to satisfy certain government- and industry-specific laws or regulations.
Under those sections of the IRC, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income or tax may be limited.
Under those sections of the IRC, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income or taxes may be limited.
Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the European Economic Area (“EEA”) and the U.K. have significantly restricted the transfer of personal data to the U.S. and other countries whose privacy laws it believes are inadequate.
Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the European Economic Area (“EEA”) and the U.K. have significantly restricted the transfer of personal data to the U.S. and other countries whose privacy laws it generally believes are inadequate.
Preparing for and complying with these obligations requires significant resources and may necessitate changes to our information technologies, systems, and practices and to those of any third parties that process personal data on our behalf. In addition, these obligations may require 22 us to change our business practices.
Preparing for and complying with these obligations requires significant resources and may necessitate changes to our information technologies, systems, and practices and to those of any third parties that process personal data on our behalf. In addition, these obligations may require us to change our business practices.
Regulatory or accounting guidance with respect to existing or future tax laws could materially affect our tax obligations and effective tax rate. Further, it is uncertain if, and to what extent, various states will conform to current federal law or any newly enacted federal tax legislation.
Regulatory or accounting guidance with respect to existing or future tax laws could materially affect our tax obligations and effective tax rate. It is uncertain if, and to what extent, various states will conform to current federal law or any newly enacted federal tax legislation.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of the New York Stock Exchange (the “NYSE”). Our management and other personnel devote a substantial amount of time to compliance with these requirements.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of the New York Stock Exchange. Our management and other personnel devote a substantial amount of time to compliance with these requirements.
Under the EU’s GDPR, government regulators may impose temporary or definitive bans on data processing, as well as fines of up to 20 million euros or 4% of annual global revenue, whichever is greater, for 21 certain violations.
Under the EU’s GDPR, government regulators may impose temporary or definitive bans on data processing, as well as fines of up to 20 million euros or 4% of annual global revenue, whichever is greater, for certain violations.
Various regulatory agencies, including competition, consumer protection, and privacy authorities, have active proceedings and investigations concerning multiple technology companies, some of which have offerings, like app marketplaces and collaboration tools, that are similar to services and features we offer.
Various regulatory agencies, including competition, consumer protection, and privacy authorities, have active proceedings and investigations concerning technology companies, some of which have offerings, like app marketplaces and collaboration tools, that are similar to services and features we offer.
We attempt to mitigate 33 these risks through diversification of our investments and continuous monitoring of our portfolio’s overall risk profile, but the value of our investments may nevertheless decline. To the extent that we increase the amount of our security investments in the future, these risks could be exacerbated.
We attempt to mitigate these risks through diversification of our investments and continuous monitoring of our portfolio’s overall risk profile, but the value of our investments may nevertheless decline. To the extent that we increase the amount of our security investments in the future, these risks could be exacerbated.
We also believe that maintaining and enhancing the Procore brand is critical to retaining and expanding our customer base and, in particular, conveying to customers and collaborators that our platform offers capabilities that address the needs of the construction ecosystem throughout the project lifecycle.
We also believe that maintaining and enhancing our brand is critical to retaining and expanding our customer base and, in particular, conveying to customers and collaborators that our platform offers capabilities that address the needs of the construction ecosystem throughout the project lifecycle.
We do not currently collect and remit state and local excise, utility user, or ad valorem taxes, fees, or surcharges in jurisdictions where we believe we do not have sufficient “nexus.” There is uncertainty as to what constitutes sufficient nexus for a state or local jurisdiction to levy taxes, fees, and surcharges on sales made over the internet, and there is also uncertainty as to whether our characterization of our products, services, and platform as not taxable in certain jurisdictions will be accepted by state and local tax authorities.
We do not currently collect and remit indirect taxes, including state and local excise, utility user, and ad valorem taxes, fees, and surcharges in jurisdictions where we believe we do not have sufficient “nexus.” There is uncertainty as to what constitutes sufficient nexus for a state or local jurisdiction to levy taxes, fees, and surcharges on sales made over the internet, and there is also uncertainty as to whether our characterization of our products, services, and platform as not taxable in certain jurisdictions will be accepted by state and local tax authorities.
In addition, as required by the recent revenue recognition standard under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, we disclose the transaction price allocated to remaining performance obligations.
In addition, as required by the recent revenue recognition standard under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, we disclose the transaction price allocated to remaining performance obligations ("RPO").
Any of these events could materially adversely affect our business, financial condition, results of operations, and prospects. 29 We license technology from third parties and our inability to maintain those licenses could materially adversely affect our business, financial condition, results of operations, and prospects.
Any of these events could materially adversely affect our business, financial condition, results of operations, and prospects. We license technology from third parties and our inability to maintain those licenses could materially adversely affect our business, financial condition, results of operations, and prospects.
Although Section 230 of the CDA currently limits liability for third-party content posted on internet platforms, we cannot 30 predict whether that protection will remain in effect.
Although Section 230 of the CDA currently limits liability for third-party content posted on internet platforms, we cannot predict whether that protection will remain in effect.
For example, the European Union’s (“EU”) General Data Protection Regulation (the “EU’s GDPR”) and the United Kingdom’s (“U.K.”) GDPR (the “U.K.’s GDPR”) impose strict requirements for processing personal data.
For example, the European Union’s (“EU”) General Data Protection Regulation (the “EU’s GDPR”) and the United Kingdom’s (“U.K.”) General Data Protection Regulation (the “U.K.’s GDPR”) impose strict requirements for processing personal data.
In particular, if we are unable to successfully operate as a combined business after the completion of such transactions, including in respect of the LaborChart and Levelset acquisitions, to achieve shared growth opportunities or combine reporting or other processes within the expected time frame, such delay may materially and adversely affect the benefits that we expect to achieve as a result of any such acquisition.
In particular, if we are unable to successfully operate as a combined business after the completion of such transactions, including in respect of the Levelset acquisition, to achieve shared growth opportunities or combine reporting or other processes within the expected time frame, such delay may materially and adversely affect the benefits that we expect to achieve as a result of any such acquisition.
However, as Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all lawsuits brought to enforce any duty or liability created by the Securities Act, and an investor cannot waive compliance with the federal securities laws and the rules and regulations thereunder, there is uncertainty as to whether a court would enforce such a provision.
However, as Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all lawsuits brought to enforce any duty or liability created by the Securities Act, and an investor cannot waive compliance with the federal securities laws and the rules and regulations thereunder, there is uncertainty as to whether a court would enforce this provision.
Data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which could further complicate compliance efforts . As we expand globally, our obligations related to data protection may increase. Outside the U.S., an increasing number of laws, regulations, and industry standards apply to data privacy and security.
Additional data privacy and security laws have also been proposed at the federal, state, and local levels in recent years, which could further complicate compliance efforts. As we expand globally, our obligations related to data protection may increase. Outside the U.S., an increasing number of laws, regulations, and industry standards apply to data privacy and security.
In the future, we may leverage third parties, including intermediaries, agents, and partners, to conduct our business in the U.S. 27 and abroad and to sell subscriptions.
In the future, we may leverage third parties, including intermediaries, agents, and partners, to conduct our business in the U.S. and abroad and to sell subscriptions.
We had customers running projects in over 150 countries as of December 31, 2022, and 14% of our revenue in 2022 was generated from customers outside the U.S. We expect to continue to expand our international operations, which may include opening offices in new jurisdictions and providing our products, services, and platform in additional languages.
We had customers running projects in over 150 countries as of December 31, 2023, and 14% of our revenue in 2023 was generated from customers outside the U.S. We expect to continue to expand our international operations, which may include opening offices in new jurisdictions and providing our products, services, and platform in additional languages.
Additionally, we may need to assess our potential tax collection and remittance obligations based on the requirements of existing or future economic nexus laws. There have been, and will continue to be, substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous markets in which we conduct or may conduct business.
Additionally, we may need to assess our potential tax collection and remittance obligations based on the requirements of existing or future economic nexus laws. There have been, and will continue to be, substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous jurisdictions in which we conduct or may conduct business.
We may also be adversely affected through other penalties, reputational harm, loss of access to certain markets, or otherwise. Obtaining the necessary authorizations, including any required license, for a particular transaction may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities.
We may also be adversely affected through other penalties, reputational harm, loss of access to certain countries, or otherwise. Obtaining the necessary authorizations, including any required license, for a particular transaction may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities.
As we continue to supportgrow our lien rights management offering or expand into new jurisdictions, we may face increased scrutiny and risk of additional UPL claims, actions, or proceedings. Any failure or perceived failure by us to comply with applicable UPL laws and regulations may subject us to regulatory inquiries, actions, lawsuits, or proceedings.
As we continue to support our lien rights management offering or expand into new jurisdictions, we may face increased scrutiny and risk of additional UPL claims, actions, or proceedings. Any failure or perceived failure by us to comply with applicable UPL laws and regulations may subject us to regulatory inquiries, actions, lawsuits, or proceedings.
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage.
These provisions include: • a classified Board with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board; • the denial of any right of our stockholders to remove members of our Board except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of the total voting power of all our outstanding voting stock then entitled to vote in the election of directors; • the ability of our Board to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; 36 • the exclusive right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our Board; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairperson of our Board, chief executive officer, president, or by our Board acting pursuant to a resolution adopted by a majority of our Board, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • certain amendments to our amended and restated certificate of incorporation will require the approval of two-thirds of the then-outstanding voting power of our capital stock; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
These provisions include: • a classified Board with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board; • the denial of any right of our stockholders to remove members of our Board except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of the total voting power of all our outstanding voting stock then entitled to vote in the election of directors; • the ability of our Board to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the exclusive right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our Board; 42 Table of Contents • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairperson of our Board, chief executive officer, president, or by our Board acting pursuant to a resolution adopted by a majority of our Board, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the requirement to obtain approval of two-thirds of the then-outstanding voting power of our capital stock in order to make certain amendments to our amended and restated certificate of incorporation; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
Changes in our platform, or changes in sanctions and import and export laws, may delay the introduction and sale of subscriptions to access our products or services in international markets, prevent our customers with international operations from using our platform, or in some cases, prevent the access or use of our platform to and from certain countries, governments, persons, or entities altogether.
Changes in our platform, or changes in sanctions and import and export laws, may delay the introduction and sale of subscriptions to access our products or services internationally, prevent our customers with international operations from using our platform, or in some cases, prevent the access or use of our platform to and from certain countries, governments, persons, or entities altogether.
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including, but not limited to, regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, reputational harm, loss of revenue or profits, loss of customers or sales, and other adverse consequences, any of which could materially adversely affect our business, financial condition, results of operations, and prospects.
If our IT systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including, but not limited to, regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, reputational harm, loss of revenue or profits, loss of customers or sales, and other adverse consequences, any of which could materially adversely affect our business, financial condition, results of operations, and prospects.
In the ordinary course of business, we process substantial amounts of sensitive information. Cyberattacks, malicious internet-based activity, and online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of such sensitive information and information technology systems, and those of the third parties on which we rely.
In the ordinary course of business, we process substantial amounts of sensitive information. Cyberattacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of such sensitive information and IT systems, and those of the third parties on which we rely.
Our issued patents in the U.S. will expire between 2034 and 2041. We continually review our development efforts to assess the existence and patentability of new intellectual property. We have devoted substantial resources to the development of our proprietary technologies and related processes.
Our issued patents in the U.S. will expire between 2034 and 2042. We continually review our development efforts to assess the existence and patentability of new intellectual property. We have devoted substantial resources to the development of our proprietary technologies and related processes.
In addition, to prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation will further provide that the U.S. federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
In addition, to prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation provides that the U.S. federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
If our research and development investments do not accurately anticipate user demand or if we fail to develop our products, features, or capabilities in a manner that satisfies customer needs in a timely and cost-effective manner, we may fail to retain our existing customers or increase demand for our products, which could materially adversely affect our business, financial condition, results of operations, and prospects.
If our investments in engineering and product development do not accurately anticipate user demand or if we fail to develop our products, features, or capabilities in a manner that satisfies customer needs in a timely and cost-effective manner, we may fail to retain our existing customers or increase demand for our products, which could materially adversely affect our business, financial condition, results of operations, and prospects.
During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to certify that our internal control over financial reporting is effective.
During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our disclosure controls and procedures and internal control over financial reporting, we will be unable to certify that our internal control over financial reporting is effective.
In addition, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our products, services, and platform) or the third-party information technology systems that support us and our services.
In addition, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our IT systems (including our products, services, and platform) or the third-party IT systems that support us and our services.
The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of such jurisdictions, including the U.S., to our international business activities, changes in tax rates, new or revised tax laws, or interpretations of existing tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.
The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of such jurisdictions, including the U.S., to our international business activities, changes in tax rates, new or revised tax laws, or interpretations of existing tax laws and policies, and our ability 36 Table of Contents to operate our business in a manner consistent with our corporate structure and intercompany arrangements.
If we fail to promote and maintain the Procore brand, or if we incur increased expenses in this effort, our business, financial condition, results of operations, and prospects could be materially adversely affected.
If we fail to promote and maintain our brand, or if we incur increased expenses in this effort, our business, financial condition, results of operations, and prospects could be materially adversely affected.
If we were to receive a claim of non-compliance with the terms of any of these open source licenses, we may be required to publicly release certain portions of our proprietary source code. We could also be required to expend substantial time and resources to re-engineer some or all of our software.
If 34 Table of Contents we were to receive a claim of non-compliance with the terms of any of these open source licenses, we may be required to publicly release certain portions of our proprietary source code. We could also be required to expend substantial time and resources to re-engineer some or all of our software.
Furthermore, o ur ability to grow our customer base and increase revenue from customers depends on our ability to enhance and improve our platform in response to changes in the construction management software industry and customer demand.
Furthermore, our ability to grow our customer base and increase revenue from customers depends on our ability to enhance and improve our platform in response to changes in the construction management software industry and customer demand.
In particular, we intend to continue to expend substantial financial and other resources on the following: expanding our sales and marketing and customer success teams to drive new subscriptions, increase the use of our products, services, and platform by existing customers, and support our international expansion; developing our technology infrastructure, including systems architecture, scalability, availability, performance, and security; and investing in our engineering and product development teams and developing new products, services, and platform functionality.
In particular, we intend to continue to expend substantial financial and other resources on the following: expanding our sales and marketing and customer success teams to drive new subscriptions, increase the use of our products, services, and platform by existing customers, and support our international growth; developing our technology infrastructure, including systems architecture, scalability, availability, performance, and data security and privacy; and investing in our engineering and product development teams and developing new products, services, and platform functionality.
Our corporate structure and intercompany arrangements cause us to be subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which could materially adversely affect our business, financial condition, results of operations, and prospects. We are expanding our international operations and personnel to support our business in international markets.
Our corporate structure and intercompany arrangements cause us to be subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which could materially adversely affect our business, financial condition, results of operations, and prospects. We are expanding our international operations and personnel to support our business internationally.
If a court were to find either exclusive forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business. 37 Item 1B. Unresolved Staff Comments. None.
If a court were to find either exclusive forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business. 43 Table of Contents Item 1B. Unresolved Staff Comments. None.
Our ability to increase our customer base and achieve broader market acceptance of our products, services, and platform will significantly depend on our ability to develop and expand our sales and marketing capabilities, the failure of which could materially adversely affect our business, financial condition, results of operations, and prospects.
Our ability to increase our customer base, expand existing customers' use of our platform, and achieve broader market acceptance of our products, services, and platform will significantly depend on our ability to develop and expand our sales and marketing capabilities, the failure of which could materially adversely affect our business, financial condition, results of operations, and prospects.
It is possible that analysts and investors could misinterpret our disclosure or that the terms of our customer subscriptions or other circumstances could cause our methods for calculating this disclosure to differ significantly from others, which could lead to inaccurate or unfavorable forecasts by analysts and investors.
It is possible that analysts and investors could misinterpret our disclosure or that the terms of our customer subscriptions or other circumstances could cause our methods for 40 Table of Contents calculating this disclosure to differ significantly from others, which could lead to inaccurate or unfavorable forecasts by analysts and investors.
In addition, our international operations and expansion efforts requires considerable management attention and the investment of significant resources, while subjecting us to new risks and increasing certain risks that we already face, including risks associated with: • providing our products, services, and platform in different languages and customizing them to support local requirements; • compliance by us and our partners with applicable international laws and regulations, including laws and regulations with respect to anti-corruption, competition, import and export controls, tariffs, trade barriers, economic sanctions, employment, construction, privacy, data protection, consumer protection, and unsolicited email, and unauthorized practice of law (“UPL”), and the risk of penalties and fines against us and individual members of management or employees if our practices are deemed to be out of compliance; • recruiting and retaining talented and capable employees outside the U.S., including employees who speak multiple languages and come from a wide variety of different cultural backgrounds and customs, and managing an employee base in jurisdictions with differing employment regulations; • operating in jurisdictions that do not protect intellectual property rights to the same extent as the U.S. and navigating the practical enforcement of such intellectual property rights outside of the U.S.; • political and economic instability (including as a result of the COVID-19 pandemic or the military conflict involving Russia and Ukraine); • generally longer payment cycles and greater difficulty in collecting accounts receivable; and • higher costs of doing business internationally, including increased accounting, tax, travel, infrastructure, and legal compliance costs, and costs associated with fluctuations in currency exchange rates.
In addition, our international operations and expansion efforts require considerable management attention and the investment of significant resources, while subjecting us to new risks and increasing certain risks that we already face, including risks associated with: • providing our products, services, and platform in different languages and customizing them to support local requirements; • compliance by us and our partners with applicable international laws and regulations, including laws and regulations with respect to anti-corruption, competition, import and export controls, tariffs, trade barriers, economic sanctions, employment, construction, privacy, data protection, consumer protection, and unsolicited email, and the risk of penalties and fines against us and individual members of management or employees if our practices are deemed to be out of compliance; • recruiting and retaining talented and capable employees outside the U.S., including employees who speak multiple languages and come from a wide variety of different cultural backgrounds and customs, and managing an employee base in jurisdictions with differing employment regulations; • operating in jurisdictions that do not protect intellectual property rights to the same extent as the U.S. and navigating the practical enforcement of such intellectual property rights outside of the U.S.; • political and economic instability, including as a result of the Russia-Ukraine war; • generally longer payment cycles and greater difficulty in collecting accounts receivable; and • higher costs of doing business internationally, including increased accounting, tax, travel, infrastructure, and legal compliance costs, and costs associated with fluctuations in currency exchange rates.
Additionally, as we introduce new products and services in the market, such as materials financing, we may face new or different competitors who may similarly have competitive advantages over us. Such competitive pressures may erode our market share and may hinder or slow our expansion into new markets, including materials financing.
Additionally, as we introduce new products and services in the market, we may face new or different competitors who may similarly have competitive advantages over us. Such competitive pressures may erode our market share and may hinder or slow our expansion into new markets.
Remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit, and in public locations.
Remote work has become more common and has increased risks to our IT systems and data, as more of our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit, and in public locations.
State NOL carryforwards and other state tax credits may be subject to similar limitations under state tax laws, and there may be periods during which the use of state net operating losses is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
State NOL carryforwards and other state tax credits may be subject to similar limitations under state tax laws, and there may be periods during which the use of state NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
If any of these policies, materials, or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.
If any of these policies, materials, or statements are found by our customers or regulators to be overly broad, deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.
Our future growth also depends on changes in our customers’ budgetary constraints, the timing and success of new products and services introduced by us or our competitors, the pace of development of the construction management software industry, regulatory and macroeconomic conditions, and economic conditions and business practices within the construction industry, including construction spending in the public and private sectors.
Our future growth also depends on changes in our customers’ IT budgets, the timing and success of new products and services introduced by us or our competitors, the pace of development of the construction management software industry, regulatory and macroeconomic conditions, and economic conditions and business practices within the construction industry, including construction spending in the public and private sectors.
In addition, business transactions, such as acquisitions or integrations, could expose us to these same or additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
In addition, business transactions, such as acquisitions or integrations, have exposed us to these same or additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
As a result, we may experience a significant decline in value or loss of liquidity of our investments, which could materially adversely affect our business, financial condition, results of operations, and prospects.
As a result, we may experience a significant decline in value or loss of liquidity of our investments, which could materially adversely affect our business, financial condition, results of operations, and 38 Table of Contents prospects.
Our executive officers, directors, and stockholders who own more than 5% of our outstanding common stock, in the aggregate, beneficially owned a significant percentage of our outstanding common stock. Furthermore, many of our current directors were appointed by our principal stockholders.
Our executive officers, directors, and stockholders who own more than 5% of our outstanding common stock, beneficially own, in the aggregate, a significant percentage of our outstanding common stock. Furthermore, several of our current directors were appointed by our principal stockholders.
For example, any failure by a third-party processor to comply with applicable law, regulations, or contractual obligations could result in adverse consequences for us, including our inability to or interruption in our ability to operate our business and proceedings against us by governmental entities or others.
For example, any failure by a third-party processor to comply with applicable law, regulations, or contractual obligations could result in adverse consequences for us, 26 Table of Contents including our inability to, or interruption in our ability to, operate our business and proceedings against us by governmental entities or others.
Applicable data privacy and security obligations, including data breach laws and contractual obligations to various customers, may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosures, or the failure to comply with such requirements could lead to adverse consequences.
Applicable data privacy and security obligations, including data breach laws and contractual obligations to various customers, may require us to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents. Such disclosures are costly, and the disclosures, or the failure to comply with such requirements, could lead to adverse consequences.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”) to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting as of December 31, 2022. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
In addition, we are required, pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”) to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
If an ownership change occurs and our ability to use our NOL carryforwards and tax credits is limited, or if our ability to utilize NOL carryforwards and certain tax credits is otherwise restricted by law, our business, financial condition, results of operations, and prospects could be materially adversely affected.
If our ability to use our NOL carryforwards and tax credits is limited, or if our ability to utilize NOL carryforwards and certain tax credits is otherwise restricted by law, our business, financial condition, results of operations, and prospects could be materially adversely affected.
All of these changes to our financial systems and the implementation and integration of acquisitions create an increased risk of deficiencies in our internal controls over financial reporting.
All of these changes to our financial systems and the implementation and integration of acquisitions create an increased risk of deficiencies in our disclosure controls and procedures or internal controls over financial reporting.
Tax authorities may challenge our position that we do not have sufficient nexus in a taxing jurisdiction or that our products, services, and platform are not taxable in such jurisdiction and may decide to audit our business and operations with respect to sales, use, value added, goods and services, and other taxes, which could result in significant tax liabilities (including related penalties and interest) for us or our customers, which could materially adversely affect our business, financial condition, results of operations, and prospects.
Tax authorities may challenge our position that we do not have sufficient nexus in a taxing jurisdiction or that our products, services, and platform are not taxable in such jurisdiction and may decide to audit our business and operations with respect to indirect taxes, which could result in significant tax liabilities (including related penalties and interest) for us or our customers, which could materially adversely affect our business, financial condition, results of operations, and prospects.
We may also rely on third-party developers, service providers, and technologies to provide other products or services to operate our business. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. We may also share or receive sensitive information with or from third parties.
We may also rely on third-party developers, service providers, and technologies to provide other products or services to operate our business. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.
Our lien rights management business model includes the provision of document-processing services in connection with the filing of mechanic’s liens. In the past, various aspects of Levelset’s lien rights management offering have been subject to claims of UPL. In the future, we could face similar claims, actions, or proceedings.
Our lien rights management business model includes the provision of document-processing services in connection with the filing of mechanic’s liens. In the past, various aspects of Levelset’s lien rights management offering have been subject to claims of UPL. We currently face, and may in the future, continue to face, similar claims, actions, or proceedings.
We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.
We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain effective disclosure controls and procedures or internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.
We make business decisions about when to seek patent protection for a particular technology and when to rely upon copyright or trade secret protection, and the approach we select may ultimately prove to be inadequate.
We make business decisions about when to seek patent protection for a particular technology and when to rely upon copyright or trade secret protection, and the approach we select may ultimately prove to be 33 Table of Contents inadequate.
We rely on third-party data centers, such as AWS, to host and operate our platform, and any disruption of or interference with these resources may negatively affect our ability to maintain the performance and reliability of our platform, which could cause our business to suffer.
We rely on third-party data centers, such as Amazon Web Services (“AWS”), to host and operate our platform, and any disruption of or interference with these resources may negatively affect our ability to maintain the performance and reliability of our platform, which could cause our business to suffer.
We currently collect and remit applicable sales taxes and other applicable transfer taxes in jurisdictions where we, through our employees or economic activity, have a presence and where we have determined, based on applicable legal precedents, that sales of subscriptions to access our products, services, and platform are classified as taxable.
We currently collect and remit applicable indirect taxes in jurisdictions where we, through our employees or economic activity, have a presence and where we have determined, based on applicable legal precedents, that sales of subscriptions to access our products, services, and platform are taxable.
During times of war and other major conflicts, we, the third parties upon which we rely, and our customers are subject to a variety of evolving threats, including, but not limited to, social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, break-ins, ransomware attacks, supply chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, and other similar threats.
During times of war and other major conflicts, we, the third parties upon which we rely, and our customers are subject to a variety of evolving threats, including, but not limited to, social-engineering attacks (including through deep fakes, which may be increasingly difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, break-ins, ransomware attacks, supply chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other IT assets, adware, telecommunications failures, and other similar threats.
During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination is uncertain. We may be audited in various jurisdictions, and such jurisdictions may assess additional taxes (including income taxes, sales taxes, and value added taxes) against us.
During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination is uncertain. We may be audited in various jurisdictions, and such jurisdictions may assess additional taxes against us.
If we fail to properly manage future growth, our business, financial condition, results of operations, and prospects could be materially adversely affected. We have experienced rapid growth in recent periods. Our revenue was $400.3 million in 2020, $514.8 million in 2021, and $720.2 million in 2022.
If we fail to properly manage future growth, our business, financial condition, results of operations, and prospects could be materially adversely affected. We have experienced rapid growth in recent periods. Our revenue was $514.8 million in 2021, $720.2 million in 2022, and $950.0 million in 2023.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition, we maintain additional offices in the U.S. in San Diego, California; Austin, Texas; New York, New York; Portland, Oregon; Willmar, Minnesota; Overland Park, Kansas; Tampa, Florida; New Orleans, Louisiana; and internationally in Sydney, Australia; Toronto and Vancouver, Canada; Mexico City, Mexico; London, England; Cairo, Egypt; Singapore, Republic of Singapore; Paris, France; Dublin, Ireland; and Dubai, UAE.
Biggest changeIn addition, we maintain additional offices in the U.S. in Austin, Texas; New York, New York; Portland, Oregon; Willmar, Minnesota; Tampa, Florida; New Orleans, Louisiana; and internationally in Sydney, Australia; Toronto, Canada; London, England; Cairo, Egypt; Singapore, Republic of Singapore; Paris, France; Dublin, Ireland; and Dubai, UAE.
Item 2. Properties. Our corporate headquarters are located in Carpinteria, California, where we lease approximately 200,000 square feet of office space pursuant to operating and finance leases that expire between September 2026 and March 2027, with options to renew through March 2037.
Item 2. Properties. Our corporate headquarters are located in Carpinteria, California, where we lease approximately 176,000 square feet of office space pursuant to operating and finance leases that expire between September 2026 and March 2027, with options to renew through March 2037.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeWe 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 4. Mine Safety Disclosures. Not applicable. 38 PART II
Biggest changeWe 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 4. Mine Safety Disclosures. Not applicable. 45 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−3 removed2 unchanged
Biggest changeStock Performance Graph This performance graph shall not be deemed “soliciting material” or “filed” with the SEC or subject to Regulation 14A or 14C under the Exchange Act or for purposes of Section 18 of the Exchange Act or incorporated by reference into any of our filings under the Securities Act.
Biggest changeWe believe a substantially greater number of beneficial owners hold shares through brokers, banks, or other nominees. 46 Table of Contents Stock Performance Graph This performance graph shall not be deemed “soliciting material” or “filed” with the SEC or subject to Regulation 14A or 14C under the Exchange Act or for purposes of Section 18 of the Exchange Act or incorporated by reference into any of our filings under the Securities Act.
The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the S&P 500 Index and the NASDAQ Computer Index. The graph assumes $100 was invested at the market close on May 20, 2021, which was our initial trading day, in our common stock.
The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the S&P 500 Index and the NASDAQ Computer Index. The graph assumes $100 was invested in our common stock at the market close on May 20, 2021, which was our initial trading day.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information for Common Stock Our common stock is listed and traded on the NYSE under the symbol “PCOR”. Dividend Policy We have never declared or paid any cash dividends on our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information for Common Stock Our common stock is listed and traded on the NYSE under the symbol “PCOR.” Dividend Policy We have never declared or paid any cash dividends on our common stock.
Data for the S&P 500 Index and the NASDAQ Computer Index assume reinvestment of dividends. The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. 39 Unregistered Sales of Equity Securities None.
Data for the S&P 500 Index and the NASDAQ Computer Index assume reinvestment of dividends. The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. Unregistered Sales of Equity Securities None. Use of Proceeds None. Issuer Purchases of Equity Securities None.
In addition, our ability to pay dividends may be restricted by agreements we may enter into in the future. Holders of Record As of February 23, 2023, there were 93 registered stockholders of record of our common stock. We believe a substantially greater number of beneficial owners hold shares through brokers, banks or other nominees.
In addition, our ability to pay dividends may be restricted by agreements we may enter into in the future. Holders of Record As of February 16, 2024, there were 54 registered stockholders of record of our common stock.
Removed
Use of Proceeds On May 24, 2021, we completed our IPO, in which we sold 10,410,000 shares of our common stock at a price to the public of $67.00 per share, including 940,000 shares sold in connection with the full exercise of the underwriters’ option to purchase additional shares.
Removed
The offer and sale of all of the shares in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-236789), which was declared effective by the SEC on May 19, 2021.
Removed
There has been no material change in the planned use of proceeds from our IPO as described in our Final Prospectus dated May 19, 2021 and filed with the SEC pursuant to Rule 424(b) under the Securities Act on May 21, 2021. Issuer Purchases of Equity Securities None. Item 6. [Reserved.] 40

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

77 edited+31 added−53 removed49 unchanged
Biggest changeYear Ended December 31, 2022 2021 2020 (in thousands) Revenue $ 720,203 $ 514,821 $ 400,291 Cost of revenue (1)(2)(3)(4)(5) 148,416 98,312 71,663 Gross profit 571,787 416,509 328,628 Operating expenses: Sales and marketing (1)(2)(3)(4)(5) 424,976 308,511 189,032 Research and development (1)(2)(3)(4)(5) 270,982 237,290 124,661 General and administrative (1)(3)(4)(5) 166,283 156,635 73,465 Total operating expenses 862,241 702,436 387,158 Loss from operations (290,454 ) (285,927 ) (58,530 ) Interest income 7,861 175 293 Interest expense (2,135 ) (2,328 ) (2,353 ) Change in fair value of Series I redeemable convertible preferred stock warrant liability - - (36,990 ) Other (expense) income, net (1,737 ) (843 ) 420 Loss before provision for (benefit from) income taxes (286,465 ) (288,923 ) (97,160 ) Provision for (benefit from) income taxes 466 (23,758 ) (993 ) Net loss $ (286,931 ) $ (265,165 ) $ (96,167 ) Year Ended December 31, 2022 2021 2020 (as a percentage of revenue) Revenue 100 % 100 % 100 % Cost of revenue (1)(2)(3)(4)(5) 21 % 19 % 18 % Gross profit 79 % 81 % 82 % Operating expenses: Sales and marketing (1)(2)(3)(4)(5) 59 % 60 % 47 % Research and development (1)(2)(3)(4)(5) 38 % 46 % 31 % General and administrative (1)(3)(4)(5) 23 % 30 % 18 % Total operating expenses 120 % 136 % 97 % Loss from operations (40 %) (56 %) (15 %) Interest income 1 % 0 % 0 % Interest expense (0 %) (0 %) (1 %) Change in fair value of Series I redeemable convertible preferred stock warrant liability 0 % 0 % (9 %) Other (expense) income, net (0 %) (0 %) 0 % Loss before provision for (benefit from) income taxes (40 %) (56 %) (24 %) Provision for (benefit from) income taxes 0 % (5 %) (0 %) Net loss (40 %) (52 %) (24 %) 46 (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Cost of revenue $ 7,253 $ 8,094 $ 1,722 Sales and marketing 53,397 68,755 13,385 Research and development 63,262 85,040 12,930 General and administrative 38,974 65,272 15,923 Total stock-based compensation expense $ 162,886 $ 227,161 $ 43,960 (2) Includes amortization of acquired intangible assets as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Cost of revenue $ 22,428 $ 7,522 $ 3,315 Sales and marketing 12,425 3,600 1,728 Research and development 3,528 2,674 721 Total amortization of acquired intangible assets $ 38,381 $ 13,796 $ 5,764 (3) Includes employer payroll tax on employee stock transactions as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Cost of revenue $ 308 $ 457 $ 7 Sales and marketing 1,955 2,325 205 Research and development 2,474 2,606 88 General and administrative 1,202 1,127 272 Total employer payroll tax on employee stock transactions $ 5,939 $ 6,515 $ 572 (4) Includes acquisition-related expenses as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Cost of revenue $ - $ 2 $ - Sales and marketing 1,725 488 - Research and development 5,549 1,348 - General and administrative 2,128 7,442 792 Total acquisition-related expenses $ 9,402 $ 9,280 $ 792 ( 5 ) Includes restructuring-related charges as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Cost of revenue $ - $ - $ 127 Sales and marketing - - 1,824 Research and development - - 1,681 General and administrative - - 801 Total restructuring-related charges $ - $ - $ 4,433 47 Comparison of the Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, Change 2022 2021 Dollar Percent (dollars in thousands) Revenue $ 720,203 $ 514,821 $ 205,382 40 % In 2022, our revenue increased by $205.4 million, or 40%, compared to 2021, which is primarily due to expansion within our existing customers and revenue from new customers added during the year.
Biggest changeYear Ended December 31, 2023 2022 2021 (in thousands) Revenue $ 950,010 $ 720,203 $ 514,821 Cost of revenue (1)(2)(3)(4) 174,462 148,416 98,312 Gross profit 775,548 571,787 416,509 Operating expenses Sales and marketing (1)(2)(3)(4) 494,908 424,976 308,511 Research and development (1)(2)(3)(4) 300,571 270,982 237,290 General and administrative (1)(3)(4) 195,746 166,283 156,635 Total operating expenses 991,225 862,241 702,436 Loss from operations (215,677) (290,454) (285,927) Interest income 19,779 5,826 175 Interest expense (1,957) (2,135) (2,328) Accretion income, net 9,794 2,035 — Other expense, net (360) (1,737) (843) Loss before provision for (benefit from) income taxes (188,421) (286,465) (288,923) Provision for (benefit from) income taxes 1,273 466 (23,758) Net loss $ (189,694) $ (286,931) $ (265,165) Year Ended December 31, 2023 2022 2021 (as a percentage of revenue) Revenue 100 % 100 % 100 % Cost of revenue (1)(2)(3)(4) 18 % 21 % 19 % Gross profit 82 % 79 % 81 % Operating expenses Sales and marketing (1)(2)(3)(4) 52 % 59 % 60 % Research and development (1)(2)(3)(4) 32 % 38 % 46 % General and administrative (1)(3)(4) 21 % 23 % 30 % Total operating expenses 104 % 120 % 136 % Loss from operations (23 %) (40 %) (56 %) Interest income 2 % 1 % 0 % Interest expense 0 % 0 % 0 % Accretion income, net 1 % 0 % 0 % Other expense, net 0 % 0 % 0 % Loss before provision for (benefit from) income taxes (20 %) (40 %) (56 %) Provision for (benefit from) income taxes 0 % 0 % (5 %) Net loss (20 %) (40 %) (52 %) 54 Table of Contents (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Cost of revenue $ 11,491 $ 7,253 $ 8,094 Sales and marketing 55,162 53,397 68,755 Research and development 68,275 63,262 85,040 General and administrative 44,406 38,974 65,272 Total stock-based compensation expense* $ 179,334 $ 162,886 $ 227,161 * Includes amortization of capitalized stock-based compensation of $4.5 million for the year ended December 31, 2023, which was initially capitalized as capitalized software and cloud-computing arrangement implementation costs.
Overview Our mission is to connect everyone in construction on a global platform. We are a leading provider of cloud-based construction management software, and are helping transform one of the oldest, largest, and least digitized industries in the world.
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.
These assumptions represent management’s best 55 estimates and if different assumptions had been used, our stock-based compensation expense could have been materially different . For awards that vest solely based on continued service, the grant date fair value is recognized as compensation expense on a straight-line basis over the requisite service period of the awards, which is generally four years.
These assumptions represent management’s best estimates and if different assumptions had been used, our stock-based compensation expense could have been materially different. For awards that vest solely based on continued service, the grant date fair value is recognized as compensation expense on a straight-line basis over the requisite service period of the awards, which is generally four years.
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 the Company’s historical operating results and to other companies in our industry.
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.
Further, as of December 31, 2022, 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 .
Further, as of December 31, 2023, 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.
We determine the percentage of non-U.S. revenue based on the billing location of each subscription. 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.
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.
The primary input in determining the fair value of the stock- based awards is the value of the Company’s common stock. The determination of the grant date fair value using the Black-Scholes option-pricing model is affected by volatility, expected term, dividend yield, and risk-free rate.
The primary input in determining the fair value of the stock-based awards is the value of our common stock. The determination of the grant date fair value using the Black-Scholes option-pricing model is affected by volatility, expected term, dividend yield, and risk-free rate.
Upon the effective date of the registration statement for our IPO in May 2021, the liquidity-based condition for all RSUs granted was satisfied and we recognized a cumulative catch-up stock-based compensation adjustment of $115.3 million in our consolidated statement of operations and comprehensive loss for the portion of the service period satisfied from the grant date through the effective date of the registration statement.
Upon the effective date of the registration statement for our IPO in May 2021, the liquidity-based condition for all RSUs granted was satisfied and we recognized a cumulative catch-up stock-based compensation adjustment in our consolidated statement of operations and comprehensive loss for the portion of the service period satisfied from the grant date through the effective date of the registration statement.
Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Expenses, Non-GAAP Loss 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, acquisition-related expenses, and restructuring-related charges.
Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Expenses, Non-GAAP Income (Loss) 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.
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, the Company places a greater emphasis on overall stockholder dilution than the accounting charges associated with such grants).
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).
A discussion of our financial condition and results of operations for the fiscal year ended December 31, 2022 compared to the fiscal year ended December 31, 2021 is presented below.
A discussion of our financial condition and results of operations for the fiscal year ended December 31, 2023 compared to the fiscal year ended December 31, 2022 is presented below.
A discussion of our financial condition and results of operations for the fiscal year ended December 31, 2021 compared to the year ended December 31, 2020 has been reported previously under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on March 4, 2022.
A discussion of our financial condition and results of operations for the fiscal year ended December 31, 2022 compared to the year ended December 31, 2021 has been reported previously under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023.
For awards that contain both performance and service vesting conditions, the grant date fair value is recognized as compensation expense using a graded vesting attribution model. No expense is recognized for awards with performance conditions until that condition is probable of being met.
For awards that contain both performance and service vesting conditions, the grant date fair value is recognized as compensation expense using a graded vesting attribution model. No expense is 64 Table of Contents recognized for awards with performance conditions until that condition is probable of being met.
We have made, and plan to continue to make, significant investments in existing and select additional 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.
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.
We expect to maintain this full valuation allowance for our net U.S. and U.K. deferred tax assets for the foreseeable future. 45 Results of Operations The following tables set forth our 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.
We expect to maintain this full valuation allowance for our net U.S. deferred tax assets for the foreseeable future. 53 Table of Contents Results of Operations The following tables set forth our 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.
As we expand our international operations, we expect to incur increased foreign tax expenses. We have a full valuation allowance for net U.S. and U.K. deferred tax assets. The U.S. valuation allowance includes NOL carryforwards and tax credits related primarily to research and development for our operations in the U.S. The U.K. valuation allowance is primarily comprised of NOL carryforwards.
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 NOL carryforwards and tax credits related primarily to research and development for our operations in the U.S.
Further, multiple stakeholders can be customers on the same project and retain access to project information for the duration of their subscription. 41 Certain Factors Affecting Our Performance Acquiring New Customers and Retaining and Expanding Existing Customers’ Use of Our Platform We are highly focused on continuing to acquire new customers to support our long-term growth.
Further, multiple stakeholders can be customers on the same project and retain access to project information for the duration of their subscription. 48 Table of Contents Certain Factors Affecting Our Performance Acquiring New Customers and Retaining and Expanding Existing Customers’ Use of Our Platform We are highly focused on continuing to acquire new customers and expand existing customers’ use of our platform to support our long-term growth.
The amount of employer payroll tax-related items on employee stock transactions is dependent on RSU 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.
The amount of employer payroll tax-related items on employee stock transactions is dependent on restricted stock unit (“RSU”) 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.
In the next 12 months, we have contractual commitments consisting of operating lease obligations of $9.9 million, finance lease obligations of $3.8 million, and non-cancelable purchase commitments of $19.5 million, as disclosed in Note 6 and Note 12 of the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
In the next 12 months, we have contractual commitments consisting of operating lease obligations of $12.0 million, finance lease obligations of $3.9 million, and non-cancelable purchase commitments of $37.5 million, as disclosed in Note 6 and Note 11 of the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Our cash sources primarily consist of cash generated from sales to our customers, proceeds from employees through stock option exercises and our employee stock purchase plan (“ESPP”), and interest income on our marketable securities and savings account balances.
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.
We account for forfeitures as they occur instead of estimating the number of awards expected to be forfeited. Prior to our IPO, we had granted RSUs to certain employees and non-employee consultants that contained both liquidity- and service-based vesting conditions.
We account for forfeitures as they occur instead of estimating the number of awards expected to be forfeited. Prior to our initial public offering (“IPO”), we had granted RSUs to certain employees and non-employee consultants that contained both liquidity- and service-based vesting conditions.
Research and Development Research and development expenses primarily consist of personnel-related compensation expenses for our engineering, product, and design teams, contractor costs to supplement our staff levels, consulting services, amortization of certain acquired intangible assets used in research and development activities, and allocated overhead.
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, consulting services, amortization of certain acquired intangible assets used in research and development activities, and allocated overhead.
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 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, the timing and extent of amounts financed and customer repayments under our materials financing program, and inflation.
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 timing and extent of spending to support further sales and marketing and 61 Table of Contents research and development efforts, general and administrative expenses to support our growth, including international expansion and inflation.
Cost of revenue also includes third-party hosting costs, software license fees, amortization of acquired technology intangible assets, amortization of capitalized software development costs related to our platform, and allocated overhead. We expect our cost of revenue to increase on an absolute dollar basis as our revenue and acquisition activities increase.
Additionally, cost of revenue includes non-personnel-related expenses, such as third-party hosting costs, amortization of acquired technology intangible assets, amortization of capitalized software development costs related to our platform, software license fees, and allocated overhead. We expect our cost of revenue to increase on an absolute dollar basis as our revenue and acquisition activities increase.
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 begun to generate positive cash flows from operations in recent years, we have continued to generate losses from operations, as reflected in our accumulated deficit of $949.1 million as of December 31, 2022.
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 $1.1 billion as of December 31, 2023.
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 the period selected, which we refer to as churn. We then divide (a) the total prior period ARR minus churn by (b) the total prior period ARR to calculate the gross retention rate.
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 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.
To calculate our gross retention rate at the end of a particular period, we first calculate the ARR from the cohort of active customers at the end of the period 12 months prior to the end of the period selected.
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.
Recent Accounting Pronouncements See “Summary of Business and Significant Accounting Policies” in Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of recently issued accounting pronouncements. 57
Recent Accounting Pronouncements See “Summary of Significant Accounting Policies” in Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of recently issued accounting pronouncements. 65 Table of Contents
We are also developing other programs and services, such as our materials financing program, 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.
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.
The fair value of RSUs and restricted stock awards (“RSAs”) is based on the estimated fair value of the Company’s common stock on the grant date. The fair value of each option award and ESPP purchase right is estimated on the grant date using the Black-Scholes option pricing model.
The fair value of RSUs, performance-based restricted stock units (“PSUs”), and restricted stock awards is based on the estimated fair value of our common stock on the grant date. The fair value of each option award and ESPP purchase right is estimated on the grant date using the Black-Scholes option pricing model.
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 GAAP revenue on an annualized basis. ARR is not intended to be a replacement or forecast of revenue. We use a gross retention rate to measure our ability to retain our customers.
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.
Sales and Marketing Sales and marketing expenses primarily consist of personnel-related compensation expenses for our sales and marketing organizations, 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.
Additionally, sales and marketing expenses include non-personnel-related expenses, such as advertising costs, marketing events, travel, trade shows, and other marketing activities; amortization of acquired customer relationship intangible assets; contractor costs to supplement our staff levels; consulting services; and allocated overhead. We expense advertising and other promotional expenditures as incurred.
Beyond the next 12 months, we have contractual commitments that we are reasonably likely to incur consisting of operating lease obligations of $41.8 million, finance lease obligations of $60.3 million, and non-cancelable purchase commitments of $28.8 million, as disclosed in Note 6 52 and Note 12 of the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Beyond the next 12 months, we have contractual commitments that we are reasonably likely to incur consisting of operating lease obligations of $41.1 million, finance lease obligations of $56.4 million, and non-cancelable purchase commitments of $22.5 million, as disclosed in Note 6 and Note 11 of the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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. On April 29, 2022, we terminated our Credit Facility.
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.
The transaction price allocated to remaining performance obligations 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.
Remaining Performance Obligations Our subscriptions typically have a term of one to three years. The transaction price allocated to 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.
Interest Income Interest income consists primarily of interest income earned on our marketable securities, money market funds, and cash savings accounts. Interest income also includes accretion of discounts, net of amortization of premiums, related to our available-for-sale marketable debt securities.
Interest Income Interest income consists primarily of interest income earned on our marketable securities, money market funds, and cash savings accounts. 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.
The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 12,608 $ 36,730 $ 21,853 Net cash used in investing activities (340,476 ) (541,768 ) (33,511 ) Net cash provided by financing activities 38,652 711,826 272,117 Operating Activities Our largest source of cash from operating activities is collections from the sales of subscriptions to our customers.
The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2023 2022 2021 (dollars in thousands) Net cash provided by operating activities $ 92,015 $ 12,608 $ 36,730 Net cash used in investing activities (76,061) (340,476) (541,768) Net cash provided by financing activities 41,165 38,652 711,826 Operating Activities Our largest source of cash from operating activities is collections from the sales of subscriptions to our customers.
The increase in revenue from existing customers includes the net benefit of a full year of subscription revenue in 2022 from customers that were new in 2021 and continued their subscriptions in 2022, and customers that expanded their subscriptions in 2022 through the purchase of additional construction volume or products, as well as price increases.
The increase in revenue from existing customers includes the net benefit of a full year of subscription revenue in 2023 from customers that were newly acquired in 2022 and continued their subscriptions in 2023, and customers that expanded their subscriptions in 2023 through the purchase of additional construction volume or products and services.
These changes in our operating assets and liabilities were partially offset by the following: • a $35.8 million increase in accounts receivable primarily due to timing of billings and cash receipts from customers from the growth of our business; • a $22.0 million increase in deferred contract cost assets related to commissions as a result of additional customer contracts closed during the period; • an $8.9 million decrease in operating lease liabilities related to lease payments; and • a $3.8 million increase in prepaid expenses and other assets primarily due to timing of cash payments to our vendors. 53 Net cash provided by operating activities was $36.7 million in 2021, which resulted from a net loss of $265.2 million, adjusted for non-cash charges of $247.9 million and a net cash inflow of $54.0 million from changes in operating expenses and liabilities.
These changes in our operating assets and liabilities were partially offset by the following: • a $35.8 million increase in accounts receivable primarily due to timing of billings and cash receipts from customers from the growth of our business; • a $22.0 million increase in deferred contract cost assets related to commissions as a result of additional customer contracts closed during the period; • an $8.9 million decrease in operating lease liabilities related to lease payments; and • a $3.8 million increase in prepaid expenses and other assets primarily due to timing of cash payments to our vendors.
We increased our general and administrative headcount by 18% since December 31, 2021 in order to continue to support the growth of our business.
We increased our general and administrative headcount by 14% since December 31, 2022 in order to continue to support the efficiency of other departments and the growth of our business.
We have also developed focused sales and marketing efforts in Germany, where we do not yet 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 14% in 2022, 15% in 2021, and 12% in 2020.
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 14% for the years ended December 31, 2023 and 2022, respectively .
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.
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.
The $54.0 million of net cash inflows provided as a result of changes in our operating assets and liabilities primarily reflected the following: • a $78.7 million increase in deferred revenue primarily due to the growth of our business and timing of billings; • a $38.2 million increase in accrued expenses and other liabilities primarily due to timing of payroll and cash payments to our vendors, and accrued ESPP contributions; and • a $4.0 million increase in accounts payable primarily due to timing of cash payments to our vendors.
The $23.4 million of net cash inflows provided as a result of changes in our operating assets and liabilities primarily reflected the following: • a $106.6 million increase in deferred revenue primarily due to the growth of our business and timing of billings; and • a $4.8 million increase in accrued expenses and other liabilities primarily due to the size of bonus and payroll accruals, and cash payments to our vendors.
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.
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.
As of December 31, 2022, we had issued letters of credit totaling $6.5 million to secure various U.S. and Australia leased office facilities.
As of December 31, 2023, we had outstanding letters of credit on an unsecured basis totaling approximately $5.6 million to secure various leased office facilities in the U.S. and Australia.
We expect research and development 44 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 invest in headcount to build, enhance, maintain, and scale our products , services, and platform.
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 invest in headcount to build, enhance, maintain, and scale our products, services, and platform. 52 Table of Contents General and Administrative General and administrative expenses primarily consist of personnel-related compensation expenses for our human resources, IT, finance, legal, executive, and other administrative functions.
We do not currently believe that these macroeconomic factors have had a material impact on our business; however, as they develop, we continue to monitor the ways in which such factors may directly or indirectly impact our business, results of operations, and financial condition.
We believe that macroeconomic factors have resulted in cautious customer spending, contributing to a decline in the cRPO annual growth rate. However, as they develop, we continue to monitor the ways in which such factors may directly or indirectly impact our business, results of operations, and financial condition.
We intend to continue to invest in building additional products, financial offerings, features, and functionality that expand our capabilities and facilitate the extension of our platform. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion.
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.
We primarily sell our products on a subscription basis for a fixed fee with pricing generally based on the number and mix of products and the annual construction volume contracted to run on our platform. As our customers subscribe to additional products or increase the annual construction volume contracted to run on our platform, we generate more revenue.
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.
The number of customers on our platform has increased from 10,166 as of December 31, 2020, to 12,193 as of December 31, 2021, to 14,488 as of December 31, 2022, reflecting year-over-year growth rates of 20% in 2021 and 19% in 2022.
As of December 31, 2023, 2022, and 2021, the number of customers on our platform was 16,367, 14,488, and 12,193, respectively, reflecting year-over-year growth rates of 13% in 2023 and 19% in 2022.
The increase in cost of revenue was also attributable to a $ 14.9 million increase in amortization of acquired developed technology intangible assets related to recent acquisitions, and a $ 9.7 million increase in third-party cloud hosting and related services as we grow our customer base.
The increase in cost of revenue was also attributable to a $7.4 million increase in amortization of capitalized software development costs, and a $6.8 million increase in third-party cloud hosting and related services as we grow our customer base.
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. 50 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: Year Ended December 31, 2022 2021 2020 (dollars in thousands) Revenue $ 720,203 $ 514,821 $ 400,291 Gross profit 571,787 416,509 328,628 Stock-based compensation expense 7,253 8,094 1,722 Amortization of acquired technology intangible assets 22,428 7,522 3,315 Employer payroll tax on employee stock transactions 308 457 7 Acquisition-related expenses - 2 - Restructuring-related charges - - 127 Non-GAAP gross profit $ 601,776 $ 432,584 $ 333,799 Gross margin 79 % 81 % 82 % Non-GAAP gross margin 84 % 84 % 83 % Reconciliation of operating expenses to non-GAAP operating expenses: Year Ended December 31, 2022 2021 2020 (dollars in thousands) Revenue $ 720,203 $ 514,821 $ 400,291 GAAP sales and marketing 424,976 308,511 189,032 Stock-based compensation expense (53,397 ) (68,755 ) (13,385 ) Amortization of acquired intangible assets (12,425 ) (3,600 ) (1,728 ) Employer payroll tax on employee stock transactions (1,955 ) (2,325 ) (205 ) Acquisition-related expenses (1,725 ) (488 ) - Restructuring-related charges - - (1,824 ) Non-GAAP sales and marketing $ 355,474 $ 233,343 $ 171,890 GAAP sales and marketing as a percentage of revenue 59 % 60 % 47 % Non-GAAP sales and marketing as a percentage of revenue 49 % 45 % 43 % GAAP research and development 270,982 237,290 124,661 Stock-based compensation expense (63,262 ) (85,040 ) (12,930 ) Amortization of acquired intangible assets (3,528 ) (2,674 ) (721 ) Employer payroll tax on employee stock transactions (2,474 ) (2,606 ) (88 ) Acquisition-related expenses (5,549 ) (1,348 ) - Restructuring-related charges - - (1,681 ) Non-GAAP research and development $ 196,169 $ 145,622 $ 109,241 GAAP research and development as a percentage of revenue 38 % 46 % 31 % Non-GAAP research and development as a percentage of revenue 27 % 28 % 27 % GAAP general and administrative 166,283 156,635 73,465 Stock-based compensation expense (38,974 ) (65,272 ) (15,923 ) Employer payroll tax on employee stock transactions (1,202 ) (1,127 ) (272 ) Acquisition-related expenses (2,128 ) (7,442 ) (792 ) Restructuring-related charges - - (801 ) Non-GAAP general and administrative $ 123,979 $ 82,794 $ 55,677 GAAP general and administrative as a percentage of revenue 23 % 30 % 18 % Non-GAAP general and administrative as a percentage of revenue 17 % 16 % 14 % 51 Reconciliation of loss from operations and operating margin to non-GAAP loss from operations and non-GAAP operating margin: Year Ended December 31, 2022 2021 2020 (dollars in thousands) Revenue $ 720,203 $ 514,821 $ 400,291 Loss from operations (290,454 ) (285,927 ) (58,530 ) Stock-based compensation expense 162,886 227,161 43,960 Amortization of acquired intangible assets 38,381 13,796 5,764 Employer payroll tax on employee stock transactions 5,939 6,515 572 Acquisition-related expenses 9,402 9,280 792 Restructuring-related charges - - 4,433 Non-GAAP loss from operations $ (73,846 ) $ (29,175 ) $ (3,009 ) Operating margin (40 %) (56 %) (15 %) Non-GAAP operating margin (10 %) (6 %) (1 %) Liquidity and Capital Resources Prior to our IPO, we financed our operations principally through private placements of our equity securities.
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. 58 Table of Contents 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: Year Ended December 31, 2023 2022 2021 (dollars in thousands) Revenue $ 950,010 $ 720,203 $ 514,821 Gross profit 775,548 571,787 416,509 Stock-based compensation expense 11,491 7,253 8,094 Amortization of acquired technology intangible assets 22,396 22,428 7,522 Employer payroll tax on employee stock transactions 540 308 457 Acquisition-related expenses — — 2 Non-GAAP gross profit $ 809,975 $ 601,776 $ 432,584 Gross margin 82 % 79 % 81 % Non-GAAP gross margin 85 % 84 % 84 % 59 Table of Contents Reconciliation of operating expenses to non-GAAP operating expenses: Year Ended December 31, 2023 2022 2021 (dollars in thousands) Revenue $ 950,010 $ 720,203 $ 514,821 GAAP sales and marketing 494,908 424,976 308,511 Stock-based compensation expense (55,162) (53,397) (68,755) Amortization of acquired intangible assets (12,425) (12,425) (3,600) Employer payroll tax on employee stock transactions (2,766) (1,955) (2,325) Acquisition-related expenses (2,483) (1,725) (488) Non-GAAP sales and marketing $ 422,072 $ 355,474 $ 233,343 GAAP sales and marketing as a percentage of revenue 52 % 59 % 60 % Non-GAAP sales and marketing as a percentage of revenue 44 % 49 % 45 % GAAP research and development $ 300,571 $ 270,982 $ 237,290 Stock-based compensation expense (68,275) (63,262) (85,040) Amortization of acquired intangible assets (2,757) (3,528) (2,674) Employer payroll tax on employee stock transactions (3,217) (2,474) (2,606) Acquisition-related expenses (6,370) (5,549) (1,348) Non-GAAP research and development $ 219,952 $ 196,169 $ 145,622 GAAP research and development as a percentage of revenue 32 % 38 % 46 % Non-GAAP research and development as a percentage of revenue 23 % 27 % 28 % GAAP general and administrative $ 195,746 $ 166,283 $ 156,635 Stock-based compensation expense (44,406) (38,974) (65,272) Employer payroll tax on employee stock transactions (1,910) (1,202) (1,127) Acquisition-related expenses (35) (2,128) (7,442) Non-GAAP general and administrative $ 149,395 $ 123,979 $ 82,794 GAAP general and administrative as a percentage of revenue 21 % 23 % 30 % Non-GAAP general and administrative as a percentage of revenue 16 % 17 % 16 % 60 Table of Contents Reconciliation of loss from operations and operating margin to non-GAAP income (loss) from operations and non-GAAP operating margin: Year Ended December 31, 2023 2022 2021 (dollars in thousands) Revenue $ 950,010 $ 720,203 $ 514,821 Loss from operations (215,677) (290,454) (285,927) Stock-based compensation expense 179,334 162,886 227,161 Amortization of acquired intangible assets 37,578 38,381 13,796 Employer payroll tax on employee stock transactions 8,433 5,939 6,515 Acquisition-related expenses 8,888 9,402 9,280 Non-GAAP income (loss) from operations $ 18,556 $ (73,846) $ (29,175) Operating margin (23 %) (40 %) (56 %) Non-GAAP operating margin 2 % (10 %) (6 %) Liquidity and Capital Resources As of December 31, 2023, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $678.0 million, which were held in money market funds, U.S. treasury securities, corporate notes and obligations, time deposits, commercial paper, checking accounts, and savings accounts.
Our gross retention rate reflects only customer losses and does not reflect customer expansion or contraction. We believe our high gross retention rates demonstrate 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 renew their subscriptions.
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.
Operating Expenses Year Ended December 31, Change 2022 2021 Dollar Percent (dollars in thousands) Sales and marketing $ 424,976 $ 308,511 $ 116,465 38 % The increase in sales and marketing expenses during 2022 was primarily attributable to an increase of $ 77.2 million in personnel-related expenses, including an increase of $ 92.9 million in salaries and wages driven by headcount and merit increases, partially offset by a decrease of $ 15.4 million in stock-based compensation expense.
Operating Expenses Year Ended December 31, Change 2023 2022 Dollar Percent (dollars in thousands) Sales and marketing $ 494,908 $ 424,976 $ 69,932 16 % The increase in sales and marketing expenses during 2023 was primarily attributable to an increase of $61.0 million in personnel-related expenses, including increases of $58.7 million in salaries and wages and $1.5 million in stock-based compensation expense driven by headcount and merit increases.
Other (Expense) Income, Net Other (expense) income, net primarily consists of gains or losses on foreign currency transactions, unrealized gains or losses on equity securities, and miscellaneous other income and expenses.
Other Expense, Net Other expense, net primarily consists of gains or losses on foreign currency transactions, unrealized gains or losses on equity securities, 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.
Investing Activities Net cash used in investing activities of $340.5 million in 2022 consisted of purchases of marketable securities of $369.2 million, capitalized software development costs of $ 33.6 million, originations for materials financing of $ 23.5 million, purchases of property and equipment of $ 15.8 million, and purchases of strategic investments of $ 4.0 million, partially offset by $85.6 million of maturities of marketable securities, $ 18.7 million of customer repayments for materials financing, and $ 1.3 million in cash receipts from the settlement of post-close working capital adjustments related to our acquisitions of Levelset and LaborChart in the fourth quarter of 2021.
Such outflows were partially offset by $85.6 million of maturities of marketable securities, $18.7 million of customer repayments for materials financing, and $1.3 million in cash receipts from the settlement of post-close working capital adjustments related to our acquisitions of Levelset and LaborChart in the fourth quarter of 2021.
Macroeconomic Factors and COVID-19 Update Macroeconomic factors such as rising inflation, rising interest rates, volatility in capital markets, and fluctuations in foreign exchange rates, may impact our operating expenses, customers’ spending, and cash flows.
Macroeconomic Factors Macroeconomic and geopolitical factors such as trends within the commercial construction industry, rising inflation, rising interest rates, 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.
Net cash provided by operating activities was $12.6 million in 2022, which resulted from a net loss of $286.9 million, adjusted for non-cash charges of $237.8 million and a net cash inflow of $61.7 million from changes in operating assets and liabilities.
Net cash provided by operating activities was $92.0 million in 2023 which resulted from a net loss of $189.7 million, adjusted for non-cash charges of $258.3 million and a net cash inflow of $23.4 million from changes in operating expenses and liabilities.
Interest Income, Interest Expense, Other Expense, Net, and Provision for (Benefit from) Income Taxes Year Ended December 31, Change 2022 2021 Dollar Percent (dollars in thousands) Interest income $ 7,861 $ 175 $ 7,686 * Interest expense 2,135 2,328 (193 ) (8 %) Other expense, net 1,737 843 894 106 % Provision for (benefit from) income taxes 466 (23,758 ) 24,224 * * Percentage not meaningful In 2022, our interest income increased due to interest earned as a result of our purchases of marketable securities starting in the third quarter of 2022 and an increase in interest rates on our money market funds and cash savings accounts.
Interest Income, Interest Expense, Accretion Income, Net, Other Expense, Net, and Provision for Income Taxes Year Ended December 31, Change 2023 2022 Dollar Percent (dollars in thousands) Interest income $ 19,779 $ 5,826 $ 13,953 * Interest expense 1,957 2,135 (178) (8 %) Accretion income, net 9,794 2,035 7,759 * Other expense, net 360 1,737 (1,377) (79 %) Provision for income taxes 1,273 466 807 * * Percentage not meaningful During 2023, our interest income increased by $7.3 million due to an increase in interest rates on our money market funds and cash savings accounts and by $6.6 million due to interest earned as a result of our purchases of marketable securities, which began in the third quarter of 2022.
During 2022 and 2021, we recognized stock-based compensation expense of $ 15.0 million and $8.5 million, respectively, relating to the ESPP. Business Combinations We account for business combinations using the acquisition method of accounting. We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values.
The portion of expense recognized in any period may fluctuate depending on changing estimates of the achievement of the performance conditions. Business Combinations We account for business combinations using the acquisition method of accounting. We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values.
Cost of Revenue, Gross Profit, and Gross Margin Year Ended December 31, Change 2022 2021 Dollar Percent (dollars in thousands) Cost of revenue $ 148,416 $ 98,312 $ 50,104 51 % Gross profit 571,787 416,509 155,278 37 % Gross margin 79 % 81 % The increase in cost of revenue in 2022 was primarily attributable to an increase of $ 18.4 million in personnel-related expenses, including an increase of $ 19.3 million in salaries and wages driven by headcount and merit increases, partially offset by a decrease of $ 0.8 million in stock-based compensation expense.
Cost of Revenue, Gross Profit, and Gross Margin Year Ended December 31, Change 2023 2022 Dollar Percent (dollars in thousands) Cost of revenue $ 174,462 $ 148,416 $ 26,046 18 % Gross profit 775,548 571,787 203,761 36 % Gross margin 82 % 79 % The increase in cost of revenue during 2023 was primarily attributable to an increase of $11.2 million in personnel-related expenses, including an increase of $10.8 million in salaries and wages driven by headcount and merit increases.
Financing Activities Net cash provided by financing activities was $38.7 million in 2022, which primarily consisted of $22.4 million in proceeds from stock option exercises and $22.1 million in proceeds from our ESPP, partially offset by $3.9 million in deferred payments related to our acquisition of Indus in 2021, and $1.7 million in payments on our finance lease obligations.
Net cash provided by financing activities was $38.7 million in 2022, which primarily consisted of $22.4 million in proceeds from stock option exercises and $22.1 million in proceeds from our ESPP, partially offset by $3.9 million in deferred payments related to our acquisition of Indus.ai Inc. in 2021, and $1.7 million in payments on our finance lease obligations. 63 Table of Contents 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.
Net cash provided by financing activities was $711.8 million in 2021, which primarily consisted of $665.1 million in net proceeds from our IPO, $43.1 million in proceeds from stock option exercises, and $9.5 million in proceeds from our ESPP partially offset by $3.9 million in payments of deferred offering costs and $1.5 million in payments on our finance lease obligations.
Financing Activities Net cash provided by financing activities of $41.2 million in 2023 consisted of $25.4 million in proceeds from employee purchases under the ESPP and $17.6 million in proceeds from stock option exercises, partially offset by $1.8 million in payments on our finance lease obligations.
We increased our sales and marketing headcount by 31 % since December 31, 2021 in order to continue to drive customer growth. 48 Year Ended December 31, Change 2022 2021 Dollar Percent (dollars in thousands) Research and development $ 270,982 $ 237,290 $ 33,692 14 % The increase in research and development expenses during 2022 was primarily attributable to an increase of $ 21.7 million in personnel-related expenses, including an increase of $ 43.6 million in salaries and wages driven by headcount and merit increases, partially offset by a decrease of $ 21.8 million in stock-based compensation expense.
We increased our sales and marketing headcount by 2% since December 31, 2022 as we operate more efficiently with less headcount growth than in prior years, compared to revenue growth. 56 Table of Contents Year Ended December 31, Change 2023 2022 Dollar Percent (dollars in thousands) Research and development $ 300,571 $ 270,982 $ 29,589 11 % The increase in research and development expenses during 2023 was primarily attributable to an increase of $25.0 million in personnel-related expenses, including increases of $19.3 million in salaries and wages and $5.0 million in stock-based compensation expense driven by headcount and merit increases.
We have introduced new products and services developed in-house and through our acquisitions of Zimfly, Inc., Honest Buildings, Construction BI, LLC, Esticom, LaborChart, and Levelset. In connection with our acquisition of Levelset, we assumed, and continue to develop, a materials financing program for our customers.
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 new products and services developed in-house and through our acquisitions of Zimfly, Inc., Honest Buildings, Inc., Construction BI, LLC, Esticom, LaborChart, Levelset, and Unearth.
The increase in sales and marketing expenses was also attributable to a $ 9.9 million increase in marketing events and expenses, an $ 8.8 million increase in amortization of acquired customer relationship intangible assets related to recent acquisitions, an $ 8.2 million increase in travel-related costs, and a $3.4 million increase in computer software expenses.
The increase in sales and marketing expenses was also attributable to a $5.9 million increase in marketing events and expenses to drive customer growth, and a $1.4 million increase in computer software expenses.
These changes in our operating assets and liabilities were partially offset by the following: • a $34.2 million increase in accounts receivable primarily due to timing of billings and cash receipts from customers; • a $16.7 million increase in prepaid expenses and other assets primarily due to cash retention payments made to certain Levelset employees at the close of the acquisition which are subject to vest based on future service, further described in Note 7 of our audited consolidated financial statements, and timing of cash payments to our vendors; • a $10.2 million increase in deferred contract cost assets related to commissions as a result of additional customer contracts closed during the period; and • a $5.7 million decrease in operating lease liabilities related to lease payments.
These changes in our operating assets and liabilities were partially offset by the following: • a $57.5 million increase in accounts receivable primarily due to the growth of our business and timing of billings and cash receipts from customers; • a $13.8 million decrease in operating lease liabilities related to lease payments; • a $9.3 million increase in deferred contract cost assets related to commissions as a result of additional customer contracts closed during the period; and • a $6.4 million increase in prepaid expenses and other current assets primarily due to timing of cash payments to our vendors. 62 Table of Contents Net cash provided by operating activities was $12.6 million in 2022, which resulted from a net loss of $286.9 million, adjusted for non-cash charges of $237.8 million and a net cash inflow of $61.7 million from changes in operating assets and liabilities.
The increase in general and administrative expenses was also attributable to an increase of $0.6 million in personnel-related expenses, including an increase of $26.9 million in salaries and wages driven by headcount and merit increases, partially offset by a decrease of $26.3 million in stock-based compensation expense.
Year Ended December 31, Change 2023 2022 Dollar Percent (dollars in thousands) General and administrative $ 195,746 $ 166,283 $ 29,463 18 % The increase in general and administrative expenses during 2023 was primarily attributable to a $23.4 million increase in personnel-related expenses, including increases of $17.4 million in salaries and wages and $5.3 million in stock-based compensation expense driven by headcount and merit increases.
To support the growth of our business, we also increased our headcount in each of these categories, including, to a limited extent, through our previous acquisitions.
To support the growth of our business, we also increased our headcount in each of these categories. Sales and Marketing Sales and marketing expenses primarily consist of personnel-related compensation expenses for our sales and marketing organizations.
Net cash used in investing activities of $541.8 million in 2021 consisted of the acquisitions of Levelset, LaborChart, and Indus.ai Inc. (“Indus”), net of cash acquired, of $509.8 million, capitalized software development costs of $15.2 million, purchases of property and equipment of $12.4 million, and purchases of strategic investments of $4.3 million.
Net cash used in investing activities of $340.5 million in 2022 consisted of purchases of marketable securities of $369.2 million, capitalized software development costs of $33.6 million, originations for materials financing of $23.5 million, purchases of property and equipment of $15.8 million, and purchases of strategic investments of $4.0 million.
We have started to grow our presence internationally with the opening of sales and marketing offices in Sydney, Australia and Vancouver and Toronto, Canada in 2017; London, England in 2018; Mexico City, Mexico in 2019; and Singapore, Republic of Singapore; Paris, France; Dublin, Ireland; and Dubai, UAE in 2022.
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 been growing our presence internationally with sales and marketing offices in Sydney, Australia; Toronto, Canada; London, England; Paris, France; Dublin, Ireland; and Dubai, UAE.
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.
While the impact of these developments, including Procore Pay, is 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.
We increased our cost of revenue headcount by 28 % since December 31, 2021 in order to support the growth of our business.
We increased our cost of revenue headcount by 2% since December 31, 2022, as we operate more efficiently with less headcount growth than in prior years, compared to revenue growth.
Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available. 56 JOBS Act Accounting Election and Emerging Growth Company Status Effective as of December 31, 2022, we are no longer an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
Fair value estimates are based on the assumptions management believes a market participant would use in valuing the asset or liability. Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available.
Our gross retention rate was 95% as of December 31, 2022 and 2021.
Our GRR was 95% as of December 31, 2023, 2022, and 2021. Net retention rate (“NRR”) compares ARR from existing customers on a trailing 12-month basis.
We expect remaining performance obligations to change from period to period primarily due to the size, timing, and duration of new customer contracts and customer renewals.
We expect RPO to change from period to period primarily due to the size, timing, and duration of new customer contracts and customer renewals. 50 Table of Contents 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.
The increase in research and development expenses was also attributable to a $4.7 million increase in computer software expenses, and a $ 3.0 million increase in professional fees primarily for contractors to supplement our staff levels.
The increase in research and development expenses was also attributable to a $4.7 million increase in computer software expenses. We increased our research and development headcount by 2% since December 31, 2022 as we operate more efficiently with less headcount growth than in prior years, compared to revenue growth.
Removed
We added 2,295 net new customers in 2022, including 189 customers from LaborChart when it was integrated into the sales process in the third quarter of 2022.
Added
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.
Removed
All customer counts aforementioned exclude customers acquired from Levelset and Esticom which have not yet been renewed onto standard Procore annual contracts. Remaining Levelset and Esticom legacy customers will be included in our customer metrics once they are renewed onto standard Procore annual contracts or upon integration of the sales process.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+0 added−1 removed4 unchanged
Biggest changeThe cash and cash equivalents are held for working capital and general corporate purposes. The restricted cash is used as collateral to satisfy certain contractual arrangements related to corporate credit cards. 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.
Biggest changeInterest-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.
Interest Rate Risk We had cash, cash equivalents, restricted cash, and marketable securities of $585.3 million as of December 31, 2022. Cash, cash equivalents, restricted cash, and marketable securities consist of checking accounts, savings accounts, money market funds, U.S. treasury securities, commercial paper, corporate notes and obligations, and time deposits.
Interest Rate Risk We had cash, cash equivalents, and marketable securities of $678.0 million as of December 31, 2023. Cash, cash equivalents, and marketable securities consist of money market funds, U.S. treasury securities, corporate notes and obligations, time deposits, commercial paper, checking accounts, and savings accounts. The cash and cash equivalents are held for working capital and general corporate purposes.
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.
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. 66 Table of Contents
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.
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.
As of December 31, 2022, a hypothetical 100 bps 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.
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.
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.
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 December 31, 2023, 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.
Removed
Our inability or failure to do so could harm our business, results of operations, or financial condition. 58

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