PROCORE TECHNOLOGIES, INC. Q4 FY2024 earnings

Procore Technologies reported fourth quarter revenue of $302.05 million, up 16.2% from the prior-year quarter. Gross profit was $245.21 million, up 15.6%. Gross margin slipped to 81.2%, down 0.4 percentage points. The quarter's operating loss widened to $66.24 million, and operating margin was -21.9%, down 7.6 percentage points. Net loss widened to $62.29 million. Operating cash flow was $29.06 million, down 28.7% from the prior-year quarter. Capital expenditures were $11.63 million, up 416.6%. Free cash flow, a non-GAAP measure, was $0.3 million for the quarter. The company said the quarter included large transactions and reflected the trust customers place in it.

For the full year, revenue was $1.15 billion, up 21.2%. Gross profit was $946.10 million, up 22.0%, and gross margin was 82.1%, up 0.5 percentage points. The full-year operating loss narrowed to $136.42 million, and operating margin was -11.8%, up 10.9 percentage points. Net loss narrowed to $105.96 million. Diluted EPS was -$0.72, up 46.3% as the loss narrowed. Operating cash flow was $196.17 million, up 113.2%. Capital expenditures were $19.14 million, up 85.4%. Free cash flow for 2024 was $128 million. Deferred revenue, current portion, was $584.72 million, up 16.5%. Total remaining performance obligations were $1.30 billion, up 30.0%. On a non-GAAP basis, gross margin was 85% for the fourth quarter and 86% for the full year, while operating margin was negative 1% for the fourth quarter and 10% for the full year. The company highlighted 800 basis points of non-GAAP operating margin improvement for 2024.

Customer metrics showed 2,333 organic customers contributing more than $100,000 of annual recurring revenue as of December 31, 2024, up 16% year over year. Customers contributing more than $1,000,000 of ARR totaled 86, up 39%. Procore added 113 net new organic customers in the fourth quarter and ended with 17,088 organic customers. Gross revenue retention was 94% for 2024, and net revenue retention was 106%. As of December 31, 2024, 75% of total ARR came from customers using four or more products, and 48% came from customers using six or more products. The company ended 2024 with 4,203 full-time employees, up 14% year over year. Management also pointed to product innovations launched at Groundbreak 2024 and a place on Fortune Magazine's Future 50 list.

Guidance for the first quarter of 2025 calls for revenue growth of 12% year over year and a non-GAAP operating margin of 7% to 8%. For the full year 2025, revenue growth is expected to be 12%, with a non-GAAP operating margin of 13% to 13.5%. Management said the fourth quarter results are not indicative of the operating margin to expect for FY25. The company described ambitious goals to be a high margin business and a commitment to further progress in 2025 and beyond, while keeping its outlook separate from a single quarter's growth rate.

The quarter and guidance come with several risks. Procore is in the middle of a go-to-market transition that began in July 2024 and includes a general manager model and new product specialists. Management expects some disruptions and adverse impacts to near-term financial and operating results from that transition. Macroeconomic factors such as inflation, interest rates, tariffs and geopolitical conditions could keep customer spending cautious. The MD&A notes that cautious customer spending and pricing sensitivity contributed to a decline in the cRPO annual growth rate. The company has continued to generate losses from operations and may not achieve profitability in the foreseeable future, and it may require additional capital resources. The board authorized a stock repurchase program of up to $300 million on October 29, 2024, expiring on October 29, 2025. No shares were repurchased under the program during 2024. The MD&A also points to international expansion as a major opportunity but notes it requires management attention and resources and may adversely affect near-term operating results. Other risks include competition and the ability to retain and expand customer use of the platform.