PROCORE TECHNOLOGIES INC

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2023 Form 10-K. You should review the disclosure under Part I, Item 1A,“Risk Factors” in our 2023 Form 10-K for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. These statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments, except as required by law.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2023 Form 10-K. You should review the disclosure under the section titled“Special Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q and Part I, Item 1A,“Risk Factors” in our 2023 Form 10-K for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. These statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments, except as required by law.

Previous wording

We are highly focused on continuing to acquire new customers and expand existing customers’ use of our platform to support our long-term growth. We intend to efficiently drive new customer acquisitions by continuing to invest across our sales and marketing engine to engage our prospective customers, increase brand awareness, and drive adoption of our products, services, and platform. The number of customers on our platform has increased from 15,089 as of March 31, 2023 to 16,598 as of March 31, 2024, reflecting a year-over-year growth rate of 10%. All aforementioned customer counts exclude customers acquired from Express Lien, Inc. (d/b/a Levelset) (“Levelset”) and Esticom, Inc. (“Esticom”) that do not have standard Procore annual contracts.

Current wording

We are highly focused on continuing to acquire new customers and expand existing customers’ use of our platform to support our long-term growth. We intend to efficiently drive new customer acquisitions by continuing to invest across our sales and marketing engine to engage our prospective customers, increase brand awareness, and drive adoption of our products, services, and platform. We have seen an increase in the number of customers that contributed more than $100,000 of annual recurring revenue ("ARR"), which increased from 1,820 as of June 30, 2023 to 2,191 as of June 30, 2024, reflecting a year-over-year growth rate of 20%. The number of customers on our platform has increased from 15,704 as of June 30, 2023 to 16,750 as of June 30, 2024, reflecting a year-over-year growth rate of 7%. All aforementioned customer counts exclude customers acquired from business combinations that do not have standard Procore annual contracts.

Previous wording

To calculate GRR at the end of a particular period, we first calculate our annual recurring revenue (“ARR”) from the cohort of active customers at the end of the period 12 months prior to the end of the period selected. We define ARR at the end of a particular period as the annualized dollar value of our subscriptions from customers as of such period end date. For multi-year subscriptions, ARR at the end of a particular period is measured by using the stated contractual subscription fees as of the period end date on which ARR is measured. For example, if ARR is measured during the first year of a multi-year contract, the first-year subscription fees are used to calculate ARR. ARR at the end of a particular period includes the annualized dollar value of subscriptions for which the term has not ended, and subscriptions for which we are negotiating a subscription renewal. ARR should be viewed independently of revenue determined in accordance with accounting principles generally accepted in the U.S. (“GAAP” or “U.S. GAAP”) and does not represent our U.S. GAAP revenue on an annualized basis. ARR is not intended to be a replacement or forecast of revenue. We then calculate the value of ARR from any customers whose subscriptions terminated and were not renewed during the 12 months preceding the end of the period selected, which we refer to as cancellations. We then divide (a) the total prior period ARR minus cancellations by (b) the total prior period ARR to calculate GRR. Our GRR was 95% and 94% as of March 31, 2024 and 2023, respectively.

Current wording

To calculate GRR at the end of a particular period, we first calculate our ARR from the cohort of active customers at the end of the period 12 months prior to the end of the period selected. We define ARR at the end of a particular period as the annualized dollar value of our subscriptions from customers as of such period end date. For multi-year subscriptions, ARR at the end of a particular period is measured by using the stated contractual subscription fees as of the period end date on which ARR is measured. For example, if ARR is measured during the first year of a multi-year contract, the first-year subscription fees are used to calculate ARR. ARR at the end of a particular period includes the annualized dollar value of subscriptions for which the term has not ended, and subscriptions for which we are negotiating a subscription renewal. ARR should be viewed independently of revenue determined in accordance with accounting principles generally accepted in the U.S. (“GAAP” or “U.S. GAAP”) and does not represent our U.S. GAAP revenue on an annualized basis. ARR is not intended to be a replacement or forecast of revenue. We then calculate the value of ARR from any customers whose subscriptions terminated and were not renewed during the 12 months preceding the end of the period selected, which we refer to as cancellations. We then divide (a) the total prior period ARR minus cancellations by (b) the total prior period ARR to calculate GRR. Our GRR was 94% as of each of June 30, 2024 and 2023.

Previous wording

We believe that cRPO is a key metric to track our ability to win fixed revenue commitments from new customers and to expand and retain existing customers. As of March 31, 2024, cRPO increased by $118.5 million, or 20%, year-over-year. Approximately 23% of the increase was attributable to existing customers and 77% was attributable to new customers acquired during the twelve months ended March 31, 2024. We expect RPO to change from period to period primarily due to the size, timing, and duration of new customer contracts and customer renewals.

Current wording

We believe that cRPO is a key metric to track our ability to win fixed revenue commitments from new customers and to expand and retain existing customers. As of June 30, 2024, cRPO increased by $102.2 million, or 16%, year-over-year. Approximately 5% of the increase was attributable to existing customers and 95% was attributable to new customers acquired during the twelve months ended June 30, 2024. We expect RPO to change from period to period primarily due to the size, timing, and duration of new customer contracts and customer renewals.

Previous wording

We plan to continue to invest in technology innovation and product development to enhance the capabilities of our platform. Additional features and products will also enable customers and collaborators to manage new workflows on our platform and allow us to attract a broader set of stakeholders. We have introduced new products and services developed in-house and through our acquisitions of Zimfly, Inc., Honest Buildings, Inc., Construction BI, LLC, Esticom, LaborChart, Inc., Levelset, and Unearth Technologies Inc. (“Unearth”).

Current wording

We plan to continue to invest in technology innovation and product development to enhance the capabilities of our platform. Additional features and products will also enable customers and collaborators to manage new workflows on our platform and allow us to attract a broader set of stakeholders. We have introduced and continue to develop new products and services organically and through our acquisitions.

Previous wording

We intend to continue to invest in building additional products, offerings, features, and functionality that expand our capabilities and facilitate the extension of our platform. For example, in March 2023, we launched Procore Risk Advisors, a modern construction brokerage that offers insurance and surety solutions; in September 2023, we launched Procore Pay, a payments solution that handles all aspects of the payment processes between general contractors and subcontractors; and in September 2023, we acquired Unearth, a geographic information systems asset management platform that helps general contractors and infrastructure providers connect assets, data, and field teams. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion. While the impact of these developments, including Procore Pay, are not yet material to our business, our future success is dependent on our ability to successfully develop or acquire, market, and sell existing and new products and services to both new and existing customers.

Current wording

We intend to continue to invest in building additional products, offerings, features, and functionality that expand our capabilities and facilitate the extension of our platform. For example, in May 2024, we acquired Intelliwave Technologies Inc., a construction materials management company that enhances our Workforce Management solution; in September 2023, we acquired Unearth Technologies Inc., a geographic information systems asset management platform that helps general contractors and infrastructure providers connect assets, data, and field teams; and in September 2023, we launched Procore Pay, a payments solution that handles all aspects of the payment processes between general contractors and subcontractors. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion. While the impact of these developments, including Procore Pay, are not yet material to our business, our future success is dependent on our ability to successfully develop or acquire, market, and sell existing and new products and services to both new and existing customers.

Previous wording

We see international expansion as a major, and largely greenfield, opportunity for growth as we look to capture a larger part of the worldwide construction market. We have a presence internationally with sales and marketing offices in Sydney, Australia; Toronto, Canada; London, England; Paris, France; Dublin, Ireland; and Dubai, United Arab Emirates (“UAE”). We have also developed focused sales and marketing efforts in Germany, where we do not maintain an office location. As a result of our international efforts, we support multiple languages and currencies. Non-U.S. revenue as a percentage of our total revenue was 14% for the three months ended March 31, 2024 and 2023, respectively. We determine the percentage of non-U.S. revenue based on the billing location of each customer. Fluctuations in foreign currencies may positively or negatively impact the amount of revenue that we report for our foreign subsidiaries upon the translation of these amounts into U.S. Dollars.

Current wording

We see international expansion as a major, and largely greenfield, opportunity for growth as we look to capture a larger part of the worldwide construction market. We have an international sales and marketing presence with offices in Sydney, Australia; Toronto, Canada; London, England; Paris, France; Dublin, Ireland; and Dubai, United Arab Emirates (“UAE”). We have also developed focused sales and marketing efforts in Germany, where we do not maintain an office location. As a result of our international efforts, we support multiple languages and currencies. Non-U.S. revenue as a percentage of our total revenue was 15% and 14% for the six months ended June 30, 2024 and 2023, respectively. We determine the percentage of non-U.S. revenue based on the billing location of each customer. Fluctuations in foreign currencies may positively or negatively impact the amount of revenue that we report for our foreign subsidiaries upon the translation of these amounts into U.S. Dollars.

Previous wording

Furthermore, we believe global demand for our products, services, and platform will continue to increase as we expand our international sales and marketing efforts, and the awareness of our products, services, and platform grows. However, our ability to conduct our operations internationally will require considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, currencies, cultures, customs, legal, tax and regulatory systems, alternative dispute systems, and commercial markets. We have made, and plan to continue to make, significant investments in international markets. While these investments may adversely affect our operating results in the near term, we believe they will contribute to our long-term growth.

Current wording

Furthermore, we believe global demand for our products, services, and platform will continue to increase as we expand our international sales and marketing efforts, and the awareness of our products, services, and platform grows. However, our ability to conduct our operations internationally will require considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, currencies, cultures, customs, and commercial markets, as well as differing legal, tax, regulatory, and alternative dispute systems. We have made, and plan to continue to make, significant investments in international markets. While these investments may adversely affect our operating results in the near term, we believe they will contribute to our long-term growth.

Previous wording

Macroeconomic and geopolitical factors such as trends within the commercial construction industry, rising inflation, rising interest rates, volatility in capital markets, bank failures, fluctuations in foreign exchange rates, global pandemics (such as the COVID-19 pandemic), and wars and other conflicts (such as the Russia-Ukraine war) may impact our customers’ spending, as well as our operating expenses and cash flows. We believe that macroeconomic factors have resulted in cautious customer spending, contributing to the decline in our cRPO annual growth rate. However, as such factors evolve, we continue to monitor the ways in which they may directly or indirectly impact our business, results of operations, and financial condition. See the section titled “Risk Factors” in Part I, Item 1A, of our 2023 Form 10-K for further discussion.

Current wording

Macroeconomic and geopolitical factors, such as trends within the commercial construction industry, elevated inflation, higher interest rates than we've seen in recent history, volatility in capital markets, bank failures, fluctuations in foreign exchange rates, global pandemics (such as the COVID-19 pandemic), and wars and other conflicts (such as the Russia-Ukraine war) may impact our customers’ spending, as well as our operating expenses and cash flows. We believe that macroeconomic factors have resulted in cautious customer spending, contributing to the decline in our cRPO annual growth rate. However, as such factors evolve, we continue to monitor the ways in which they may directly or indirectly impact our business, results of operations, and financial condition. See the section titled “Risk Factors” in Part I, Item 1A, of our 2023 Form 10-K for further discussion.

Previous wording

Cost of revenue primarily consists of personnel-related compensation expenses for our customer support team, including salaries, benefits, stock-based compensation, payroll taxes, commissions, and bonuses. Additionally, cost of revenue includes non-personnel-related expenses, such as third-party hosting costs, amortization of acquired technology intangible assets, amortization of capitalized software development costs related to our platform, software license fees, and allocated overhead. Cost of revenue also includes severance costs incurred related to the restructuring event in January 2024, which is described in Note 13 of our condensed consolidated financial statements. We expect our cost of revenue to increase on an absolute dollar basis as our revenue and acquisition activities increase. We intend to continue to invest additional resources in platform hosting, customer support, and software development as we grow our business and to ensure that our customers are realizing the full benefit of our products. The level and timing of investment in these areas could affect our cost of revenue in the future.

Current wording

Cost of revenue primarily consists of personnel-related compensation expenses for our customer support team, including salaries, benefits, stock-based compensation, payroll taxes, commissions, and bonuses. Additionally, cost of revenue includes non-personnel-related expenses, such as third-party hosting costs, amortization of capitalized software development costs related to our platform, amortization of acquired technology intangible assets, software license fees, and allocated overhead. Cost of revenue also includes severance costs incurred related to the restructuring event in January 2024, which is described in Note 14 of our condensed consolidated financial statements. We expect our cost of revenue to increase on an absolute dollar basis as our revenue and acquisition activities increase. We intend to continue to invest additional resources in platform hosting, customer support, and software development as we grow our business and to ensure that our customers are realizing the full benefit of our products. The level and timing of investment in these areas could affect our cost of revenue in the future.

Previous wording

Our 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, payroll taxes, commissions, benefits, bonuses, and severance expenses as a result of the restructuring event in January 2024, which is described in Note 13 of our condensed consolidated financial statements.

Current wording

Our 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, payroll taxes, benefits, bonuses, and severance expenses as a result of the restructuring event in January 2024, which is described in Note 14 of our condensed consolidated financial statements.

Previous wording

Research and development expenses primarily consist of personnel-related compensation expenses for our engineering, product, and design teams. Additionally, research and development expenses include non-personnel-related expenses, such as computer software expenses, contractor costs to supplement our staff levels; consulting services; amortization of certain acquired intangible assets used in research and development activities; and allocated overhead. We expect research and development expenses to increase on an absolute dollar basis and vary from period to period as a percentage of revenue for the foreseeable future as we continue to build, enhance, maintain, and scale our products, services, and platform.

Current wording

Research and development expenses primarily consist of personnel-related compensation expenses for our engineering, product, and design teams. Additionally, research and development expenses include non-personnel-related expenses, such as contractor costs to supplement our staff levels; computer software expenses; consulting services; amortization of certain acquired intangible assets used in research and development activities; and allocated overhead. We expect research and development expenses to increase on an absolute dollar basis and vary from period to period as a percentage of revenue for the foreseeable future as we continue to build, enhance, maintain, and scale our products, services, and platform.

Previous wording

General and administrative expenses primarily consist of personnel-related compensation expenses for our information technology, human resources, finance, legal, executive, 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; computer software 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. We expect general and administrative expenses to increase on an absolute dollar basis and vary from period to period as a percentage of revenue, as our business continues to grow, including our international expansion.

Current wording

General and administrative expenses primarily consist of personnel-related compensation expenses for our information technology, human resources, finance, legal, executive, 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; computer software 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. We expect general and administrative expenses to increase on an absolute dollar basis and vary from period to period as a percentage of revenue as our business continues to grow, including in relation to our international expansion.

Previous wording

Other expense, net primarily consists of gains or losses on foreign currency transactions, unrealized gains or losses on equity securities, and miscellaneous other income and expenses.

Current wording

Other expense, net primarily consists of unrealized gains or losses on equity securities, gains or losses on foreign currency transactions, and miscellaneous other income and expenses.

Previous wording

*Includes amortization of capitalized stock-based compensation of $1.5 million and $0.9 million, respectively, for the three months ended March 31, 2024 and 2023 which was initially capitalized as capitalized software and cloud-computing arrangement implementation costs.

Current wording

*Includes amortization of capitalized stock-based compensation of $1.7 million and $1.0 million, respectively, for the three months ended June 30, 2024 and 2023; and $3.3 million and $2.0 million, respectively, for the six months ended June 30, 2024 and 2023; which was initially capitalized as capitalized software and cloud-computing arrangement implementation costs.

Previous wording

During the three months ended March 31, 2024, our revenue increased by $55.9 million, or 26%, compared to the three months ended March 31, 2023, of which approximately 90% was attributable to revenue from existing customers and approximately 10% was attributable to revenue from new customers acquired during the three months ended March 31, 2024. The increase in revenue from existing customers includes the net benefit of a full quarter of subscription revenue in the first quarter of 2024 from customers that were newly acquired in 2023 and continued their subscriptions in the first quarter of 2024, and customers that expanded their subscriptions in the first quarter of 2024 through the purchase of additional construction volume or products and services.

Current wording

During the three months ended June 30, 2024, our revenue increased by $55.8 million, or 24%, compared to the three months ended June 30, 2023, of which approximately 89% was attributable to revenue from existing customers and approximately 11% was attributable to revenue from new customers acquired during the three months ended June 30, 2024. The increase in revenue from existing customers includes the net benefit of a full quarter of subscription revenue in the second quarter of 2024 from customers that were newly acquired or expanded their subscriptions between the second quarter of 2023 and the first quarter of 2024 and continued or expanded their subscriptions, as applicable, in the second quarter of 2024.

Previous wording

During the three months ended March 31, 2024, our interest income increased by $1.0 million due to an increase in interest rates and balances in our money market funds, cash savings accounts, and marketable securities.

Current wording

During the three months ended June 30, 2024, our interest income increased by $0.9 million due to an increase in the balances of our money market funds, cash savings accounts, and marketable securities.

Previous wording

During the three months ended March 31, 2024, accretion income, net increased by $1.5 million due to an increase both in our purchases of marketable securities and the balance of our marketable securities portfolio year over year.

Current wording

During the three months ended June 30, 2024, accretion income, net increased by $1.7 million due to an increase both in our purchases of marketable securities and the balance of our marketable securities portfolio year over year.

Previous wording

The increase in cost of revenue during the three months ended March 31, 2024 was primarily attributable to a $2.0 million increase in amortization of capitalized software development costs, and a $2.0 million increase in third-party cloud hosting and related services as we grow our customer base. The increase in cost of revenue was also attributable to an increase of $1.2 million in personnel-related expenses, including increases of $0.6 million in salaries and wages, $0.3 million in severance costs incurred related to the restructuring event in January 2024, and $0.2 million in stock-based compensation expense. We decreased our cost of revenue headcount by 6% since March 31, 2023 as we continue to focus on improving operating efficiency.

Current wording

The increase in cost of revenue during the six months ended June 30, 2024 was primarily attributable to a $5.2 million increase in third-party cloud hosting and related services as we grow our customer base, a $4.6 million increase in amortization of capitalized software development costs, and a $1.1 million increase in amortization of developed technology intangible assets. The increase in cost of revenue was also attributable to an increase of $0.9 million in personnel-related expenses, including increases of $0.4 million in stock-based compensation expense, $0.3 million in severance costs incurred related to the restructuring event in January 2024, and $0.2 million in salaries and wages. We decreased our cost of revenue headcount by 5% since June 30, 2023, as we continue to focus on improving operating efficiency.

Previous wording

The increase in sales and marketing expenses during the three months ended March 31, 2024 was primarily attributable to an increase of $3.6 million in personnel-related expenses, including an increase of $2.2 million in salaries and wages driven by merit increases, an increase of $1.3 million in severance costs incurred related to the restructuring event in January 2024, and an increase of $0.3 million in stock-based compensation expense. The increase in sales and marketing expenses was also attributable to a $1.1 million increase in professional fees for contractors to supplement our staff levels. The increases in sales and marketing expenses were partially offset by a $1.3 million decrease in marketing events and expenses. We decreased our sales and marketing headcount by 7% since March 31, 2023 as we continue to focus on improving operating efficiency.

Current wording

The increase in sales and marketing expenses during the six months ended June 30, 2024 was primarily attributable to an increase of $2.9 million in personnel-related expenses, including increases of $1.3 million in severance costs incurred related to the restructuring event in January 2024, and $1.0 million in stock-based compensation expense. The increase in sales and marketing expenses was also attributable to a $2.1 million increase in professional fees for professional services, including contractors to supplement our staff levels, and a $0.9 million increase in computer software expenses. We decreased our sales and marketing headcount by 9% since June 30, 2023, as we continue to focus on improving operating efficiency.

Previous wording

The decrease in research and development expenses during the three months ended March 31, 2024 was primarily attributable to a $6.0 million decrease in acquisition-related expenses, including $4.9 million related to the acceleration of cash retention payments in the first quarter of 2023 upon the departure of certain employees from our previous acquisitions. The decrease in research and development expenses was also attributable to a decrease of $4.4 million in personnel-related expenses, including decreases of $6.1 million in stock-based compensation expense and $0.5 million in salaries and wages, partially offset by an increase of $1.8 million due to severance costs incurred related to the restructuring event in January 2024. The decreases in research and development expenses were partially offset by a $0.8 million increase in computer software expenses. We decreased our research and development headcount by 2% since March 31, 2023 as we continue to focus on improving operating efficiency.

Current wording

The decrease in research and development expenses during the six months ended June 30, 2024 was primarily attributable to a decrease of $8.4 million in personnel-related expenses, including a decrease of $4.7 million in stock-based compensation expense, a decrease of $3.2 million in salaries and wages as a higher percentage of our software development costs were capitalized, and a decrease of $2.2 million in bonus expense, partially offset by an increase of $1.8 million due to severance costs incurred related to the restructuring event in January 2024. The decrease in research and development expenses was also attributable to a $6.2 million decrease in acquisition-related expenses, including $4.9 million related to the acceleration of cash retention payments in the first quarter of 2023 upon the departure of certain employees from our previous acquisitions. The decreases in research and development expenses were partially offset by a $2.4 million increase in professional fees for professional services, including contractors to supplement our staff levels, and a $1.4 million increase in computer software expenses. We increased our research and development headcount by 6% since June 30, 2023 in order to continue to build, enhance, maintain, and scale our products, services, and platform.

Previous wording

The increase in general and administrative expenses during the three months ended March 31, 2024 was primarily due to a $5.9 million increase in personnel-related expenses, including increases of $3.4 million in salaries and wages, $1.2 million in stock-based compensation expense, and $0.8 million due to severance costs incurred related to the restructuring event in January 2024. The increase in general and administrative expenses was also attributable to a $1.1 million increase in professional fees for legal and other professional services. The increases in general and administrative expenses were partially offset by a $1.0 million decrease in bad debt expenses primarily relating to the receivables from our materials financing business, which we ceased origination under in the fourth quarter of 2023. Our general and administrative headcount has remained consistent since March 31, 2023.

Current wording

The increase in general and administrative expenses during the six months ended June 30, 2024 was primarily due to a $10.2 million increase in personnel-related expenses, including increases of $5.3 million in stock-based compensation expense, $3.8 million in salaries and wages, and $0.8 million due to severance costs incurred related to the restructuring event in January 2024. The increase in general and administrative expenses was also attributable to a $2.1 million increase in professional fees for professional services, including contractors to supplement our staff levels, and a $1.2 million increase in computer software expenses. The increases in general and administrative expenses were partially offset by a $2.7 million decrease in bad debt expenses primarily relating to the receivables from our materials financing business, which we ceased originations under in the fourth quarter of 2023. We decreased our general and administrative headcount by 1% since June 30, 2023, as we continue to focus on improving operating efficiency.

Previous wording

The non-GAAP financial information is presented for supplemental informational purposes only. Non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP. There are limitations in using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP, non-GAAP financial measures may be different from similarly-titled non-GAAP measures used by other companies since other companies may calculate such non-GAAP financial measures differently, and non-GAAP financial measures exclude expenses that may have a material impact on our reported financial results. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. Investors should not rely on any single financial measure to evaluate our business.

Current wording

The non-GAAP financial information is presented for supplemental informational purposes only. Non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP. There are limitations in using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP, non-GAAP financial measures may be different from similarly-titled non-GAAP measures used by other companies since other companies may calculate such non-GAAP financial measures differently, and non-GAAP financial measures exclude expenses that may have a material impact on our reported financial results. Unlike stock-based compensation expense, employer payroll tax related to employee stock transactions is a cash expense that we will continue to incur in the future. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. Investors should not rely on any single financial measure to evaluate our business.

Previous wording

We define these non-GAAP financial measures as the respective GAAP measures, excluding stock-based compensation expense, amortization of acquired intangible assets, employer payroll tax related to employee stock transactions, and acquisition-related expenses. Stock-based compensation expense includes the net effects of capitalization and amortization of stock-based compensation expense related to capitalized software and cloud-computing arrangement implementation costs. Stock-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of the compensation provided to our employees. Because of varying available valuation methodologies, subjective assumptions, and the variety of equity instruments that can impact a company’s non-cash expenses, we believe that providing non-GAAP financial measures that exclude stock-based compensation expense allow for meaningful comparisons between our operating results from period to period. The expense related to amortization of acquired intangible assets is dependent upon estimates and assumptions, which can vary significantly and are unique to each asset acquired; therefore, we believe that non-GAAP measures that adjust for the amortization of acquired intangible assets provide investors a consistent basis for comparison across accounting periods. The amount of employer payroll tax-related items on employee stock transactions is dependent on restricted stock unit settlements, option exercises, related stock price, and other factors that are beyond our control and that do not correlate to the operation of our business. When evaluating the performance of our business and making operating plans, we do not consider these items (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution than the accounting charges associated with such grants). Acquisition-related expenses include external and incremental transaction costs, such as legal and due diligence costs, and retention payments. These expenses are unpredictable and generally would not have otherwise been incurred in the periods presented as part of our continuing operations. In addition, the size and complexity of an acquisition, which often drives the magnitude of acquisition-related expenses, may not be indicative of such future costs. We believe excluding acquisition-related expenses facilitates the comparison of our financial results to our historical operating results and to other companies in our industry. Overall, we believe it is useful to exclude these expenses in order to better understand the long-term performance of our core business and to facilitate comparison of our results period-over-period and to those of peer companies.

Current wording

We define these non-GAAP financial measures as the respective GAAP measures, excluding stock-based compensation expense, amortization of acquired intangible assets, employer payroll tax related to employee stock transactions, and acquisition-related expenses. Stock-based compensation expense includes the net effects of capitalization and amortization of stock-based compensation expense related to capitalized software and cloud-computing arrangement implementation costs. Stock-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of the compensation provided to our employees. Because of varying available valuation methodologies, subjective assumptions, and the variety of equity instruments that can impact a company’s non-cash expenses, we believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for meaningful comparisons between our operating results from period to period. The expense related to amortization of acquired intangible assets is dependent upon estimates and assumptions, which can vary significantly and are unique to each asset acquired; therefore, we believe that non-GAAP measures that adjust for the amortization of acquired intangible assets provide investors a consistent basis for comparison across accounting periods. The amount of employer payroll tax-related items on employee stock transactions is dependent on restricted stock unit settlements, option exercises, related stock price, and other factors that are beyond our control and that do not correlate to the operation of our business. When evaluating the performance of our business and making operating plans, we do not consider these items (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution than the accounting charges associated with such grants). Since the amount of employer payroll tax-related items on employee stock transactions is highly variable due to factors outside our control, and unrelated to our core operations, operating results, revenue-generating activities, business strategy, industry, or regulatory environment, management does not consider employer payroll tax on employee stock transactions in the evaluation of the business or in making operating plans. Accordingly, we believe this adjustment in arriving at our non-GAAP measures provides investors with a better understanding of the performance of our core business in a manner that is consistent with management’s view of the business. Acquisition-related expenses include external and incremental transaction costs, such as legal and due diligence costs, and retention payments. These expenses are unpredictable and generally would not have otherwise been incurred in the periods presented as part of our continuing operations. In addition, the size and complexity of an acquisition, which often driv…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

As of March 31, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $744.6 million, which were held in money market funds, U.S. treasury securities, corporate notes and obligations, commercial paper, checking accounts, and savings accounts. Our investments in marketable securities are exposed to interest rate risk; however, due to the short-term nature of our investments, we do not anticipate being exposed to material risks due to changes in interest rates.

Current wording

As of June 30, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $780.8 million, which were held in money market funds, U.S. treasury securities, corporate notes and obligations, commercial paper, checking accounts, and savings accounts. Our investments in marketable securities are exposed to interest rate risk; however, due to the short-term nature of our investments, we do not anticipate being exposed to material risks due to changes in interest rates.

Previous wording

As of March 31, 2024, we had outstanding letters of credit, on an unsecured basis, totaling approximately $4.7 million to secure various leased office facilities in the U.S. and Australia.

Current wording

As of June 30, 2024, we had outstanding letters of credit, on an unsecured basis, totaling approximately $4.3 million to secure various leased office facilities in the U.S. and Australia.

Previous wording

During the three months ended March 31, 2024, operating lease commencements and modifications resulted in increases of $10.7 million in future rent commitments through 2036, relating to the office leases in Austin, Texas, which were modified to extend the lease terms and adjust the rent obligations. There have been no other material changes to our contractual obligations from those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Form 10-K. We believe our existing cash, cash equivalents, and marketable securities will be sufficient to meet our needs for at least the next 12 months. While we have generated positive cash flows from operations in recent years, we have continued to generate losses from operations, as reflected in our accumulated deficit of $1.1 billion as of March 31, 2024. We may not achieve profitability in the foreseeable future and may require additional capital resources to execute strategic initiatives to grow our business.

Current wording

During the six months ended June 30, 2024, operating lease commencements and modifications resulted in increases of $10.7 million in future rent commitments through 2036, relating to the office lease in Austin, Texas, which were modified to extend the lease terms and adjust the rent obligations. There have been no other material changes to our contractual obligations from those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Form 10-K. We believe our existing cash, cash equivalents, and marketable securities will be sufficient to meet our needs for at least the next 12 months. While we have generated positive cash flows from operations in recent years, we have continued to generate losses from operations, as reflected in our accumulated deficit of $1.2 billion as of June 30, 2024. We may not achieve profitability in the foreseeable future and may require additional capital resources to execute strategic initiatives to grow our business.

Previous wording

Net cash provided by operating activities was $69.1 million during the three months ended March 31, 2024 which resulted from a net loss of $11.0 million, adjusted for non-cash charges of $60.6 million and a net cash inflow of $19.5 million from changes in operating expenses and liabilities. The $19.5 million of net cash inflows provided as a result of changes in our operating assets and liabilities primarily reflected the following:

Current wording

Net cash provided by operating activities was $127.8 million during the six months ended June 30, 2024 which resulted from a net loss of $17.3 million, adjusted for non-cash charges of $129.6 million and a net cash inflow of $15.6 million from changes in operating expenses and liabilities. The $15.6 million of net cash inflows provided as a result of changes in our operating assets and liabilities primarily reflected the following:

Previous wording

•a $68.0 million decrease in accounts receivable primarily due to timing of billings and cash receipts from customers; and

Current wording

•a $49.0 million decrease in accounts receivable primarily due to timing of billings and cash receipts from customers; and

Previous wording

•a $3.2 million increase in accounts payable primarily due to timing of cash payments to our vendors.

Current wording

•a $13.3 million increase in accounts payable primarily due to timing of cash payments to our vendors.

Previous wording

•a $34.2 million decrease in accrued expenses and other liabilities primarily due to the size and timing of bonus and commission accruals and payouts, accrued ESPP contributions, payroll, and cash payments to our vendors;

Current wording

•a $30.4 million decrease in accrued expenses and other liabilities primarily due to the size and timing of bonus and commission accruals and payouts, accrued ESPP contributions, payroll, and cash payments to our vendors;

Previous wording

•a $14.1 million decrease in deferred revenue primarily due to timing of billings and seasonality; and

Current wording

•a $10.9 million decrease in deferred revenue primarily due to timing of billings and seasonality;

Previous wording

•a $2.3 million decrease in operating lease liabilities related to lease payments.

Current wording

•a $3.1 million decrease in operating lease liabilities related to lease payments; and

Previous wording

Net cash provided by operating activities was $29.3 million during the three months ended March 31, 2023, which resulted from a net loss of $63.4 million, adjusted for non-cash charges of $65.3 million and net cash inflows of $27.4 million from changes in operating assets and liabilities. The $27.4 million of net cash inflows provided as a result of changes in our operating assets and liabilities primarily reflected the following:

Current wording

Net cash provided by operating activities was $17.6 million during the six months ended June 30, 2023, which resulted from a net loss of $116.3 million, adjusted for non-cash charges of $128.0 million and net cash inflows of $5.9 million from changes in operating assets and liabilities. The $5.9 million of net cash inflows provided as a result of changes in our operating assets and liabilities primarily reflected the following:

Previous wording

•a $42.9 million decrease in accounts receivable primarily due to timing of billings and cash receipts from customers;

Current wording

•a $23.6 million decrease in accounts receivable primarily due to timing of billings and cash receipts from customers;

Previous wording

•a $6.5 million increase in deferred revenue primarily due to the growth of our business and timing of billings;

Current wording

•a $19.6 million increase in deferred revenue primarily due to the growth of our business and timing of billings;

Previous wording

•a $4.5 million decrease in prepaid expenses and other assets primarily due to the acceleration of acquisition-related expenses associated with cash retention payments upon the departure of certain employees from our previous acquisitions.

Current wording

•a $1.7 million decrease in prepaid expenses and other assets primarily due to the acceleration of acquisition-related expenses associated with cash retention payments, which had been paid in advance, upon the departure of certain employees from our previous acquisitions; and

Previous wording

•a $4.6 million increase in accounts payable primarily due to timing of cash payments to our vendors; and

Current wording

•a $1.1 million increase in accounts payable primarily due to timing of cash payments to our vendors.

Previous wording

•a $28.2 million decrease in accrued expenses and other liabilities primarily due to the size and timing of bonus and commission accruals and payouts, ESPP contributions, payroll, and cash payments to our vendors; and

Current wording

•a $31.1 million decrease in accrued expenses and other liabilities primarily due to the size and timing of bonus and commission accruals and payouts, accrued ESPP contributions, payroll, and cash payments to our vendors;

Previous wording

•a $2.6 million decrease in operating lease liabilities related to lease payments.

Current wording

•a $5.4 million decrease in operating lease liabilities related to lease payments; and