Summary
Procore Technologies reported third quarter fiscal 2023 revenue of $247.9 million, up 33.0% from the prior-year quarter. Gross profit was $203.8 million, up 37.1%. GAAP gross margin was 82.2%, up 2.5 percentage points. GAAP operating margin was negative 20.3%, an 18.2 percentage point improvement from the prior-year quarter. The company returned to non-GAAP operating profitability, with a non-GAAP operating margin of 3% and non-GAAP gross margin of 86%. Operating cash flow was $33.7 million, up 411.2%. Non-GAAP free cash flow was $22 million. Capital expenditures were $3.4 million, down 20.3%. Year-to-date operating cash flow was $51.3 million, up 608.4%.
The company still posted a GAAP operating loss of $50.4 million and a net loss of $43.8 million, both narrower than the prior-year quarter. Diluted EPS was a loss of $0.31, also narrower than the prior-year quarter. Deferred revenue was $425.6 million, up 29.3%. Total remaining performance obligations were $890.4 million, up 24.5%. Procore added 363 net new organic customers in the quarter and ended with 16,067 organic customers. Gross revenue retention was 95%.
Management described a more challenging demand environment and incremental demand headwinds. The company continued to push platform innovation, including Procore Copilot, Procore Connectability, Procore Pay, and other product updates. Procore also cited awards and partnerships during the quarter. Revenue growth came largely from existing customers, which accounted for approximately 93% of the quarterly increase, while new customers acquired in the quarter contributed approximately 7%. The company increased sales and marketing headcount by 14% since September 30, 2022, research and development headcount by 5%, and general and administrative headcount by 15%. Cost of revenue headcount rose 4%.
On the risk side, Procore pointed to macroeconomic factors such as rising inflation, rising interest rates, volatility in capital markets, bank failures, and fluctuations in foreign exchange rates. It also noted challenges from international expansion, competition, and the need to attract and retain customers. The materials financing program generated bad debt expenses tied to receivables the company does not expect to collect, and Procore ceased originations under that program in October 2023. The company may not achieve sustainable profitability in the foreseeable future and may require additional capital resources to execute strategic initiatives. It believes existing cash, cash equivalents, and marketable securities will be sufficient to meet its needs for at least the next 12 months.
Fourth quarter 2023 guidance points to year-over-year revenue growth of 22% to 23% and a non-GAAP operating margin of 2% to 3%. For the full year 2023, Procore guides to revenue growth of 30% and a non-GAAP operating margin of 0.5% to 1%. The company said it remains focused on a disciplined operating approach to optimize efficient growth. RPO can change from period to period due to the size, timing, and duration of new customer contracts and renewals.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $247.9M | $228.5M | +8.5% | $186.4M | +33.0% |
| Gross profit | $203.8M | $186.2M | +9.4% | $148.7M | +37.1% |
| Gross margin | 82.2% | 81.5% | +0.7 pp | 79.7% | +2.5 pp |
| Research & development | $72.7M | $73.2M | -0.7% | $71.5M | +1.7% |
| Sales & marketing | $129.7M | $125.4M | +3.4% | $109.6M | +18.3% |
| General & administrative | $51.8M | $46.4M | +11.6% | $39.4M | +31.5% |
| Total operating expenses | $254.1M | $245.0M | +3.7% | $220.5M | +15.3% |
| Operating income (loss) | -$50.4M | -$58.7M | +14.3% | -$71.8M | +29.9% |
| Operating margin | -20.3% | -25.7% | +5.4 pp | -38.5% | +18.2 pp |
| Net income (loss) | -$43.8M | -$52.9M | +17.1% | -$71.2M | +38.4% |
| Net margin | -17.7% | -23.1% | +5.4 pp | -38.2% | +20.5 pp |
| Diluted EPS | -$0.31 | -$0.37 | +$0.06 | -$0.52 | +$0.21 |
Risks
Construction spending and customer budgets directly affect revenue because pricing is based on customers' annual construction volume. Risk factors and MD&A both flag rising inflation, rising interest rates, capital markets volatility, bank failures, government funding reductions, tariffs, supply chain disruptions, and labor shortages as factors that could reduce demand or increase costs.
Revenue increased 33.2% year over year to $690.0 million for the nine months ended September 30, 2023, but the filing states rapid growth may not be indicative of future performance and expects the revenue growth rate to decline as the business matures. The company also had net losses of $160.2 million for the nine months ended September 30, 2023 and an accumulated deficit of $1.1 billion as of September 30, 2023.
The materials financing program assumed through the Levelset acquisition exposes the company to credit, performance, and liquidity risks and depends on mechanic's lien rights that vary by jurisdiction. MD&A states general and administrative expenses included a $6.0 million increase in bad debt expenses for materials financing receivables not expected to be collected in the nine months ended September 30, 2023, and the company ceased originations under the program in October 2023.
The company processes sensitive customer data, including building plans and information for regulated industries, and is subject to CCPA/CPRA, EU GDPR, UK GDPR, and cross-border transfer restrictions. The filing notes EU GDPR fines of up to 20 million euros or 4% of annual global revenue and says compliance requires significant resources and may require changes to business practices.
Risk factors highlight new state laws on artificial intelligence and machine learning, the proposed EU Artificial Intelligence Act, and risks that employee or vendor use of generative AI could disclose sensitive information. These evolving obligations could impose onerous compliance requirements and require changes to products or business practices.
Cash, cash equivalents, and marketable securities totaled $626.5 million as of September 30, 2023, with account balances often exceeding FDIC insurance limits. The filing cites Silicon Valley Bank as one banking partner and says adverse financial services industry events could threaten access to cash, while MD&A notes the marketable securities portfolio is exposed to interest rate risk but is short term in nature.
Large enterprise and owner customers often require lengthy evaluation and negotiation processes, increasing upfront sales costs and unpredictability, and the company may spend substantial resources without assurance of a sale. MD&A shows sales and marketing expenses increased 18% in the third quarter and 21% in the nine months ended September 30, 2023, while sales and marketing headcount grew 14% since September 30, 2022.
The construction management software market is highly competitive, and the company sells at a premium compared with some competitors. Competitors may offer lower-priced or free products, bundle broader offerings, or use lower-cost marketing strategies, which could force price cuts, discounts, or higher marketing spend.
SaaS KPIs
All quarters →Non-GAAP Gross Margin
Non-GAAP Operating Margin
Total Organic Customers
Free Cash Flow
Gross Revenue Retention
Current Remaining Performance Obligations (cRPO)
Net New Organic Customers Added
Summary, forecast, risks and KPIs are extracted from PROCORE TECHNOLOGIES, INC.'s SEC filings for Q3 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.