What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-03-04 · 486 added, 462 removed, 737 unchanged (56% of the section changed)

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To the Board of Directors and Stockholders of Procore Technologies, Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Procore Technologies, Inc.

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders’ equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 202 1 and 20 20 , and the results of its operations and its cash flows for each of the three years in the period ended December 31, 202 1 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition

As described in Notes 2 and 18 to the consolidated financial statements, the Company’s consolidated revenue was $720.2 million for the year ended December 31, 2022.

The Company generates substantially all of its revenue from subscriptions for access to its software products and related support.

Access to software products and support represents a series of distinct services as the Company fulfills its obligation to the customer and the customer receives and consumes the benefits of the software products and support over the subscription term.

The series of distinct services represents a single performance obligation.

The transaction price is determined by the stated fixed fees in the contract and revenue is recognized ratably over the term of the subscription agreement.

The principal consideration for our determination that performing procedures relating to revenue recognition is a critical audit matter is a high degree of auditor effort in performing procedures related to revenue recognized.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls related to the revenue recognition process, including controls over the completeness, accuracy and occurrence of revenue recognized.

These procedures also included, among others, evaluating the completeness, accuracy and occurrence of revenue recognized on a test basis by (i) obtaining and inspecting, where applicable, contracts, customer invoices, and cash receipts from customers and (ii) testing the appropriateness of revenue recognized based on the terms of the related contract.

/s/ PricewaterhouseCoopers LLP

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Cash and cash equivalents

Accounts receivable, net

Marketable securities (amortized cost of $ 286,001 and $ 0 at

December 31, 2022 and 2021, respectively)

Accounts receivable, net of allowances for credit losses of $ 4,113

and $ 2,437 at December 31, 2022 and 2021, respectively

Contract cost asset, current

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Intangible assets, net

Restricted cash, non-current

Liabilities, Redeemable Convertible Preferred Stock and Stockholders'

Equity (Deficit)

Liabilities and Stockholders' Equity

Current liabilities

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Commitments and contingencies (Note 12)

Redeemable convertible preferred stock, $ 0.0001 par value, 0 and 85,734,623

shares authorized at December 31, 2021 and 2020, respectively;

85,331,278 shares issued and outstanding at December 31, 2021 and 2020,

respectively.

Stockholders' equity (deficit)

Preferred stock, $ 0.0001 par value, 100,000,000 and 0 shares authorized

Stockholders' equity

Preferred stock, $ 0.0001 par value, 100,000,000 shares authorized

at December 31, 2022 and 2021, respectively;

issued and outstanding at December 31, 2021 and 2020, respectively.

Common stock, $ 0.0001 par value, 1,000,000,000 and 138,490,810 shares

0 shares issued

and outstanding at December 31, 2022 and 2021, respectively

Common stock, $ 0.0001 par value, 1,000,000,000 shares

authorized at December 31, 2022 and 2021, respectively;

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Additional paid-in capital

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Accumulated deficit

Total stockholders' equity (deficit)

Total liabilities, redeemable convertible preferred stock and

stockholders' equity (deficit)

Total stockholders' equity

Total liabilities and stockholders' equity

The accompanying notes are an integral part of these consolidated financial statements.

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Loss from operations

Interest expense, net

Interest income

Interest expense

Change in fair value of Series I redeemable convertible

convertible preferred stock warrant liability

preferred stock warrant liability

Other (expense) income, net

Loss before (benefit from) provision for income taxes

(Benefit from) provision for income taxes

Recognition of beneficial conversion feature on

preferred stock as a deemed dividend

Net loss attributable to common stockholders

Loss before provision for (benefit from) income taxes

Provision for (benefit from) income taxes

Net loss per share attributable to common stockholders,

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per share attributable to common stockholders, basic

Total comprehensive loss

Foreign currency translation adjustment

Other comprehensive (loss) income

Foreign currency translation adjustment, net of tax

Unrealized loss on available-for-sale debt

and marketable securities, net of tax

Total other comprehensive (loss) income

Comprehensive loss

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Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Stockholders'

Preferred Stock

Comprehensive

Stockholders'

(in thousands, except share amounts)

(Loss) Income

Equity (Deficit)

Balances as of December 31, 2018

Exercise of stock options

Stock-based compensation

Conversion of redeemable convertible preferred stock to common stock

Adjustment to Series H issuance costs

Issuance of Series H-1 redeemable convertible preferred stock

Options granted for business combination attributed to pre-combination

Issuance of Series I redeemable convertible preferred stock for cash, net

of issuance costs of $ 126

Foreign currency translation adjustment

Balances as of December 31, 2019

Income (Loss)

Balance as of December 31, 2019

Cumulative-effect of accounting change due to adoption of ASU 2016-13

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escrow for business acquisition

Beneficial conversion feature on Series I redeemable convertible preferred

Recognition of beneficial conversion feature as a deemed dividend

Vesting of restricted stock units

Foreign currency translation adjustment

Balances as of December 31, 2020

Other comprehensive income

Balance as of December 31, 2020

Exercise of stock options

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Issuance of restricted stock awards

Foreign currency translation adjustment

Balances as of December 31, 2021

Other comprehensive loss

Balance as of December 31, 2021

Exercise of stock options

Stock-based compensation

Issuance of common stock upon settlement of restricted stock units

Issuance of common stock for employee stock purchase plan

Adjustment of holdback shares released for business combination

Other comprehensive loss

Balance as of December 31, 2022

The accompanying notes are an integral part of these consolidated financial statements.

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Operating activities

Adjustments to reconcile net loss to net cash provided by (used in)

operating activities

Adjustments to reconcile net loss to net cash provided by operating activities

Stock-based compensation

Depreciation and amortization

Accretion of discounts on marketable debt securities, net

Change in fair value of Series I redeemable convertible

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Noncash operating lease expense

Unrealized foreign currency loss (gain), net

Unrealized foreign currency (gain) loss, net

Deferred income taxes

Provision for credit losses

Decrease (increase) in fair value of strategic investments

Changes in operating assets and liabilities, net of effect of

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Operating lease liabilities

Net cash flow provided by (used in) operating activities

Net cash provided by operating activities

Investing activities

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Capitalized software development costs

Strategic investments

Purchases of strategic investments

Purchases of marketable securities

Maturities of marketable securities

Originations of materials financing

Customer repayments of materials financing

Acquisition of businesses, net of cash acquired

Net cash flow used in investing activities

Settlement of post-close working capital adjustments from business

Net cash used in investing activities

Financing activities

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convertible preferred stock warrant

Payment of debt issuance costs

Payments of debt issuance costs

Proceeds from employee stock purchase plan

Payments of deferred offering costs

Payment of deferred business acquisition consideration

Payments of deferred business acquisition consideration

Principal payments under finance lease agreements, net

of proceeds from lease incentives

Net cash flows provided by financing activities

Net increase in cash, cash equivalents and restricted cash

Net cash provided by financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash

Effect of exchange rate changes on cash

Cash, cash equivalents and restricted cash, beginning

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

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expenses and other current assets

Restricted cash, non-current at end of period

Restricted cash, non-current at end of period included in other assets

Total cash, cash equivalents and restricted cash at end of

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Cash paid for income taxes, net of refunds received

Stock-based compensation capitalized for cloud-computing arrangement

Cash received for lease incentives

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accrued expenses at year end

Costs associated with the issuance of redeemable convertible

preferred stock included in accrued expenses at year end

Indemnity holdback consideration associated with business combinations

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Stock-based compensation capitalized for software

Conversion of available-for-sale debt securities into equity securities

Conversion of redeemable convertible preferred stock to

Issuance of redeemable convertible preferred stock as

consideration in a business combination

common stock upon initial public offering

Issuance of common stock as consideration in

business combinations

Options granted for business combination attributed to

pre-combination services

Right of use assets obtained in exchange for operating lease liabilities

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Procore Technologies, Inc.

and subsidiaries (together “Procore”, the “Company”, “we”, “us”, or “our”) provide a cloud-based construction management platform and related software products that allow the construction industry’s key stakeholders, such as owners, general contractors, specialty contractors, architects, and engineers, to collaborate on construction projects.

(together with its subsidiaries, “Procore” or the “Company”) provides a cloud-based construction management platform and related products and services that allow the construction industry’s key stakeholders, such as owners, general contractors, specialty contractors, architects, and engineers, to collaborate on construction projects.

The Company was incorporated in California in 2002 and re-incorporated in Delaware in 2014.

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Initial Public Offering

The Company’s registration statement on Form S-1 related to its initial public offering (“IPO”) was declared effective on May 19, 2021, and the Company’s common stock began trading on the New York Stock Exchange (the “NYSE”) on May 20, 2021.

On May 24, 2021, the Company completed its IPO, in which it issued and sold 10,410,000 shares of common stock at a price of $ 67.00 per share, including 940,000 shares of common stock pursuant to the exercise in full of the underwriters’ option to purchase additional shares.

The Company received $ 665.1 million in net proceeds, after deducting underwriting discounts and commissions of $ 32.3 million and before other offering costs of $ 7.5 million.

At the closing of the IPO, all outstanding shares of redeemable convertible preferred stock were automatically converted into an aggregate of 85,331,278 shares of common stock on a one -for-one basis, further discussed in Note 11 and 12 to these consolidated financial statements.

Upon the effectiveness date of the registration statement for the IPO, the performance vesting condition of restricted stock units (“RSUs”) was met and the Company recognized $ 115.3 million of stock-based compensation expense in its consolidated statement of operations and comprehensive loss, for the portion of the service period completed by employees and non-employees from the grant date through the effectiveness date of the registration statement for the IPO, as further described in Note 12 to these consolidated financial statements.

Upon the effectiveness date of the registration statement for the IPO, the performance vesting condition of restricted stock units (“RSUs”) was met, and the Company recognized $ 115.3 million of stock-based compensation expense in its consolidated statement of operations and comprehensive loss, for the portion of the service period completed by employees and non-employees from the grant date through the effectiveness date of the registration statement for the IPO.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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All intercompany balances and transactions have been eliminated in consolidation.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.

Certain balances have been reclassified to conform to current year presentation.

Use of estimates

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Management periodically evaluates its estimates and assumptions for continued reasonableness, primarily with respect to revenue recognition, the period of benefit of contract cost assets, the fair value of assets acquired and liabilities assumed in a business combination, stock-based compensation expense, the fair value of the Company’s common stock prior to the effective date of its IPO, the recoverability of goodwill and long-lived assets, useful lives of long-lived assets, capitalization of software development costs, the fair value of the Series I redeemable convertible preferred stock warrant liability, and income taxes, including related reserves and allowances.

Management periodically evaluates its estimates and assumptions for continued reasonableness, primarily with respect to revenue recognition, the period of benefit of contract cost assets, the fair value of assets acquired and liabilities assumed in a business combination, stock-based compensation expense, including the fair value of the Company’s common stock prior to the effective date of the Company’s IPO, the recoverability of goodwill and long-lived assets, useful lives of long-lived assets, capitalization of software development costs, income taxes, including related reserves and allowances, and self-insurance reserve estimates.

Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation.

Management bases its estimates on historical experience and on various other assumptions that management believes to be reasonable.

Actual results could differ from our estimates.

In light of the currently unknown duration and severity of the COVID-19 pandemic, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply our significant accounting policies.

As of the date these consolidated financial statements were issued, the impacts of the COVID-19 pandemic did not have a significant impact on our estimates or judgments.

Judgments and assumptions may change, as new events occur and additional information is obtained,

Actual results could differ from the Company’s estimates.

The extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted.

As of the date these consolidated financial statements were issued, the COVID-19 pandemic did not have a significant impact on the Company’s estimates or judgments.

Judgments and assumptions may change as new events occur, additional information is obtained, and as other factors arise related to the

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

as well as other factors related to COVID-19 and economic recovery that could result in a meaningful impact on our consolidated financial statements in future reporting periods .

We operate as a single operating segment.

COVID-19 pandemic and economic recovery that could result in a meaningful impact on the Company’s consolidated financial statements in future reporting periods .

The Company operates as a single operating segment.

Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and assess performance.

Our CODM is our Chief Executive Officer.

In recent years, we have completed a number of acquisitions.

These acquisitions have allowed us to expand our products offered on our platform.

Our CODM evaluates the Company’s financial information for purposes of assessing financial performance and allocating resources on a consolidated basis.

The Company’s CODM is its Chief Executive Officer.

In recent years, the Company has completed a number of acquisitions which have allowed it to expand its platform capabilities and related product and service offerings.

While the Company provides different product and service offerings, including as a result of its acquisitions, its business operates as one operating segment because its CODM evaluates the Company’s financial information for purposes of assessing financial performance and allocating resources on a consolidated basis.

Cash, cash equivalents, and restricted cash

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents.

The Company classifies all investments that are readily convertible to known amounts of cash and have maturities of three months or less from the date of purchase as cash equivalents, which are carried at fair value.

Cash includes cash held in checking and savings accounts.

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From time to time, the Company posts cash collateral to satisfy certain contractual arrangements that may arise in the normal course of business and that is contractually restricted as to use.

Restricted cash consisted of the following (in thousands):

Collateral letters of credit and bank guarantees related

Funds required to secure certain corporate credit card

Total restricted cash

Restricted cash is included in other assets on the accompanying consolidated balance sheets and consists of funds required to secure certain corporate credit card accounts.

The Company held $ 3.1 million of restricted cash as of December 31, 2022 and 2021.

Marketable securities

Investments with stated maturities of greater than three months are classified as marketable securities, which consist of U.S.

treasury securities, commercial paper, corporate notes and obligations, and time deposits.

The Company determines the appropriate classification of each investment at the time of purchase and re-evaluates such classification at each balance sheet date.

The Company classifies each marketable debt security as either short-term or long-term at each balance sheet date based on the underlying investment’s contractual maturity date.

Short-term investments are investments with an original maturity date of less than one year when purchased.

All marketable securities held as of December 31, 2022 are classified and accounted for as short-term available-for-sale debt securities, which are carried at fair value.

The Company periodically assesses its portfolio of marketable securities for impairment.

The Company evaluates each investment in an unrealized loss position to determine if any portion of the unrealized loss is related to credit losses.

In determining whether a credit loss may exist, the Company considers the extent of the unrealized loss position, any adverse conditions specifically related to the security or the issuer’s operating environment, the pay structure of the security, the issuer’s payment history, and any changes in the issuer’s credit rating.

Unrealized losses on marketable securities due to expected credit losses are recognized in other (expense) income, net in the accompanying consolidated statements of operations and comprehensive loss, and any excess unrealized gains and losses, net of tax, that are not due to expected credit losses are included in accumulated other comprehensive loss, a component of stockholders’ equity.

During the year ended December 31, 2022, there were no credit losses recorded on marketable securities.

Interest recorded on marketable securities is recorded in interest income on the accompanying consolidated statements of operations and comprehensive loss.

Concentrations of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash, and accounts receivable.

The Company maintains cash, cash equivalents and restricted cash balances in excess of the Federal Deposit Insurance Corporation insurance limits.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, restricted cash, investments in marketable securities, accounts receivable, and materials financing receivables.

The Company maintains its cash, cash equivalents, and restricted cash balances with major financial institutions that may at times exceed federally insured limits.

However, the Company believes that these financial institutions are financially sound with minimal credit risk.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

Investments in marketable securities consist primarily of investment-grade securities and the Company’s investment policy limits the amount of credit exposure to any individual issuer.

Accounts receivable are recorded at the invoiced amounts, do not require collateral or bear interest, and mainly result from subscriptions to access the Company’s software products.

The Company regularly assesses the need for allowances for expected losses from these accounts receivable.

We estimate the expected credit losses for trade receivables by applying the estimated credit loss percentages based on our historical credit loss experience to an aging schedule.

Each reporting period, the Company evaluates the collectability of its accounts receivable based on a number of factors such as the age of the receivables, credit quality, historical experience, and current and future economic conditions that may affect a customer’s ability to pay.

At December 31, 2022 and 2021, the Company’s allowance for expected credit losses was $ 4.1 million and $ 2.4 million, respectively.

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No single customer accounted for 10 % or more of total revenue for the years ended December 31, 2022, 2021, and 2020.

The Company also has receivables related to its materials financing program that finances customers’ purchases of construction materials on deferred payment terms.

The related allowance recorded on the Company’s materials financing receivables is primarily based on expectations of credit losses based on historical loss data as well as macroeconomic factors.

At December 31, 2022, the Company’s allowance for expected credit losses related to its materials financing program was $2.1 million, and was immaterial at December 31, 2021.

Materials financing revenues and receivables

In connection with its acquisition of Express Lien, Inc.

(d/b/a Levelset) (“Levelset”) in November 2021, the Company assumed a materials financing program, which facilitates the purchase of construction materials from fulfillment partners (the Company’s suppliers) on behalf of its customers, allowing such customers to finance their materials purchases from the Company on deferred payment terms.

The fulfillment partner is primarily responsible for fulfilling the materials purchases and the Company does not have control over such materials.

The Company earns revenues from origination fees and finance charges on the amounts it finances for customers on deferred payment terms, which are typically 120 days.

Such fees earned are computed and recognized based on the effective interest method and are presented net of any related reserves and amortization of deferred origination costs.

Gross receivables outstanding from customers under the materials financing program were $ 13.6 million and $ 4.4 million as of December 31, 2022 and 2021, respectively.

Materials financing receivables, net of allowances, are recorded within prepaid expenses and other current assets on the accompanying consolidated balance sheets.

Foreign currency transactions and translation

The functional currency of the Company’s foreign subsidiaries in Australia, Canada, and England is primarily their local currencies and the functional currency of the Company’s subsidiaries in Mexico, Egypt, Singapore, and United Arab Emirates is U.S.

For foreign subsidiaries where the functional currency is their local currencies, assets and liabilities are translated into U.S.

The functional currency of the Company’s foreign subsidiaries in Australia, Canada, and England is primarily the local currency of such countries, and the functional currency of the Company’s subsidiaries in Mexico, Egypt, Singapore, United Arab Emirates, France, and Ireland is U.S.

For foreign subsidiaries where the functional currency is the local currency of such countries, assets and liabilities are translated into U.S.

dollars at exchange rates in effect at the balance sheet date, stockholders’ equity is translated at the applicable historical exchange rate, and revenue and expenses are translated using the average exchange rates during the period.

The effect of exchange rate changes resulting from the translation of the foreign subsidiary financial statements is accounted for as a component of accumulated other comprehensive (loss) income.

The effect of exchange rate changes resulting from the translation of the foreign subsidiary financial statements is accounted for as a component of accumulated other comprehensive loss.

In addition, the Company incurs foreign currency transaction gains and losses, including those related to intercompany agreements among the Company and its subsidiaries, which are recorded in other (expense) income, net in the accompanying consolidated statements of operations and comprehensive loss.

Foreign currency gains and losses were not material for the years ended December 31, 2022, 2021, and 2020.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

In addition, we incur foreign currency transaction gains and losses, including those related to intercompany agreements among us and our subsidiaries, which are recorded in other (expense) income, net in the consolidated statements of operations and comprehensive loss.

Foreign currency gains and losses were not material for the years ended December 31, 2021, 2020, and 2019.

Property and equipment, net

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Purchased software

We determine an arrangement is a lease at inception if we are both able to identify an asset and conclude we have the right to control the identified asset.

Contractual term

The Company determines an arrangement is a lease at inception if it is both able to identify an asset and conclude it has the right to control the identified asset.

Leases are classified as finance or operating based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification will determine whether lease expense is comprised of amortization of the right of use (“ROU”) asset and interest expense recognized based on an effective interest method for finance leases, or as a single lease cost recognized on a straight-line basis over the term of the lease for operating leases.

Leases are included in ROU assets, other current liabilities, and long-term finance and operating lease liabilities within our consolidated balance sheets.

Leases with expected terms of 12 months or less are not recorded on the consolidated balance sheets.

Certain leases contain provisions that allow us to be reimbursed by the landlord for specified tenant improvements that are subject to final approval prior to being paid.

We estimate the likelihood that we will incur and be reimbursed for such costs at the commencement of the lease and reduce the ROU liability for the discounted future cash receipt, with a corresponding offset to the ROU asset.

ROU assets represent our right to control an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.

Leases are included in ROU assets, other current liabilities, and long-term finance and operating lease liabilities within the accompanying consolidated balance sheets.

Leases with expected terms of 12 months or less are not recorded on the accompanying consolidated balance sheets.

Certain leases contain provisions that allow the Company to be reimbursed by the landlord for specified tenant improvements that are subject to final approval prior to being paid.

The Company estimates the likelihood that it will incur and be reimbursed for such costs at the commencement of the lease and reduce the ROU liability for the discounted future cash receipt, with a corresponding offset to the ROU asset.

ROU assets represent the Company’s right to control an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the expected lease term.

Our leases do not provide an implicit rate, therefore we use our incremental borrowing rate based on the information available at the lease commencement date in determining the discount rate used to calculate the present value of minimum lease payments.

The incremental borrowing rate used is estimated based on what we would be required to pay for a collateralized loan over a similar term.

Our leases do not include any residual value guarantees, bargain purchase options, or asset retirement obligations.

We have lease agreements with lease and non-lease components, which are accounted for as a single lease component.

Our agreements may contain variable lease payments.

We include variable lease payments that depend on an index or a rate in the calculation of the ROU lease liabilities and exclude those which depend on facts or circumstances occurring after the commencement date, other than the passage of time.

Deferred Offering Costs

Deferred offering costs of $ 5.0 million were recorded as other assets on the consolidated balance sheet as of December 31, 2020, and consisted of costs incurred in connection with the sale of the Company’s common stock in the IPO, including certain legal, accounting, printing, and other IPO related costs.

Upon the closing of the IPO, deferred offering costs of $ 7.5 million were reclassified to stockholders’ equity as a reduction from the proceeds of the offering.

There are no deferred offering costs as of December 31, 2021.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The Company’s leases do not provide an implicit rate, therefore the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the discount rate used to calculate the present value of minimum lease payments.

The incremental borrowing rate used is estimated based on what the Company would be required to pay for a collateralized loan over a similar term.

The Company’s leases do not include any residual value guarantees, bargain purchase options, or asset retirement obligations.

The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component.

The Company’s agreements may contain variable lease payments.

The Company includes variable lease payments that depend on an index or a rate in the calculation of the ROU lease liabilities and exclude those which depend on facts or circumstances occurring after the commencement date, other than the passage of time.

Self-insurance reserves

In January 2022, the Company elected to partially self-fund its health insurance plan.

To reduce its risk related to high-dollar claims, the Company maintains individual stop-loss insurance.

The Company estimates its exposure for claims incurred at the end of each reporting period, including claims not yet reported, with the assistance of an independent third-party actuary.

As of December 31, 2022, the Company’s net self-insurance accrual was $ 1.9 million, included within other current liabilities on the accompanying consolidated balance sheet.

Strategic investments

Investments in equity securities

We hold investments in equity securities of certain privately held companies, which do not have readily determinable fair values.

We do not have a controlling interest or significant influence in these companies.

We have elected to measure the non-marketable equity securities at cost, with remeasurements to fair value only upon the occurrence of observable price changes in orderly transactions for the identical or similar securities of the same issuer, or in the event of any impairment.

This election is reassessed each reporting period to determine whether a non-marketable equity security has a readily determinable fair value, in which case they would no longer be eligible for this election.

All gains and losses on such equity securities, realized and unrealized, are recorded in other (expense) income, net on the consolidated statements of operations and comprehensive loss.

We evaluate our non-marketable equity securities for impairment at each reporting period based on a qualitative assessment that considers various potential impairment indicators.

If an impairment exists, a loss is recognized in the consolidated statements of operations and comprehensive loss for the amount by which the carrying value exceeds the fair value of the investment.

During the year ended December 31, 2021, the Company purchased $ 3.8 million of investments in equity securities of privately held companies, which are recorded in other assets in the consolidated balance sheet .

There were no impairments, changes in fair value, or realized gains or losses related to the investments during the year ended December 31, 2021.

The Company held no equity securities of privately held companies as of December 31, 2020.

The Company holds investments in equity securities of certain privately held companies, which do not have readily determinable fair values.

The Company does not have a controlling interest or significant influence in these companies.

The Company has elected to measure the non-marketable equity securities at cost, with remeasurements to fair value only upon the

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

occurrence of observable price changes in orderly transactions for the identical or similar securities of the same issuer, or in the event of any impairment.

This election is reassessed each reporting period to determine whether a non-marketable equity security has a readily determinable fair value, in which case the security would no longer be eligible for this election.

All gains and losses on such equity securities, realized and unrealized, are recorded in other (expense) income, net on the accompanying consolidated statements of operations and comprehensive loss.

The Company evaluates its non-marketable equity securities for impairment at each reporting period based on a qualitative assessment that considers various potential impairment indicators.

If an impairment exists, a loss is recognized in the accompanying consolidated statements of operations and comprehensive loss for the amount by which the carrying value exceeds the fair value of the investment .

Investments in limited partnership funds

The Company also holds investments in certain limited partnership funds.

The Company does not hold a controlling interest or significant influence in these limited partnerships.

The fair value of such investments is valued using the Net Asset Value (“NAV”) provided by the fund administrator as a practical expedient.

Available-for-sale debt securities

In connection with the acquisition of Express Lien inc.

(d/b/a Levelset) (“Levelset”) in November 2021, further discussed in Note 5, the Company acquired a convertible promissory note (“Convertible Note”) in a privately held company.

At the acquisition date, the fair value of the Convertible Note was $ 3.0 million.

The Convertible Note is classified as an available-for-sale debt security.

The available-for-sale debt security is recorded at fair value with changes in fair value recorded in other comprehensive income or loss.

We periodically review our available-for-sale debt securities to determine if there has been an other-than-temporary decline in fair value.

If the impairment is deemed other-than-temporary, the portion of the impairment related to credit losses is recognized in other (expense) income in the accompanying consolidated statements of operations and comprehensive loss, and the portion related to non-credit related losses is recognized as a component of comprehensive loss.

As of December 31, 2021, the Company held available-for-sale debt securities of $ 3.5 million, included within other assets in the consolidated balance sheet.

The Company held no available-for-sale debt securities as of December 31, 2020 .

No changes in fair value or impairments have been recorded for available-for-sale debt securities during the year ended December 31, 2021.

The Company also holds certain investments in debt securities of privately held companies, which are classified as available-for-sale debt securities.

Such available-for-sale debt securities are recorded at fair value with changes in fair value recorded in other comprehensive income or loss.

The Company periodically reviews its available-for-sale debt securities to determine if there has been an other-than-temporary decline in fair value.

If the impairment is deemed other-than-temporary, the portion of the impairment related to credit losses is recognized in other (expense) income, net in the accompanying consolidated statements of operations and comprehensive loss, and the portion related to non-credit related losses is recognized as a component of comprehensive loss.

Business combinations

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Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to estimated level of effort and related costs of reproducing or replacing the assets acquired, future cash inflows and outflows, and discount rates, among other items.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

between market participants at the measurement date.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Market participants are assumed to be buyers and sellers in the principal (most advantageous) market for the asset or liability.

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Use of different estimates and judgments could yield different results.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

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

Intangible assets and goodwill

All of our intangible assets are amortized using the straight-line method over their estimated period of benefit, ranging from three to 10 years.

We evaluate the recoverability of intangible assets periodically by considering events or changes in circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.

All of the Company’s intangible assets are amortized using the straight-line method over their estimated period of benefit, ranging from three to 10 years .

The Company evaluates the recoverability of intangible assets periodically by considering events or changes in circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.

Goodwill is tested for impairment at the reporting unit level (i.e., the operating segment or one level below an operating segment).

We have one reporting unit and test goodwill impairment on an annual basis during the fourth quarter of our fiscal year, and between annual tests if an event occurs or circumstances change that indicate that goodwill may be impaired.

In assessing impairment, we have the option to first assess qualitative factors to determine whether or not a reporting unit is more likely than not impaired.

Alternatively, we may perform a quantitative impairment assessment or if the qualitative assessment indicates that it is more likely than not that the reporting unit’s fair value is less than its carrying amount, a quantitative analysis is required.

The Company has one reporting unit and tests goodwill impairment on an annual basis during the fourth quarter of the Company’s fiscal year, and between annual tests if an event occurs or circumstances change that indicate that goodwill may be impaired.

In assessing impairment, the Company has the option to first assess qualitative factors to determine whether or not a reporting unit is more likely than not impaired.

Alternatively, the Company may perform a quantitative impairment assessment or if the qualitative assessment indicates that it is more likely than not that the reporting unit’s fair value is less than its carrying amount, a quantitative analysis is required.

The quantitative analysis compares the estimated fair value of the reporting unit with its respective carrying amount, including goodwill.

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Capitalized internal-use software costs primarily relate to the development of and major enhancements to the Company’s cloud-based software as a service (“SaaS”) construction management platform and related software products.

Capitalized software development costs related to the SaaS construction management platform are amortized on a straight-line basis over the developed software’s estimated useful life of two years and the related amortization expense is recorded in cost of revenue within the accompanying consolidated statements of operations and comprehensive loss.

Capitalized software development costs related to the Company’s platform are amortized on a straight-line basis over the developed software’s estimated useful life of two years and the related amortization expense is recorded in cost of revenue within the accompanying consolidated statements of operations and comprehensive loss.

The Company also capitalizes certain software development costs which are used internally, rather than developments to the Company’s platform.

Such costs are amortized on a straight-line basis over the developed software’s estimated useful life, which is generally five years , and the related amortization expense is recorded in operating expenses within the accompanying consolidated statements of operations and comprehensive loss.

Fair value measurements

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Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As of December 31, 2021 and 2020, the carrying value of the Company’s financial instruments included in current assets and current liabilities (including restricted cash, accounts receivable, accounts payable and accrued expenses) approximate fair value due to the short- term nature of such items.

The Company classifies its money market funds recorded in cash equivalents

As of December 31, 2022 and 2021, the carrying value of the Company’s financial instruments included in current assets and current liabilities (including accounts receivable, accounts payable and accrued expenses) approximate fair value due to

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

within Level 1 of the hierarchy as the values are derived from quoted prices in active markets.

As of December 31, 2021 and 2020, cash equivalents of $ 514.9 million and $ 363.1 million, respectively, were held in money market funds.

the short-term nature of such items.

The Company measures its cash held in money market funds, marketable securities, and investments in available-for-sale debt securities at fair value each reporting period.

The estimation of fair value for available-for-sale debt securities in private companies requires the use of significant unobservable inputs, and as a result, the Company classifies these assets as Level 3 within the fair value hierarchy.

The Company’s investments in equity securities of privately held companies are recorded at fair value on a non-recurring basis.

The Company’s investments in available-for-sale debt securities are remeasured at fair value each reporting period.

The estimation of fair value for these investments requires the use of significant unobservable inputs, and as a result, the Company classifies these assets as Level 3 within the fair value hierarchy.

For investments without a readily determinable fair value, the Company looks to observable transactions, such as the issuance of new equity by an investee, as indicators of investee enterprise value and are used to estimate the fair value of the investments.

For investments without a readily determinable fair value, the Company looks to observable transactions, such as the issuance of new equity by an investee, as indicators of investee enterprise value and uses them to estimate the fair value of the investments.

The Company’s investments in limited partnerships are valued using NAV as a practical expedient and therefore excluded from the fair value hierarchy.

Impairment and abandonment of long-lived assets

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The Company generally invoices its customers at the beginning of each annual subscription period, and to a lesser extent, on a quarterly or monthly basis.

To the extent we invoice our customers in advance of revenue recognition, we record deferred revenue.

To the extent the Company invoices its customers in advance of revenue recognition, it records deferred revenue.

Consequently, a portion of the revenue that is reported each period is attributable to the recognition of revenue previously deferred and related to subscriptions that the Company entered into during previous periods.

Subscription fees are generally due and payable upon receipt of invoice by our customers or within 30 days of the stated billing date.

Subscription fees are generally due and payable upon receipt of invoice by the Company’s customers or within 30 days of the stated billing date.

The Company does not provide the customer with the right to take possession of its software products at any time.

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The contracts with customers include access to the Company’s products and support over the subscription period.

Access to the products and support represents a series of distinct services as the Company fulfills its obligation to the customer and the customer receives and consumes the benefits of the software products and support over the subscription term.

The series of distinct services represents a single performance obligation.

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None of the Company’s contracts include a significant financing component.

The Company recognizes revenue ratably over the term of the subscription agreement beginning on the date that access to our products is made available to the customer.

The Company recognizes revenue ratably over the term of the subscription agreement beginning on the date that access to its products is made available to the customer.

Deferred revenue

Contract liabilities consist of revenue that is deferred when we have the contractual right to invoice in advance of transferring services to our customers.

Contract liabilities consist of revenue that is deferred when the Company has the contractual right to invoice in advance of transferring services to its customers.

Substantially all deferred revenue at the beginning of 2022, 2021, and 2020 was recognized as revenue within the following 12 month period.

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Cost of revenue

Cost of revenue primarily consists of customer support personnel-related compensation expenses, including salaries, bonuses, benefits, payroll taxes, and stock-based compensation expense, as well as expenses related to third-party hosting costs, software license fees, amortization of capitalized software development costs, amortization of acquired technology intangible assets, and allocated overhead.

Cost of revenue primarily consists of personnel-related compensation expenses for the Company’s customer support team, including salaries, benefits, stock-based compensation, payroll taxes, commissions, and bonuses.

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 the Company’s platform, and allocated overhead.

Operating expenses

Our operating expenses consist of sales and marketing, research and development, and general and administrative expenses.

The Company’s operating expenses consist of sales and marketing, research and development, and general and administrative expenses.

For each of these categories of expense, personnel-related compensation expenses are the most significant component, which include salaries, stock-based compensation, commissions, benefits, payroll taxes, bonuses, and severance expenses.

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Research and development

Research and development expenses primarily consist of personnel-related compensation expenses associated with the Company’s engineering, product, and design teams, contractor costs to supplement the Company’s staff levels, consulting services, amortization of certain acquired intangible assets used in research and development activities, and allocated overhead.

Research and development expenses primarily consist of personnel-related compensation expenses for the Company’s engineering, product, and design teams, contractor costs to supplement the Company’s staff levels, consulting services, amortization of certain acquired intangible assets used in research and development activities, and allocated overhead.

General and administrative

General and administrative expenses primarily consist of compensation expenses associated with the Company’s finance, human resources, executive, information technology, legal, and other administrative functions.

General and administrative expenses primarily consist of personnel-related compensation expenses for the Company’s finance, information technology, executive, human resources, legal, and other administrative functions.

Additionally, general and administrative expenses include non-personnel-related expenses, such as professional fees for audit, legal, tax, and other external consulting services, including acquisition-related transaction expenses, costs associated with operating as a public company, including insurance costs, professional services, investor relations, and other compliance costs, property and use taxes, licenses, travel and entertainment costs, and allocated overhead.

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Series I redeemable convertible preferred stock warrant liability

In March 2020, the Company issued a warrant to purchase Series I redeemable convertible preferred stock (the “Series I warrant”).

In March 2020, the Company issued a warrant to purchase 1,452,513 shares of Series I redeemable convertible preferred stock (the “Series I warrant”).

The Series I warrant was recorded as a liability on the consolidated balance sheet at fair value of $ 11.9 million at the time of issuance.

Subsequent changes in the fair value of the Series I warrant each reporting period were recorded in the consolidated statements of operations and comprehensive loss, until the Series I warrant was exercised in December 2020.

The Company issued 1,452,513 shares of Series I redeemable convertible preferred stock for proceeds of $ 55.0 million upon exercise of the Series I warrant.

The fair value measurements used in determining the fair value of the Series I warrant liability were categorized as Level 3 on the fair value hierarchy because they were based on unobservable inputs and management’s judgment due to the absence of quoted market prices and inherent lack of liquidity of such financial instruments.

Refer to Note 11 to these consolidated financial statements for further information.

The following inputs were used in the Black-Scholes option pricing model in determining the fair value of the Series I warrant liability for the period from issuance date to September 30, 2020:

Fair value of Series I redeemable convertible

preferred stock per share

$35.04 to $49.95

Risk-free interest rate

0.10% to 0.16%

Expected term (in years)

Estimated dividend yield

Estimated weighted-average volatility

59.10% to 67.80%

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

On the date the Series I warrant was exercised, the Company remeasured its fair value using the Series I redeemable convertible preferred stock fair value of $71.54 per share as of that date.

The following table provides a summary of the changes in the fair value of the Series I warrant liability (in thousands):

Balance as of December 31, 2019

Issuance of Series I warrant

Change in fair value measurement of Series I warrant

Fair value of Series I warrant reclassified to Series I

redeemable convertible preferred stock upon exercise

Balance as of December 31, 2020

The Company accounts for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method.

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Deferred income tax assets and liabilities are measured using enacted tax rates anticipated to be in effect when those tax assets and liabilities are expected to be realized or settled.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the consolidated statements of operations and comprehensive loss in the period that includes the enactment date.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the accompanying consolidated statements of operations and comprehensive loss in the period that includes the enactment date.

A valuation allowance is established if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risk associated with estimates of future taxable income in assessing the need for a valuation allowance.

Significant judgment is required in determining the (benefit from) provision for income taxes and deferred tax assets and liabilities.

Significant judgment is required in determining the provision for (benefit from) income taxes and deferred tax assets and liabilities.

The Company recognizes a tax benefit from an uncertain position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on its technical merits.

If this threshold is met, the Company measures the tax benefit as the largest amount of the benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

The Company recognizes penalties and interest accrued with respect to uncertain tax positions, if any, in the (benefit from) provision for income taxes in the consolidated statements of operations and comprehensive loss.

As of December 31, 2021 and 2020, accrued penalties and interest related to uncertain tax positions were not significant.

If this threshold is met, the Company measures the tax benefit as the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement.

The Company recognizes penalties and interest accrued with respect to uncertain tax positions, if any, in the provision for (benefit from) income taxes in the accompanying consolidated statements of operations and comprehensive loss.

Accrued penalties and interest related to uncertain tax positions were not material to any period presented.

Recently adopted accounting pronouncements

Accounting for Contract Assets and Contract Liabilities from Customer Contracts Acquired in a Business Combination

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”).

The new guidance requires the recognition and measurement of contract assets and contract liabilities from contracts with customers acquired in a business combination to be assessed in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”).

The adoption of ASU 2021-08 would generally result in the acquirer recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree if the assessment concludes that the acquiree properly applies ASC 606.

ASU 2021-08 is effective for public business entities for fiscal years beginning after December 15, 2022 and interim periods within that fiscal year.

Early adoption is permitted, including interim periods within the fiscal year.

An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application.

The Company early adopted ASU 2021-08 in the fourth quarter of 2021 and recognized deferred revenue related to its acquisitions of Levelset and LaborChart Inc.

(“LaborChart”) consistent with the amounts previously recorded by each company, as disclosed in Note 5.

The early adoption did not have a material impact on the Company's other acquisition in 2021.

Recently issued accounting pronouncements – Not yet adopted

Simplifying the Accounting for Convertible Instruments

In August 2020, the FASB issued ASU No.

In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No.

2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) – Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).

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ASU 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021 and interim periods within that fiscal year.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company does not expect the adoption of ASU 2020-06 to have a material impact on its consolidated financial statements.

On January 1, 2022, the Company adopted ASU 2020-06, using the full retrospective approach.

As a result, the Company restated its consolidated statements of operations and comprehensive loss and consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit) as of and for the year ended December 31, 2020 by removing the impacts of the beneficial conversion feature recognized related to the Series I warrant from these financial statement schedules.

Earnings per share for the period were also restated, as the beneficial conversion feature on preferred stock of $ 3.0 million was previously recorded as a deemed dividend,

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

which was added to the total net loss attributable to common stockholders used to calculate basic and diluted net loss per share attributable to common shareholders .

Marketable securities

Marketable securities consisted of the following as of December 31, 2022 (in thousands):

Amortized Cost

treasury securities

Commercial paper

Corporate notes and obligations

Time deposits

Total marketable securities

All marketable securities held as of December 31, 2022 had a contractual maturity of less than one year.

During the year ended December 31, 2022, there were maturities of marketable securities of $ 85.6 million.

There were no sales or impairments of marketable securities during 2022.

The Company held no marketable securities as of December 31, 2021.

Strategic investments

In connection with the acquisition of Levelset in November 2021, further discussed in Note 7, the Company acquired a convertible promissory note (“Convertible Note”) in a privately held company.

At the acquisition date, the fair value of the Convertible Note was $ 3.0 million.

The Convertible Note is classified as an available-for-sale debt security.

Strategic investment activity during the year ended December 31, 2022 is summarized as follows (in thousands):

Equity Securities

Limited Partnerships

Available-for-Sale Debt Securities

Balance as of December 31, 2021

Interest accrued

Purchases of strategic investments

Conversion of available-for-sale debt

securities into equity securities

Unrealized (losses) gains

Impairment losses

Balance as of December 31, 2022

Strategic investment activity during the year ended December 31, 2021 is summarized as follows (in thousands):

Equity Securities

Available-for-Sale Debt Securities

Balance as of December 31, 2020

Purchases of strategic investments

Convertible note acquired in connection with a

business combination

Unrealized gains

Balance as of December 31, 2021

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

Strategic investments are recorded in other assets in the accompanying consolidated balance sheets.

As of December 31, 2022, in connection with the Company’s investments in limited partnerships, it has a contractual obligation to provide additional investment funding of up to $ 6.4 million at the option of the investees.

No impairment losses were recorded during the year ended December 31, 2021.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial assets measured at fair value on a recurring basis within the fair value hierarchy are summarized as follows (in thousands):

December 31, 2022

Cash equivalents:

Money market funds

Marketable securities:

treasury securities

Commercial paper

Corporate notes and obligations

Time deposits

Strategic investments:

Investments in available-for-sale debt

December 31, 2021

Cash equivalents:

Money market funds

Strategic investments:

Investments in available-for-sale debt

PROPERTY AND EQUIPMENT

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Depreciation and amortization expense was $ 11.1 million, $ 7.8 million, and $ 6.9 million for the years ended December 31, 2022, 2021, and 2020, respectively.

We have primarily entered into lease arrangements for office space, in addition to other miscellaneous equipment.

Our leases have initial non-cancelable lease terms ranging from one to 10 years .

Some of our lease arrangements include options to extend the term of the leases for up to 10 years.

However, the lessor does not have the option to cancel any of our leases prior to the end of the remaining contractual term.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The Company has primarily entered into lease arrangements for office space, in addition to other miscellaneous equipment.

The Company’s leases have initial non-cancelable lease terms ranging from one to 10 years .

Some of the Company’s lease arrangements include options to extend the term of the leases for up to 10 years.

However, the lessor does not have the option to cancel any of the Company’s leases prior to the end of the remaining contractual term.

Judgment is required when determining the minimum non-cancelable term of the lease.

We include options to extend or terminate the lease term that are reasonably certain of exercise.

If facts and circumstances regarding those judgments change in future periods, we reassess our initial estimate of the term.

Our corporate headquarters offices have initial lease terms expiring in 2027, and a 10 year renewal option that we are reasonably certain we will exercise.

We determined that the present value of lease payments represents substantially all of the fair value of the underlying leased asset and therefore recognize our corporate headquarters as a finance lease.

The Company includes options to extend or terminate the lease term that are reasonably certain of exercise.

If facts and circumstances regarding those judgments change in future periods, the Company reassesses its initial estimate of the term.

The Company’s corporate headquarters offices have initial lease terms expiring in 2027, and a 10 year renewal option that the Company is reasonably certain it will exercise.

The Company determined that the present value of lease payments represents substantially all of the fair value of the underlying leased asset and therefore recognizes its corporate headquarters as a finance lease.

The components of lease expense were as follows (in thousands):

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Total lease cost

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

Supplemental information related to leases is as follows (in thousands):

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Operating leases

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

Maturities of lease payments for leases where the lease commencement date commenced on or prior to December 31, 2022 are as follows (in thousands):

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Less imputed interest

As of December 31, 2021, operating lease payments for leases greater than one month, but less than twelve months in duration were not significant.

As of December 31, 2021, we had undiscounted commitments of $ 4.3 million for an operating lease that has not yet commenced, and therefore are not included in the right-of-use assets or operating liabilities in the consolidated balance sheet.

This operating lease commenced in 2022 with a lease term of 5 years.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2022, operating lease payments for leases greater than one month, but less than 12 months in duration were not significant.

As of December 31, 2022, the Company had undiscounted commitments of $ 2.7 million for an operating lease that had not yet commenced, and therefore are not included in the right-of-use assets or operating liabilities in the consolidated balance sheet.

This operating lease commenced in 2023 with a lease term of two years .

BUSINESS COMBINATIONS

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The acquisition was accounted for as a business combination.

The preliminary purchase consideration totaled $ 484.1 million, which consisted of the following (in thousands):

The purchase consideration totaled $ 484.1 million, which consisted of the following (in thousands):

Cash consideration

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Total purchase consideration

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

At closing, the Company issued 610,499 shares of common stock valued at $ 95.05 per share for aggregate purchase consideration of $ 58.0 million.

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Net assets acquired

The purchase price accounting for this acquisition is final.

Developed technology intangible asset represents the fair value of the Levelset’s technology, which was valued considering both the cost to rebuild and relief from royalty methods.

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The amortization expense is recorded in cost of revenue in the consolidated statements of operations and comprehensive loss.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The amortization expense is recorded in cost of revenue in the accompanying consolidated statements of operations and comprehensive loss.

Customer relationships represent the fair value of the underlying relationships with Levelset’s existing customers, which were valued using the avoided loss of income method, which quantifies the acquiree’s loss of income if it loses the right to existing customers.

Key assumptions under the avoided loss of income method include forecasted revenue to be generated from and expenses to service the customer relationships, customer churn rate, and a discount rate.

The amortization expense is recorded in sales and marketing expenses in the consolidated statements of operations and comprehensive loss.

The customer relationship intangible asset is amortized on a straight-line basis, which approximates the pattern in which the economic benefits of the

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

customer relationships are consumed, over its estimated useful life of four years .

The amortization expense is recorded in sales and marketing expenses in the accompanying consolidated statements of operations and comprehensive loss.

The $ 348.3 million goodwill balance is primarily attributable to synergies and expanded market opportunities that are expected to be achieved from the integration of Levelset with the Company’s offerings and assembled workforce.

The goodwill balance is not deductible for income taxes purposes.

The measurement period for the valuation of assets acquired and liabilities assumed ends as soon as information on the facts and circumstances that existed as of the acquisition date becomes available, but does not exceed 12 months.

The purchase price allocation is subject to future adjustments as a result of finalizing the closing net working capital.

To retain certain Levelset employees, the Company issued 199,670 RSAs which vest based on their continued employment over two years , further discussed in Note 14.

The total grant date fair value of shares issued of $ 19.0 million has been excluded from the purchase consideration and is recognized as post-combination expense over the service period on a straight-line basis.

The total grant date fair value of shares issued of $ 19.0 million was excluded from the purchase consideration and is recognized as post-combination expense over the service period on a straight-line basis.

In February 2023, the Company recognized $ 4.8 million stock-based compensation related to early vested RSAs due to the departure of a certain Levelset employee.

In addition to issuing the RSAs discussed above, the Company also paid $ 11.0 million of cash retention payments that vest based on continued employment, at the close of the acquisition.

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The related compensation is recognized as post-combination expense over the service period on a straight-line basis.

The unvested amounts of cash retention payments are recorded in prepaid expenses and other current assets and in other assets on the consolidated balance sheet as of December 31, 2021.

As of December 31, 2022, the remaining unvested amounts of $ 4.6 million are recorded in prepaid expenses and other current assets on the accompanying consolidated balance sheet, $ 3.1 million of which vested early in February 2023 due to the departure of a certain Levelset employee.

As of December 31, 2021, $ 10.1 million of cash retention payments were subject to future vesting, of which $ 5.5 million was recorded in prepaid expenses and other current assets on the accompanying consolidated balance sheet, with the remainder recorded in other assets.

The acquisition-related transaction costs incurred by the Company of $ 5.0 million were expensed as incurred in the consolidated statements of operations and comprehensive loss.

Levelset’s results of operations have been included in the Company’s consolidated financial statements from the acquisition date through December 31, 2021.

Levelset’s results of operations have been included in the Company’s consolidated financial statements from the acquisition date.

The Company has not separately presented the revenue and operating losses of Levelset for the period from the acquisition date through December 31, 2021 as the impacts were not material to the consolidated financial statements.

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Notes to Consolidated Financial Statements

On October 21, 2021, the Company completed the acquisition of all outstanding equity of LaborChart for $ 76.2 million in cash purchase consideration.

On October 21, 2021, the Company completed the acquisition of all outstanding equity of LaborChart, Inc.

(“LaborChart”) for $ 76.2 million in cash purchase consideration.

LaborChart is a labor management solution that facilitates labor scheduling, forecasting, office-to-field communications, certification tracking, data management, and labor analysis.

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The acquisition was accounted for as a business combination.

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

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

Assets acquired

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Net assets acquired

The purchase price accounting for this acquisition is final.

Developed technology intangible asset represents the fair value of LaborChart’s technology, which was valued considering both the cost to rebuild and relief from royalty methods.

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The amortization expense is recorded in cost of revenue in the consolidated statements of operations and comprehensive loss.

The amortization expense is recorded in cost of revenue in the accompanying consolidated statements of operations and comprehensive loss.

Customer relationships represent the fair value of the underlying relationships with LaborChart’s existing customers, which were valued using the multi-period excess earnings method.

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The amortization expense is recorded in sales and marketing expenses in the consolidated statements of operations and comprehensive loss.

The amortization expense is recorded in sales and marketing expenses in the accompanying consolidated statements of operations and comprehensive loss.

The Company recorded goodwill, which represents the excess of the purchase consideration over the tangible and intangible assets acquired and liabilities assumed, of $ 55.7 million relating to the acquisition.

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Goodwill is not deductible for income tax purposes.

To retain certain LaborChart employees, the Company held back $ 9.0 million of the cash purchase price, which will vest based on continued employment over a three-year period.

The cash holdback amount was excluded from the purchase consideration and is recorded as post-combination expense over the service period on a straight-line basis.

During the year ended December 31, 2022, the Company recorded $ 3.0 million of expense for the portion of the balance which vested in the

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The purchase price allocation is subject to future adjustments as a result of finalizing the closing net working capital.

To retain certain LaborChart employees , the Company held back $ 9.0 million of the cash purchase price, which will vest based on continued employment over a three-year period.

The cash holdback amount is excluded from the purchase consideration and will be recorded as post combination expense over the service period on a straight-line basis.

current year .

In February 2023, the Company recorded $ 2.1 million of expense from the remaining unvested balance due to the departure of a certain LaborChart employee .

The Company has not separately presented pro forma results reflecting the acquisition of LaborChart, or revenue and operating losses of LaborChart for the period from the acquisition date through December 31, 2021 as the impacts were not material to the consolidated financial statements.

The acquisition-related transaction costs were not material, and were expensed as incurred in the consolidated statements of operations and comprehensive loss.

The acquisition-related transaction costs were not material, and were expensed as incurred in the accompanying consolidated statements of operations and comprehensive loss.

Indus.ai Inc.

On May 3, 2021, the Company completed the acquisition of Indus.ai Inc.

(“Indus”), a Canada-based privately held company that offers an artificial intelligence-powered analytics platform to provide actionable insights for the construction industry, by acquiring 100 % of the outstanding voting interests in Indus for purchase consideration of $ 24.3 million in cash.

Of the total purchase consideration, $ 4.1 million was held back to secure certain indemnification obligations (“Holdback Consideration”) in accordance with the stock purchase agreement and will be paid, subject to any indemnification claims, in November 2022 on the 18-month anniversary of the acquisition.

The Holdback Consideration is recorded in other current liabilities on the consolidated balance sheet as of December 31, 2021.

The purpose of this acquisition is to accelerate the development of the Company’s artificial intelligence and machine learning solutions.

The purchase consideration was primarily allocated to developed technology intangible assets with an estimated fair value of $ 14.8 million at the acquisition date, which was valued using the cost to rebuild method.

(“Indus”), a Canada-based privately held company that offers an artificial intelligence (“AI”)-powered analytics platform to provide actionable insights for the construction industry, by acquiring 100 % of the outstanding voting interests in Indus for purchase consideration of $ 24.3 million in cash.

Of the total purchase consideration, $ 4.1 million was held back to secure certain indemnification obligations (“Holdback Consideration”) in accordance with the stock purchase agreement, which was scheduled to be paid, subject to any indemnification claims, on the 18-month anniversary of the acquisition.

The Holdback Consideration was recorded in other current liabilities on the consolidated balance sheet as of December 31, 2021.

In November 2022, the Company paid $ 3.9 million in cash for the Holdback Consideration, net of indemnification claims.

The purpose of this acquisition is to accelerate the development of the Company’s AI and machine learning solutions.

The purchase consideration was primarily allocated to the developed technology intangible asset with an estimated fair value of $ 14.8 million at the acquisition date, which was valued using the cost to rebuild method.

Key assumptions under the cost to rebuild method include the estimated level of effort and related costs of reproducing or replacing the acquired technology.

The fair value of the remaining acquired tangible and intangible net assets was immaterial.

We also recorded a deferred tax liability of $ 2.0 million as a result of the acquisition.

The Company also recorded a deferred tax liability of $ 2.0 million as a result of the acquisition.

The Company recorded goodwill, which represents the excess of the purchase consideration over the tangible and intangible assets acquired and liabilities assumed, of $ 11.5 million relating to the acquisition.

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Goodwill is not deductible for income tax purposes.

Developed technology acquired is amortized on a straight-line basis, which approximates the pattern in which the economic benefits of the technology is expected to be consumed, over its estimated useful life of five years .

The amortization expense is recorded in research and development in the consolidated statements of operations and comprehensive loss, as the acquired developed technology will be used to improve our internal research and development capabilities.

The purchase price accounting for this acquisition is final.

Developed technology acquired is amortized on a straight-line basis, which approximates the pattern in which the economic benefits of the technology are expected to be consumed, over its estimated useful life of five years .

The amortization expense is recorded in research and development in the accompanying consolidated statements of operations and comprehensive loss, as the acquired developed technology will be used to improve the Company’s internal research and development capabilities.

The Company has not separately presented pro forma results reflecting the acquisition of Indus, or revenue and operating losses of Indus for the period from the acquisition date through December 31, 2021 as the impacts were not material to the consolidated financial statements.

The transaction costs associated with the acquisition were not material, and were expensed as incurred as general and administrative expenses in the consolidated statements of operations and comprehensive loss.

The transaction costs associated with the acquisition were not material, and were expensed as incurred as general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.

On October 14, 2020, the Company acquired 100 % of the outstanding voting interests of Esticom, Inc.

("Esticom"), a company that provides an estimating solution which enables contractors to determine the quantities of materials needed from project plans and specifications, and calculate the cost estimates for the labor hours and materials required on a job.

("Esticom"), a company that provides an estimating solution which enables contractors to determine the quantities of materials needed from project plans and specifications, and to calculate the cost estimates for the labor hours and materials required on a job.

The purpose of this acquisition is to accelerate the development of the Company’s preconstruction solutions.

The acquisition was accounted for as a business combination.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The total purchase consideration is comprised of the following (in thousands):

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Total purchase consideration

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

At closing, the Company issued 96,749 shares of common stock for aggregate purchase consideration of $ 3.9 million.

The fair value of the common stock was determined by the Company’s Board of Directors, taking into account a contemporaneous independent valuation by a third-party valuation specialist commissioned by the Board.

The fair value is estimated based on numerous objective and subjective factors including the Company’s historical performance, financial condition, and prospects, the value of companies that the Company considers peers, recent private stock sale transactions, the economic and competitive environment, the rights, preferences, and privileges of the Company’s redeemable convertible preferred stock, and the likelihood of achieving a liquidity event, such as an IPO.

In connection with the acquisition, 58,049 of the 96,749 shares of common stock were held back for potential breaches of representations and warranties, and will be assigned to Esticom shareholders 18 months after the closing date.

The major classes of assets and liabilities to which we allocated the purchase price were as follows (in thousands):

As the acquisition occurred prior to the Company’s IPO, the fair value of the common stock was determined by the Company’s board of directors (the “Board”), taking into account a contemporaneous independent valuation by a third-party valuation specialist commissioned by the Board.

The fair value was estimated based on numerous objective and subjective factors including the Company’s historical performance, financial condition, and prospects, the value of companies that the Company considers peers, recent private stock sale transactions, the economic and competitive environment, the rights, preferences, and privileges of the Company’s redeemable convertible preferred stock, and the likelihood of achieving a liquidity event, such as an IPO.

In connection with the acquisition, 58,049 of the 96,749 shares of common stock were held back for potential breaches of representations and warranties, and were assigned to Esticom shareholders 18 months after the closing date.

The transaction costs associated with the acquisition were not material and were expensed as incurred as general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.

The major classes of assets and liabilities to which the Company allocated the purchase price were as follows (in thousands):

Assets acquired

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Net assets acquired

The purchase price accounting for this acquisition is final.

The amortization expense is recorded in cost of revenue in the consolidated statements of operations and comprehensive loss.

The amortization expense is recorded in cost of revenue in the accompanying consolidated statements of operations and comprehensive loss.

The goodwill was primarily attributable to synergies that are expected to be achieved from the integration of Esticom with the Company’s current product offerings and assembled workforce.

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As part of the acquisition, the Company also entered into employment agreements with the majority of Avata’s employees.

The purpose of this acquisition is to accelerate the development of the Company’s artificial intelligence and machine learning solutions.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The purpose of this acquisition is to accelerate the development of the Company’s AI and machine learning solutions.

The purchase consideration was primarily allocated to developed technology intangible assets with an estimated fair value of $ 2.2 million.

The excess of the purchase consideration over the net assets acquired of $ 1.6 million was recorded as goodwill.

The amount of goodwill that is deductible for income tax purposes as of December 31, 2020 is $ 1.6 million.

Construction BI

On August 8, 2019, the Company completed the acquisition of Construction BI, LLC, (“CBI”), an Ohio limited liability company, by acquiring 100 % of the outstanding voting interests of CBI for $ 1.1 million in cash consideration.

The purchase price was primarily allocated to developed technology intangible assets.

The purpose of this acquisition is to accelerate the development of the Company’s business intelligence and data analytics solutions.

Honest Buildings

On July 30, 2019, the Company entered into a Merger Agreement with Honest Buildings, Inc.

(“Honest Buildings”) to acquire all of Honest Buildings’ outstanding stock.

Honest Buildings was an App Marketplace partner that already had an integration with Procore’s platform and is a provider of financial and project management software for owners.

This acquisition allowed the Company to extend its software products and platform to this core customer group.

The total purchase consideration is comprised of the following (in thousands):

Cash consideration

Fair value of Series H-1 redeemable convertible preferred

Fair value of exchanged options relating to

pre-combination services

Total purchase consideration

At closing, the Company issued 3,660,203 shares of Series H-1 redeemable convertible preferred stock valued at $ 26.75 per share for aggregate purchase consideration of $ 97.9 million.

In addition, the Company issued 205,464 shares of Series H-1 redeemable convertible preferred stock with an acquisition date fair value of $ 5.5 million to certain key employees of Honest Buildings which vest based on their continued employment.

These shares have been excluded from the purchase consideration and will be recorded as post-combination expense over two years as discussed in Note 12 to the consolidated financial statements.

The fair value of the Series H-1 redeemable convertible preferred stock of $ 26.75 per share was determined by the Company’s Board of Directors, taking into account a contemporaneous independent valuation by a third-party valuation specialist commissioned by the Board.

The Company also granted options to purchase 334,655 shares of common stock at a weighted-average exercise price of $ 4.72 per share in exchange for options held by Honest Buildings employees at the acquisition date.

The aggregate fair value of these options at the acquisition date was $ 6.9 million, of which $ 2.7 million was attributed to pre-combination services and recorded as purchase consideration, and $ 4.2 million was attributed to post-combination services and will be recorded as additional stock-based compensation expense over the remaining vesting periods of the options, which range between four to 48 months from the acquisition date.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

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

Assets acquired

Cash and cash equivalents

Other current and non-current assets

Developed technology intangible asset

Customer relationships intangible asset

Total assets acquired

Liabilities assumed

Accounts payable and accrued expenses

Deferred revenue

Total liabilities assumed

Net assets acquired

Developed technology intangible asset represents the fair value of Honest Buildings’ technology, which was valued using the relief-from royalty method.

Key assumptions to estimate the fair value of developed technology include forecasted revenue to be generated from the developed technology and an estimated royalty rate applicable to the technology.

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

Customer relationships represent the fair value of the underlying relationships with Honest Buildings’ customers, which were valued using the multi-period excess earnings method.

Key assumptions to estimate the fair value of customer relationships include forecasted revenue to be generated from and expenses to service the customer relationships, customer churn rate, and a discount rate.

The customer relationship intangible asset is amortized on a straight-line basis, which approximates the pattern in which the economic benefits of the customer relationships are consumed, over its estimated useful life of 10 years, and the amortization expense is recorded in sales and marketing expenses in the consolidated statements of operations and comprehensive loss.

The goodwill balance is primarily attributable to synergies and expanded market opportunities that are expected to be achieved from the integration of Honest Buildings with the Company's offerings and assembled workforce.

The goodwill balance is not deductible for income taxes purposes.

The acquisition-related costs incurred by the Company of $ 1.1 million were expensed as incurred, as general and administrative expenses in the consolidated statements of operations and comprehensive loss.

The results of operations of Honest Buildings have been included in the Company’s consolidated financial statements from the date of acquisition.

For the period from the acquisition date to December 31, 2019, Honest Buildings contributed $ 4.6 million to Procore’s consolidated revenue.

Due to the integration of operations post acquisition, presenting the operating losses that Honest Buildings contributed to Procore’s consolidated operating loss since the acquisition date is impracticable.

The following unaudited pro forma financial information combines the results of operations for Procore and Honest Buildings for the year ended December 31, 2019, as if the closing of the acquisition had occurred on January 1, 2018 and adjusts for amortization of acquired intangible assets, transaction costs associated with the acquisition, stock-based compensation expense for (i) options exchanged in the acquisition and (ii) 205,464 shares of Series H-1 redeemable convertible preferred stock granted to certain key employees in Honest Buildings as discussed above, and fair value adjustment to deferred revenue.

The excess of the purchase consideration over the net assets acquired of $ 1.6 million was recorded as

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies or the effect of the incremental costs incurred from integrating these companies.

Accordingly, these unaudited pro forma results for the year ended December 31, 2019, are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of 2018, nor are they indicative of future results of operations (in thousands):

The amount of goodwill that is deductible for income tax purposes as of December 31, 2020 is $ 1.6 million .

The purchase price accounting for this acquisition i s final.

INTANGIBLE ASSETS AND GOODWILL

Intangible assets

Our finite-lived intangible assets are summarized as follows (in thousands):

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

December 31, 2022

Weighted-Average Remaining Useful Life (Years)

Developed technology

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December 31, 2021

Weighted-Average Remaining Useful Life (Years)

Developed technology

Customer relationships

We estimate that there is no significant residual value related to our intangible assets.

The Company estimates that there is no significant residual value related to its intangible assets.

Intangible assets amortization expense is summarized as follows (in thousands):

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Total amortization of acquired intangible assets

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The following table outlines the estimated future amortization expense related to finite-lived intangible assets (in thousands):

Years Ending December 31,

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The following table presents the changes in carrying amount of goodwill (in thousands):

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Includes post-closing working capital adjustments and the effect of foreign currency translation

The additions to goodwill in 2021 were due to the acquisitions of Levelset, LaborChart, and Indus, and the additions in 2020 were due to the acquisitions of Esticom and Avata, respectively, as disclosed in Note 5 to the consolidated financial statements.

There was no impairment of goodwill during 2021, 2020, or 2019.

The additions to goodwill in 2021 were due to the acquisitions of Levelset, LaborChart, and Indus, as disclosed in Note 7 to the consolidated financial statements.

There was no impairment of goodwill during any period presented.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Our capitalized software development costs are summarized as follows (in thousands):

The Company’s capitalized software development costs are summarized as follows (in thousands):

Gross carrying amount

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Net capitalized software costs

Amortization of capitalized software was $ 12.0 million, $ 10.4 million, and $ 5.0 million for the years ended December 31, 2021, 2020, and 2019, respectively, and is recorded primarily in cost of revenue within our statements of operations and comprehensive loss.

During 2021, 2020, and 2019, the Company recorded expense for certain software development costs of $ 0.6 million, $ 3.7 million and $ 0.5 million, respectively, within research and development expense in the consolidated statements of operations and comprehensive loss, relating to development projects the Company decided to abandon prior to completion.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The estimated amortization is comprised of (i) amortization of released products and (ii) the expected amortization for products that are not yet complete based on their estimated economic lives and projected general release dates.

Amortization of capitalized software was $ 10.9 million, $ 12.0 million, and $ 10.4 million for the years ended December 31, 2022, 2021, and 2020, respectively, and is recorded primarily in cost of revenue within the accompanying consolidated statements of operations and comprehensive loss.

During 2022, 2021, and 2020, the Company recorded expense for certain software development costs of $ 0.3 million, $ 0.6 million, and $ 3.7 million, respectively, within research and development expense in the accompanying consolidated statements of operations and comprehensive loss, relating to development projects the Company decided to abandon prior to completion.

The estimated amortization is comprised of (i) amortization of completed software and (ii) the expected amortization for software that is not yet complete based on its estimated economic lives and projected completion dates.

The following table presents the remaining estimated amortization of capitalized software development costs as of December 31, 2022 (in thousands):

Years Ending December 31,

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

ACCRUED EXPENSES

The following represents the components of accrued expenses contained within our consolidated balance sheets at the end of each period (in thousands):

Accrued commissions and bonuses

The following represents the components of accrued expenses contained within the Company’s consolidated balance sheets at the end of each period (in thousands):

Accrued bonuses

Accrued commissions

Accrued salary, payroll tax, and employee

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Total accrued expenses

(1) Certain balances have been reclassified to conform to current year presentation.

CREDIT FACILITY

The Company has a credit agreement (the “Credit Facility”) provided by Silicon Valley Bank, to be used for general corporate purposes, including the financing of working capital requirements.

As of December 30, 202 1 and 2020 , the aggregate principal amount available under the Credit Facility was up to $ 75.0 million with the option to increase the availability up to $ 100.0 million.

The Credit Facility has a maturity date of May 7, 2022 , and carries a fee of 0.225 % applied to unused balances and an interest rate equal to the Wall Street Journal prime rate plus 1.25 % applied to all amounts outstanding, with a floor of 3.25 %.

The Credit Facility contains financial covenants that require the Company to maintain minimum annual recurring revenue, as defined in the credit agreement, and a liquidity ratio, if the Credit Facility is drawn, of at least 1.25 to 1.00.

The Credit Facility also contains restrictions on our ability to pay dividends, make distributions or payments to stockholders, or redeem, retire, or purchase any capital stock, make any restricted investments, and engage in changes in business, key personnel, control, or business locations.

As of each period presented, no amounts had been drawn down under the Credit Facility, and the Company was in compliance with all financial covenants.

As of December 31, 2021 and 2020 the Company had letters of credit outstanding of $ 6.5 million and $ 7.0 million, respectively, to secure various U.S.

The Company had a credit agreement (the “Credit Facility”) provided by Silicon Valley Bank, to be used for general corporate purposes, including the financing of working capital requirements.

As of December 31, 2021, the aggregate principal amount available under the Credit Facility was up to $ 75.0 million with the option to increase the availability up to $ 100.0 million.

The Credit Facility had a maturity date of May 7, 2022 , and the Company elected to terminate the Credit Facility on April 29, 2022 , prior to such maturity date.

As of December 31, 2021, no amounts had been drawn down under the Credit Facility, and the Company was in compliance with all financial covenants.

As of December 31, 2021, the Company had letters of credit outstanding under the Credit Facility of $ 6.5 million to secure various U.S.

and Australia leased office facilities.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

Upon termination of the Credit Facility, all outstanding letters of credit remain outstanding on an unsecured basis, without any requirement to set aside restricted cash.

As of December 31, 2022, such letters of credit totaled $ 6.5 million.

COMMITMENTS AND CONTINGENCIES

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Years Ending December 31,

In January 2023, the Company executed a renewal agreement for a total commitment of $ 45.0 million to be paid over the period from 2023 through 2025 .

The commitment is excluded from the table above as the agreement was not signed as of December 31, 2022.

From time to time, the Company may be subject to various litigation matters arising in the ordinary course of business.

The Company however is not aware of any currently pending legal matters or claims that could have a material adverse effect on its financial position, results of operations, or cash flows should such litigation be resolved unfavorably.

However, the Company is not aware of any currently pending legal matters or claims that could have a material adverse effect on its financial position, results of operations, or cash flows should such litigation be resolved unfavorably.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

Indemnifications

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The Company has never paid a material claim, nor has the Company been sued in connection with these indemnification arrangements.

As of December 31, 2021 and 2020, the Company has not accrued a liability for these guarantees because the likelihood of incurring a payment obligation, if any, in connection with these guarantees is not probable or reasonably estimable.

REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

Redeemable convertible preferred stock

Upon the closing of the IPO, all of the outstanding redeemable convertible preferred stock were automatically converted into an aggregate of 85,331,278 shares of our common stock on a one -for-one basis, and the carrying value, totaling $ 728.4 million, was reclassified into common stock and additional paid-in capital on the consolidated balance sheet.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The following table summarizes the authorized, issued and outstanding redeemable convertible preferred stock of the Company as of December 31, 2020 (in thousands, except share and per share amounts):

Series I redeemable convertible preferred stock warrant

In March 2020, the Company issued a warrant to purchase 1,452,513 shares of Series I redeemable convertible preferred stock.

At the issuance date, we recorded the fair value of the Series I warrant liability of $ 11.9 million as a discount to the carrying value of the Series I redeemable convertible preferred stock on the consolidated balance sheet.

The Series I warrant liability was remeasured quarterly at its fair value through the date of exercise with changes in fair value recorded in the consolidated statements of operations and comprehensive loss.

In December 2020, the Series I warrant holder exercised the warrant and the Company issued 1,452,513 shares of Series I redeemable convertible preferred stock for proceeds of $ 55.0 million.

The following inputs were used in the Black-Scholes option pricing model in determining the fair value of the Series I warrant liability for the period from issuance date to September 30, 2020:

Fair value of Series I redeemable convertible

preferred stock per share

$35.04 to $49.95

Expected term (in years)

Expected volatility

59.10% to 67.80%

Risk-free interest rate

0.10% to 0.16%

Dividend yield

On the date the Series I warrant was exercised, the Company remeasured its fair value using the Series I redeemable convertible preferred stock fair value of $ 71.54 per share as of that date.

The following table provides a summary of the changes in the fair value of the Series I warrant liability (in thousands):

Balance as of December 31, 2019

Issuance of Series I warrant

Change in fair value measurement of Series I warrant

Fair value of Series I warrant reclassified to Series I

redeemable convertible preferred stock upon exercise

Balance as of December 31, 2020

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

Upon the closing of the IPO, the Company filed an Amended and Restated Certificate of Incorporation which authorized 1,000,000,000 shares of common stock with a par value of $ 0.0001 per share, and 100,000,000 shares of undesignated preferred stock with a par value of $ 0.0001 per share.

To date, the Company has not accrued a liability for these guarantees because the likelihood of incurring a payment obligation, if any, in connection with these guarantees is not probable or reasonably estimable.

Upon the closing of its IPO, the Company filed an Amended and Restated Certificate of Incorporation which authorized 1,000,000,000 shares of common stock with a par value of $ 0.0001 per share, and 100,000,000 shares of undesignated preferred stock with a par value of $ 0.0001 per share.

Each share of common stock is entitled to one vote per share.

STOCK-BASED COMPENSATION

Equity Incentive Pl an

In May 2021, the Company’s board of directors adopted, and the stockholders approved, the 2021 Equity Incentive Plan (the "2021 Plan") with the purpose of granting stock-based awards, including stock options, stock appreciation rights, RSAs, RSUs, performance awards and other forms of awards, to employees, directors, and consultants.

A total of 30,962,615 shares of common stock were authorized for issuance under the 2021 Plan.

Equity Incentive Pl ans

In May 2021, the Board adopted, and the stockholders approved, the 2021 Equity Incentive Plan (the "2021 Plan") with the purpose of granting stock-based awards, including stock options, stock appreciation rights, RSAs, RSUs, performance awards and other forms of awards, to employees, directors, and consultants.

A total of 30,962,615 shares of common stock were authorized for issuance under the 2021 Plan in May 2021.

The number of shares of the Company’s common stock reserved for issuance under the 2021 Plan automatically increases on January 1 of each calendar year, starting on January 1, 2022 through January 1, 2031, in an amount equal to (i) 5 % of the total number of shares of the Company’s common stock outstanding on December 31 of the fiscal year before the date of each automatic increase, or (ii) a lesser number of shares determined by the Board prior to the applicable January 1.

Accordingly, on January 1, 2022, the number of shares of common stock that may be issued under the 2021 Plan increased by an additional 6,702,346 shares.

As a result, as of December 31, 2022, a total of 37,664,961 shares of common stock are authorized for issuance under the 2021 Plan.

As of December 31, 2022, a total of 28,427,078 shares of common stock were available for issuance under the 2021 Plan.

No options have been issued under the 2021 Plan.

No stock options have been issued under the 2021 Plan.

In June 2014, the Company adopted the 2014 Equity Incentive Plan (the “2014 Plan”), which was amended in April 2020 to increase the number of shares of common stock authorized for issuance.

The 2014 Plan provides for the issuance of incentive and non-statutory stock options to purchase common shares and the grant of other common stock awards to employees, officers, consultants, and directors of the Company.

The 2014 Plan served as the successor to the Company’s 2012 and 2004 Plans.

The 2014 Plan provided for the issuance of incentive and non-statutory stock options to purchase common shares and the grant of other common stock awards to employees, officers, directors, and consultants of the Company.

The 2014 Plan served as the successor to the Company’s 2012 Incentive Plan (the “2012 Plan”) and 2004 Equity Incentive Plan (the “2004 Plan”).

On the date the Company adopted the 2014 Plan, any options issued and outstanding under the 2012 and 2004 Plans were substituted by options with identical terms to purchase the Company’s common stock under the 2014 Plan.

On the date the 2021 Plan was adopted, no further shares could be issued under the 2014 Plan, however all shares outstanding under the 2014 Plan remain subject to the terms of the 2014 Plan.

On the date the 2021 Plan was adopted, no further shares could be issued under the 2014 Plan;

however, all shares outstanding under the 2014 Plan remain subject to the terms of the 2014 Plan.

Options issued under the 2014 Plan generally are exercisable for periods not to exceed 10 years and generally vest over a four to five-year period.

The Company issues new shares upon exercise of stock-based awards.

Stock options

No stock options were granted during 2021 or 2020.

During the year ended December 31, 2019, the fair value of each stock option was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate

Expected term (in years)

Estimated dividend yield

Estimated weighted-average volatility

Use of the Black-Scholes option-pricing model requires the input of subjective assumptions.

The assumptions used in the Company’s option-pricing model represent management’s best estimates and are as follows:

Fair value of common stock

Prior to the IPO, given the Company’s common stock was not publicly traded, its board of directors exercised significant judgment in determining the fair value of its common stock with input from management, based on several objective and subjective factors.

Factors considered by the Company’s board of directors include the price paid by investors for its common and preferred stock, actual and forecasted operating and financial performance, market conditions, performance of comparable publicly traded companies and transactions of comparable companies, developments and milestones within the Company, the rights, preferences, and privileges of its common and preferred stock, the likelihood of achieving a liquidating event, and the results of contemporaneous third-party valuations.

The fair value was determined in accordance with applicable elements of the practice aid issued by the American Institute of Certified Public Accountants, Valuation of Privately Held Company Equity Securities Issued as Compensation.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

Expected term

The expected term of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding.

The expected term assumptions were determined based upon actual historical exercises and post-vesting cancelations, adjusted for expected future exercises.

Expected volatility

The expected volatility of stock options is estimated based upon the historical volatility of a group of publicly traded companies, selected by management, which are in similar stages of development and comparable industries for a period commensurate with the expected term.

Risk-free interest rate

The risk-free interest rate is based on the U.S.

Treasury yield curve in effect at the time of grant for zero-coupon U.S.

Treasury notes with maturities approximately equal to the option’s expected term.

Dividend yield

The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future.

Consequently, an expected dividend yield of zero was utilized.

Stock options

No stock options were granted during the periods presented.

The following table summarizes the stock option activity during the year ended December 31, 202 2 (aggregate intrinsic value in thousands):

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Exercisable at December 31, 2022

The weighted-average grant date fair value of options granted for the year ended December 31, 2019 was $ 9.17 per share.

No options were granted in 2021 or 2020.

As of December 31, 2022, the total unrecognized stock-based compensation cost for unvested stock options was $ 1.8 million, which is expected to be recognized over a weighted-average period of 0.4 years.

1 unchanged sentence

Restricted stock units

In 2018, the Company began issuing RSUs to certain employees, officers, non-employee consultants, and directors.

The RSUs granted prior to the IPO vest upon the satisfaction of both a service and a performance condition, if both conditions are met before the award’s expiration date.

For certain awards the performance condition was satisfied solely on the effective date of a registration statement for our IPO and for other awards the performance condition was satisfied on the earlier of either the effective date of a registration statement for our IPO or a change in control.

In 2018, the Company began issuing RSUs to certain employees, officers, directors, and consultants.

The RSUs granted prior to the Company’s IPO vested upon the satisfaction of both a service and a performance condition, if both conditions are met before the award’s expiration date.

For certain awards, the performance condition was satisfied solely on the effective date of a registration statement for the Company’s IPO, and for other awards, the performance condition was satisfied on the earlier of either the effective date of a registration statement for the Company’s IPO or a change in control.

RSUs granted with service vesting conditions generally vest over four years on either a quarterly or annual vesting schedule.

Prior to the Company’s IPO, the grant date fair value of RSUs was determined based upon the fair value of the Company’s common stock as described above under stock options.

Subsequent to the completion of the Company’s IPO in May 2021, the fair value of RSUs was determined based on the trading price of our publicly traded common stock.

Prior to its IPO, given the Company’s common stock was not publicly traded, the grant date fair value of RSUs was determined based upon the fair value of the Company’s common stock.

The Board exercised significant judgment in determining the fair value of the Company’s common stock with input from management, based on several objective and subjective factors.

Factors considered by the Board included the price paid by investors for the Company’s common and preferred stock, actual and forecasted operating and financial performance, market conditions, performance of comparable publicly traded companies and transactions of comparable companies, developments and milestones within the Company, the rights, preferences, and privileges of its common and preferred stock, the likelihood of achieving a liquidating event, and the results of contemporaneous third-party valuations.

Subsequent to the completion of the Company’s IPO in May 2021, the fair value of RSUs was determined based on the trading price of its publicly traded common stock.

The grant date fair value of RSUs granted during 2022, 2021, and 2020 was $ 326.4 million, $ 350.6 million, and $ 132.4 million, respectively.

Prior to the effective date of the registration statement for the Company’s IPO, achievement of the performance conditions was not probable.

Upon the effective date of the registration statement for the Company’s IPO, the performance vesting condition for all RSUs granted was satisfied and the Company recognized on a graded vesting basis a cumulative catch-up stock-based compensation adjustment of $ 115.3 million in its 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.

Substantially all of the RSUs granted subsequent to the Company’s IPO vest based solely on continued service, which is generally over four years .

The intrinsic value of RSUs vested during the years ended December 31, 2022 and 2021 was $ 156.9 million and $ 187.7 million, respectively.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

Prior to the effective date of the registration statement for our IPO, achievement of the performance conditions was not probable.

Upon the effective date of the registration statement for the IPO, the performance vesting condition for all RSUs granted was satisfied and the Company recognized on a graded vesting basis a cumulative catch-up stock-based compensation adjustment of $ 115.3 million in its 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.

All RSUs granted subsequent to the IPO vest based on continued service, which is generally over four years .

The intrinsic value of RSUs vested during the year ended December 31, 2021 was $ 187.7 million.

As of December 31, 202 2 , the total unrecognized stock-based compensation cost for all RSUs outstanding at that date was $ 399.3 million, which is expected to be recognized over a weighted-average vesting period of 2.5 years .

As of December 31, 202 1 , the total unrecognized stock-based compensation cost for all RSUs outstanding at that date was $ 281.0 million , which was expected to be recognized over a weighted-average vesting period of 2.0 years .

The following table summarizes the RSU activity during the year ended December 31, 202 2 :

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Unvested at December 31, 2022

During 2021, we granted an aggregate of 1,024,946 RSUs in connection with the acquisitions of Levelset, LaborChart, and Indus at grant date fair values ranging from $ 64.55 to $ 100.10 per share, for a total grant date fair value of $ 90.6 million.

These RSUs are included in the number of shares granted during 2021 and are accounted for as post-acquisition stock-based compensation expense as they vest over a period of four years based on continued employment.

Restricted stock awards

In November 2021, the Company issued 199,670 RSAs to certain key Levelset employees in connection with the acquisition of Levelset that vest based on their continued services over a two-year period.

In November 2021, the Company issued 199,670 RSAs to certain key employees in connection with the acquisition of Levelset that vest based on their continued service over a two-year period.

The fair value of the RSAs issued was $ 95.05 per share, which was the closing trading stock price of the Company’s common stock on the acquisition date.

These shares are released from restriction quarterly over a two-year period assuming the continued service of the employees.

As of December 31, 2021, no shares have vested.

During 2021, the Company recognized stock-based compensation expense of $ 1.6 million relating to these shares.

In July 2019, the Company issued 205,464 restricted Series H-1 redeemable convertible preferred stock awards (“Series H-1 RSAs”) to certain employees at a grant date fair value of $ 26.75 in connection with the acquisition of Honest Buildings.

As of December 31, 2022, 99,833 shares have vested.

As of December 31, 2021, no shares had vested.

During 2022 and 2021, the Company recognized stock-based compensation expense of $ 9.5 million and $ 1.6 million, respectively, relating to these shares.

These shares were released from restriction 50 % on the first anniversary and 50 % on the second anniversary of the acquisition date based on the continued service of the employees.

As of December 31, 2021 and 2020, 205,464 and 102,732 of the Series H-1 RSAs have vested, respectively.

Upon the closing of the IPO, the Series H-1 RSAs automatically converted into shares of restricted common stock on a one -for-one basis.

Upon the closing of the Company’s IPO, the Series H-1 RSAs automatically converted into shares of restricted common stock on a one -for-one basis.

As of December 31, 2021, all of the Series H-1 RSAs were fully vested.

During the year ended December 31, 2021 and 2020, the Company recognized stock-based compensation expense of $ 1.6 million and $ 2.7 million, respectively, for these shares.

Sales of common stock

During the years ended December 31, 2021 and 2020, certain of the Company’s investors acquired outstanding common stock from the Company’s employees.

For the shares acquired at a price in excess of the estimated fair value of the Company’s common stock, the Company recorded stock-based compensation expense of $ 5.5 million during the period from January 1, 2021 through the Company’s IPO on May 20, 2021 and $ 21.0 million during the year ended December 31, 2020, for the difference between the price paid by the investors and the estimated fair value on the date of the transactions.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

During the year ended December 31, 2021, certain of the Company’s investors acquired outstanding common stock from the Company’s employees.

For the shares acquired at a price in excess of the estimated fair value of the Company’s common stock, the Company recorded stock-based compensation expense of $ 5.5 million for the period from January 1, 2021 through the Company’s IPO on May 20, 2021 for the difference between the price paid by the investors and the estimated fair value on the date of the transactions.

Employee Stock Purchase Plan

In May 2021, the Company’s board of directors adopted, and the stockholders approved, the ESPP, which became effective immediately prior to the effective date of the Company's IPO.

In May 2021, the Board adopted, and the stockholders approved, the ESPP, which became effective immediately prior to the effective date of the Company's IPO.

A total of 2,600,000 shares of common stock were initially reserved for issuance under the ESPP.

The number of shares of our common stock reserved for issuance under the ESPP will automatically increase on January 1 of each year for a period of ten years , beginning on January 1, 2022 and continuing through January 1, 2031, by the lesser of (i) 1 % of the total number of shares of our common stock outstanding on December 31 of the immediately preceding year;

and (ii) 3,900,000 shares, except before the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii).

The number of shares of the Company’s common stock reserved for issuance under the ESPP automatically increases on January 1 of each year for a period of ten years , beginning on January 1, 2022 and continuing through January 1, 2031, by the lesser of (i) 1 % of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year;

and (ii) 3,900,000 shares, except before the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (i) and (ii).

Accordingly, on January 1, 2022, the number of shares of common stock reserved under the 2021 ESPP increased by an additional 1,340,469 shares.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The offering periods are scheduled to start in May and November of each year.

The first offering period commenced on the Company’s first day of trading on May 20, 2021 and comprises three purchase periods of approximately six months in length, scheduled to end on November 15, 2022.

The ESPP provides for consecutive offering periods that will typically have a duration of 12 months in length and comprise two purchase periods of six months in length.

The first offering period commenced on the Company’s first day of trading on May 20, 2021 and comprised three purchase periods of approximately six months in length.

The ESPP provides for consecutive offering periods that will typically have a duration of 12 months in length and comprise two purchase periods of six months in length, subject to reset and rollover provisions.

The ESPP provides eligible employees with an opportunity to purchase shares of the Company’s common stock through payroll deductions of up to 15 % of their eligible compensation, subject to a maximum of $ 25,000 of stock per calendar year.

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Participation ends automatically upon termination of employment.

We estimate the fair value of the ESPP purchase rights on the date of grant using the Black-Scholes option pricing model with the following assumptions during the year ended December 31, 2021.

The fair value of the ESPP purchase rights on the date of grant using the Black-Scholes option pricing model was estimated using the following assumptions:

Risk-free interest rate

1.47% to 4.55%

0.03% to 0.18%

Expected term (in years)

2 unchanged sentences

61.14% to 72.69%

44.81% to 69.39%

The term for the ESPP purchase rights is the offering period.

We estimate volatility using historical volatilities of a group of public companies in a similar industry and stage of life cycle, selected by management, for a period commensurate with the term.

The Company estimates volatility using historical volatilities of a group of public companies in a similar industry and stage of life cycle, selected by management, for a period commensurate with the term.

The interest rate is derived from government bonds with a similar term to the ESPP purchase right granted.

We have not declared, nor do we expect to declare dividends in the foreseeable future.

The Company has not declared, nor does it expect to declare, dividends in the foreseeable future.

Consequently, an expected dividend yield of zero was utilized.

The fair value of the Company’s common stock used to value ESPP purchase rights is determined based upon the fair value of the Company’s common stock as described above under stock options.

Employee payroll contributions accrued in connection with the ESPP were $ 4.5 million as of December 31, 2021 , and are included within accrued expenses in the consolidated balance sheet.

The fair value of the Company’s common stock used to value ESPP purchase rights is based on the trading price of its publicly traded common stock.

Employee payroll contributions accrued in connection with the ESPP were $ 4.7 million and $ 4.5 million as of December 31, 2022 and 2021, respectively , and are included within accrued expenses in the accompanying consolidated balance sheets.

Employee payroll contributions ultimately used to purchase shares will be reclassified to stockholders' equity on the purchase date.

Stock-based compensation expense related to the ESPP is recognized on a straight-line basis over the offering period.

Forfeitures are recognized as they occur.

During the year ended December 31, 2021, the Company recorded stock-based compensation of $ 8.5 million in connection with the ESPP.

During the year ended December 31, 2021 , 166,370 shares of our common stock were purchased under the ESPP.

During the years ended December 31, 2022 and 2021, the Company recorded stock-based compensation of $ 15.0 million and $ 8.5 million, respectively, in connection with the ESPP.

During the years ended December 31, 2022 and 2021 , 551,753 and 166,370 shares of the Company’s common stock were purchased under the ESPP, respectively.

As of December 31, 2022 , unrecognized stock-based compensation expense related to the ESPP was $ 4.5 million, which is expected to be recognized over a weighted-average period of 0.4 years.

Stock-based compensation

The Company recorded total stock-based compensation cost from stock options, RSUs, ESPP, RSAs, and sales of stock by employees in excess of fair value as follows (in thousands):

As of December 31, 2021 , unrecognized stock-based compensation expense related to the ESPP was $ 13.8 million, which was expected to be recognized over a weighted-average period of 0.6 years.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

Stock-based compensation

The Company recorded total stock-based compensation cost from stock options, RSUs, ESPP, RSAs, and sales of stock by employees in excess of fair value as follows (in thousands):

Year Ended December 31,

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Total stock-based compensation expense

Stock-based compensation capitalized for

software development

Stock-based compensation capitalized for software

development and cloud-computing arrangement

implementation costs

Total stock-based compensation cost

There were no net tax benefits recognized in the consolidated statements of operations and comprehensive loss for stock-based compensation arrangements for the years ended December 31, 2021, 2020 and 2019 due to the Company having a full valuation allowance against its deferred tax assets.

The domestic and foreign components of loss before (benefit from) provision for income taxes consisted of the following (in thousands):

There were no net tax benefits recognized in the accompanying consolidated statements of operations and comprehensive loss for stock-based compensation arrangements for the years ended December 31, 2022, 2021, and 2020 due to the Company having a full valuation allowance against its deferred tax assets.

The domestic and foreign components of loss before provision for (benefit from) income taxes consisted of the following (in thousands):

Year Ended December 31,

The (benefit from) provision for income taxes is comprised of the following (in thousands):

The provision for (benefit from) income taxes is comprised of the following (in thousands):

Year Ended December 31,

(Benefit from) provision for income taxes

Provision for (benefit from) income taxes

Procore Technologies, Inc.

1 unchanged sentence

The following table provides a reconciliation between income taxes computed at the U.S.

federal statutory rate and the Company's (benefit from) provision for income taxes (in thousands):

federal statutory rate and the Company's provision for (benefit from) income taxes (in thousands):

Year Ended December 31,

Computed expected income tax benefit

State income taxes - net of federal income

State income taxes - net of federal income tax benefit

Change in valuation allowance

4 unchanged sentences

Foreign rate differential

(Benefit from) provision for income taxes

Provision for (benefit from) income taxes

Significant components of the Company's deferred tax assets and liabilities are presented below (in thousands):

3 unchanged sentences

Stock-based compensation

Capitalized software cost

Total deferred tax assets

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Based on all available objective evidence management believes it is "more likely than not" that the net deferred tax assets will not be fully realizable in the U.S.

as of December 31, 2021 and 2020.

and United Kingdom (“U.K.”) as of December 31, 2022 and 2021.

Accordingly, the Company’s U.S.

6 unchanged sentences

Current year change

(Release of) increase in valuation allowance

as a result of purchase accounting for

business combinations

Release of valuation allowance as a result of purchase

accounting for business combinations

Ending balance

At the date of acquisition of Levelset and LaborChart, each entity was in a net deferred tax liability position, primarily as a result of acquired intangible assets.

At the date of acquisition of Levelset and LaborChart in 2021, each entity was in a net deferred tax liability position, primarily as a result of acquired intangible assets.

These net deferred tax liabilities are an available source of income to realize the Company’s deferred tax assets.

1 unchanged sentence

The Company did not provide for U.S.

income taxes on the undistributed earnings and other outside temporary differences of foreign subsidiaries as they are considered indefinitely reinvested outside the United States.

income taxes on the undistributed earnings and other outside temporary differences of foreign subsidiaries as they are considered indefinitely reinvested outside the U.S.

At December 31, 2022 and 2021, the amount of temporary differences related to undistributed earnings and other outside temporary differences upon which U.S.

income taxes have not been provided is immaterial to these consolidated financial statements.

As of December 31, 2021, the Company had federal net operating loss ("NOL") carryforwards of $ 794.5 million which comprise of definite and indefinite net operating losses.

At December 31, 2021 the Company had federal net operating loss carryforwards of approximately $ 156.5 million, which expire at various intervals from the years 2025 through 2037 and had NOL carryforwards of $ 638.0 million which do not expire.

As of December 31, 2022, the Company had federal net operating loss carryforwards (“NOL carryforwards”) of $ 842.6 million, which are comprised of definite and indefinite net operating losses.

At December 31, 2022 the Company had federal NOL carryforwards of approximately $ 156.5 million, which expire at various intervals from the years 2025 through 2037 and had NOL carryforwards of $ 686.1 million which do not expire.

As of December 31, 2022, the Company has state net operating losses of $ 567.2 million, which will begin to expire in 2029.

The Internal Revenue Code (“IRC”) of 1986, as amended, imposes restrictions on the utilization of net operating losses and credits when a Company experiences a cumulative change in ownership of more than 50 % over a three-year period.

The Internal Revenue Code (the “IRC”) of 1986, as amended, imposes restrictions on the utilization of net operating losses and credits when a Company experiences a cumulative change in ownership of more than 50 % over a three-year period.

As of December 31, 2022, the Company completed an analysis to determine if the Company was subject to the provisions of IRC Section 382.

Although a portion of the net operating losses and credit carryovers are subject to annual limitations, the Company has determined that it should be able to fully utilize these net operating losses and credit carryovers before they expire, provided the Company generates sufficient taxable income.

As of December 31, 2021, the Company had credits for research activities available for carryforward for federal income tax purposes of $ 36.8 million and for state income tax purposes of $ 23.2 million, which are available to offset future income tax in those jurisdictions and which begin to expire in 2022 for federal and have no expiration for state.

As of December 31, 2022, the Company had credits for research activities available for carryforward for federal income tax purposes of $ 54.2 million and for state income tax purposes of $ 27.5 million, which are available to offset future income tax in those jurisdictions and which began to expire in 2022 for federal and have no expiration for state.

The following table summarizes the activity related to unrecognized tax benefits (in thousands):

2 unchanged sentences

Increases related to current period positions

Increases (decreases) related to prior period positions

(Decreases) increases related to prior period positions

Ending balance

4 unchanged sentences

The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense.

As of December 31, 2021 and 2020, accrued interest and penalties related to income tax positions were not significant.

As of December 31, 2022 and 2021, accrued interest and penalties related to income tax positions were immaterial.

The Company files U.S.

6 unchanged sentences

NET LOSS PER SHARE

Basic and diluted net income (loss) per share is presented in conformity with the two-class method required for participating securities.

Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities.

The Company’s redeemable convertible preferred stock were participating securities as the holders of the redeemable convertible preferred stock were entitled to participate in dividends with common stock.

In periods of net income, net income is attributed to common stockholders and participating securities based on their participation rights, and basic net income per share is calculated by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

The Company’s common stock, which was converted from redeemable convertible preferred stock upon the closing of its IPO, is weighted based on the period of time the common stock was outstanding after conversion in 2021.

Net losses were not allocated to the redeemable convertible preferred stock as the holders of the redeemable convertible preferred stock did not have a contractual obligation to share in any losses.

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

The Company’s common stock which was converted from redeemable convertible preferred stock upon the closing of the IPO is weighted based on the period of time it was outstanding after conversion.

Diluted net income per share attributable to common stockholders adjusts basic net income per share for the potentially dilutive impact of stock options, stock awards, and redeemable convertible preferred stock.

As the Company has reported net losses attributable to common stockholders for all periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per share attributable to common stockholders equals diluted net loss per share attributable to common stockholders.

6 unchanged sentences

conversion of Series I warrant

Restricted stock units and restricted stock

awards subject to future vesting

RSUs and RSAs subject to future vesting

Shares issuable pursuant to the ESPP

Shares of common stock issuable from stock

Unvested early exercised common stock

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

EMPLOYEE BENEFIT PLANS

The Company has a defined-contribution plan in the U.S.

intended to qualify under Section 401 of the Internal Revenue Code (the “401(k) Plan”).

intended to qualify under Section 401 of the IRC (the “401(k) Plan”).

The 401(k) Plan covers substantially all U.S.

2 unchanged sentences

Matching contributions to the 401(k) Plan totaled $ 14.7 million, $ 9.6 million, and $ 7.6 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Procore Technologies, Inc.

Notes to Consolidated Financial Statements

The Company also has defined-contribution plans in certain other countries.

4 unchanged sentences

Revenue by geographic region

United States

Rest of the world

1 unchanged sentence

Percentage of revenue by geographic region

United States

Rest of the world

The following table sets forth the total of property and equipment, net, and right of use lease assets by geographic region (in thousands):

United States

The following table sets forth the total of property and equipment, net, and ROU lease assets by geographic region (in thousands):

Rest of the world

4 unchanged sentences

During the year ended December 31, 2020, the Company recorded severance and other benefit costs of $ 4.4 million in connection with the business transformation plan.

There have been no restructuring events or expenses in the year ended December 31, 2021.

There have been no restructuring events or expenses in the years ended December 31, 2022 and 2021.

The following table summarizes the above restructuring-related expenses for 2020 by line item within the consolidated statement of operations and comprehensive loss (in thousands):

3 unchanged sentences

General and administrative

SUBSEQUENT EVENTS

The Company has evaluated subsequent events through March 1, 2023, the date these consolidated financial statements were available to be issued, and has determined that no subsequent events, other than those disclosed in Note 7 and Note 12, require adjustment or disclosure in these consolidated financial statements.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data