Summary
Procore closed the second quarter of fiscal 2023 with revenue of $228.5 million, up 32.7% from $172.2 million in the prior-year quarter. Year-to-date revenue reached $442.1 million, up 33.3% from $331.7 million. Management said roughly 92% of the quarterly increase came from existing customers expanding volume or buying more products, while about 8% came from customers acquired during the quarter.
Gross profit rose to $186.2 million in the quarter, up 37.5% from $135.5 million, and gross margin expanded to 81.5% from 78.7%. The operating loss narrowed to $58.7 million from $72.3 million, and operating margin improved to negative 25.7% from negative 42.0%. The net loss shrank to $52.9 million from $73.1 million, and diluted loss per share was $0.37, narrower than the $0.54 loss a year earlier. Higher stock-based compensation remains a big swing factor. That expense totaled $43.5 million in the quarter, and management strips it out to show a non-GAAP operating margin of negative 1%, versus the GAAP figure.
Cash generation is the more interesting shift. Operating cash flow was negative $11.7 million in the quarter, an improvement from negative $27.0 million a year earlier, and the first half turned positive at $17.6 million versus negative $16.7 million. Free cash outflow for the quarter was $24 million, a separate measure that also subtracts purchases of property and equipment and capitalized software development costs. Deferred revenue rose 31.7% to $416.8 million, and total remaining performance obligations climbed 29.9% to $849.5 million. The customer base ended the quarter at 15,704 organic customers after adding 615 net new organic customers, and gross revenue retention was 94%.
Guidance points to slower growth ahead. For the third quarter of fiscal 2023, revenue is expected in the range of $232 million to $234 million, representing year-over-year growth of 24% to 26%, with a non-GAAP operating margin of negative 6% to negative 5%. For the full fiscal year 2023, management guided revenue of $921 million to $924 million, up 28%, and a non-GAAP operating margin of negative 4.5% to negative 4%. The company says it is on track to reach positive and sustainable free cash flow this year.
The risks are familiar. The CFO described the demand environment as still challenging, and the company continues to report losses with an accumulated deficit of $1.1 billion as of June 30, 2023. Cited macro factors include rising inflation, rising interest rates, volatility in capital markets, bank failures and foreign exchange swings. The materials financing program could use up to about 10% of the current cash, cash equivalents and marketable securities position, which totaled $603.0 million, and receivables tied to that program stood at $12.8 million. Non-U.S. revenue was 14% of the total, so international execution and currency translation both matter to the outlook.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $228.5M | $213.5M | +7.0% | $172.2M | +32.7% |
| Gross profit | $186.2M | $173.3M | +7.4% | $135.5M | +37.5% |
| Gross margin | 81.5% | 81.2% | +0.3 pp | 78.7% | +2.8 pp |
| Research & development | $73.2M | $80.0M | -8.5% | $63.8M | +14.7% |
| Sales & marketing | $125.4M | $117.4M | +6.8% | $103.3M | +21.4% |
| General & administrative | $46.4M | $45.2M | +2.6% | $40.7M | +14.1% |
| Total operating expenses | $245.0M | $242.6M | +1.0% | $207.8M | +17.9% |
| Operating income (loss) | -$58.7M | -$69.3M | +15.2% | -$72.3M | +18.8% |
| Operating margin | -25.7% | -32.4% | +6.7 pp | -42.0% | +16.3 pp |
| Net income (loss) | -$52.9M | -$63.4M | +16.7% | -$73.1M | +27.7% |
| Net margin | -23.1% | -29.7% | +6.6 pp | -42.5% | +19.3 pp |
| Diluted EPS | -$0.37 | -$0.45 | +$0.08 | -$0.54 | +$0.17 |
| Customers | 189 | 189 | ±0.0% | 3,000 | -93.7% |
Risks
The business depends on construction industry spending and prices products partly based on customers' annual construction volume, so economic slowdowns, rising inflation, rising interest rates, supply chain disruptions, labor shortages, or reduced government infrastructure funding could reduce customer demand. MD&A says these macro factors have not yet had a material impact but are being monitored.
The Levelset materials financing program holds customer receivables on the balance sheet, exposing the company to credit, performance, and liquidity risk; as of June 30, 2023, receivables net of expected credit losses were $12.8 million, and it may use up to approximately 10% of current cash, cash equivalents, and marketable securities to support the program. Early-stage default forecasting and reliance on mechanic's lien rights across jurisdictions could hamper collection.
The company reported net losses of $116.3 million for the six months ended June 30, 2023 and $144.5 million for the prior-year period, with an accumulated deficit of $1.1 billion as of June 30, 2023. It expects expenses to increase and may not achieve or sustain profitability if revenue does not grow correspondingly.
Revenue for the six months ended June 30, 2023 was $442.1 million, up 33.3% from the prior-year period, but the filing says the revenue growth rate is expected to decline as the business matures. Failure to manage rapid growth, forecast accurately, or scale sales, support, and engineering teams could harm results.
The construction management software market is highly competitive, and the company sells at a premium to some competitors. Competitors may offer lower-priced, free, or bundled products, have greater resources or customer bases, or enter new areas such as materials financing, which could force price cuts or increase customer acquisition costs.
Larger enterprise and owner customers often require lengthy, unpredictable evaluation and negotiation processes, increasing upfront sales costs without assurance of a sale. Subscription revenue is recognized ratably, so declines in new or renewed subscriptions may not immediately reduce reported revenue.
The company is highly dependent on founder, President, and CEO Craig F. Courtemanche, Jr. and other key personnel, who work on an at-will basis. Competition for skilled sales, engineering, and product personnel is significant, and failure to attract or retain them could impede strategic objectives.
Non-U.S. revenue was 14% of total revenue as of June 30, 2023 and 15% as of June 30, 2022, and further international expansion exposes the company to currency fluctuations, differing employment and privacy laws, IP enforcement challenges, and geopolitical instability including the Russia-Ukraine conflict. The company does not currently hedge non-U.S. dollar currency exposures.
Cash, cash equivalents, and marketable securities totaled $603.0 million as of June 30, 2023, but account balances with financial institutions typically exceed the $250,000 FDIC insurance limit. Bank failures such as the SVB receivership and potential inability to access deposits or raise additional capital on acceptable terms could strain liquidity.
The company handles sensitive customer and personal data and is subject to stringent and changing privacy laws including the CCPA/CPRA, EU and UK GDPR, LGPD, and PCI DSS, with EU GDPR fines up to 20 million euros or 4% of annual global revenue. Cross-border data transfer restrictions and new AI-related regulations could require operational changes and increase compliance costs.
A significant portion of customers authorize credit card billing, and the company does not review physical credit cards, increasing exposure to unauthorized transactions and chargebacks. Excessive fraudulent activity or failure to meet credit card merchant standards could result in fines or loss of the ability to accept credit cards.
Revenue is recognized ratably over subscription terms, so new sales or renewal declines may not be reflected immediately. Total remaining performance obligations increased 30% year over year to $849.5 million and current RPO increased 33% to $622.6 million as of June 30, 2023, but analysts or investors may misinterpret these disclosures.
SaaS KPIs
All quarters →Non-GAAP Gross Margin
Non-GAAP Operating Margin
Total Organic Customers
Free Cash Flow
Net New Organic Customers
Gross Revenue Retention
Total Remaining Performance Obligations
Current Remaining Performance Obligations (cRPO)
Summary, forecast, risks and KPIs are extracted from PROCORE TECHNOLOGIES, INC.'s SEC filings for Q2 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.