PROCORE TECHNOLOGIES INC

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. 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.

Current wording

Despite macroeconomic challenges, we have seen an increase in the number of customers that contributed more than $100,000 of annual recurring revenue ("ARR"), which increased from 1,921 as of September 30, 2023 to 2,261 as of September 30, 2024, reflecting a year-over-year growth rate of 18%. The number of customers on our platform has increased from 16,067 as of September 30, 2023 to 16,975 as of September 30, 2024, reflecting a year-over-year growth rate of 6%. All aforementioned customer counts exclude customers acquired from business combinations that do not have standard Procore annual contracts.

Previous wording

Our ability to generate revenue depends on maintaining our relationships with our customers. Our gross retention rate (“GRR”) reflects only customer losses and does not reflect customer expansion or contraction. We believe our high GRR demonstrates that we serve a vital role in our customers’ operations, as the vast majority of our customers continue to use our products and platform and to renew their subscriptions. We believe that GRR is a key metric to understand our ability to retain our customer base and to evaluate whether our products and platform are addressing our customers’ needs throughout the year.

Current wording

In addition, our gross retention rate (“GRR”) was 94% and 95% as of September 30, 2024 and September 30, 2023, respectively. Our GRR reflects only customer losses and does not reflect customer expansion or contraction. We believe our high GRR demonstrates that we serve a vital role in our customers’ operations, as the vast majority of our customers continue to use our products and platform and to renew their subscriptions. We believe that GRR is a key metric to understand our ability to retain our customer base, to evaluate whether our products and platform are addressing our customers’ needs throughout the year.

Previous 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.

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.

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 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.

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 September 30, 2024, cRPO increased by $103.9 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 September 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 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.

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 nine months ended September 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

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.

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, evolve our GTM operating model, and 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, 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.

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, benefits, payroll taxes, 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

Sales and marketing expenses primarily consist of personnel-related compensation expenses for our sales and marketing organizations. Additionally, sales and marketing expenses include non-personnel-related expenses, such as advertising costs, marketing events, travel, trade shows, and other marketing activities; contractor costs to supplement our staff levels; consulting services; amortization of acquired customer relationship intangible assets; and allocated overhead. We expense advertising and other promotional expenditures as incurred. We expect sales and marketing 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 and as we increase our investment in sales and marketing to drive customer growth.

Current wording

Sales and marketing expenses primarily consist of personnel-related compensation expenses for our sales and marketing organizations. Additionally, sales and marketing expenses include non-personnel-related expenses, such as advertising costs, marketing events, travel, trade shows, and other marketing activities; contractor costs to supplement our staff levels; consulting services; amortization of acquired customer relationship intangible assets; and allocated overhead. We expense advertising and other promotional expenditures as incurred. We expect sales and marketing 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, as we evolve our GTM operating model, and as we increase our investment in sales and marketing to drive customer growth.

Previous wording

Provision for income taxes consists primarily of income taxes of U.S. state franchise taxes and certain foreign jurisdictions in which we conduct business. As we expand our international operations, we expect to incur increased foreign tax expenses. We have a full valuation allowance for net U.S. deferred tax assets. The U.S. valuation allowance primarily includes net operating loss carryforwards (“NOL carryforwards”) and tax credits related primarily to research and development for our operations in the U.S. We expect to maintain this full valuation allowance for our net U.S. deferred tax assets for the foreseeable future.

Current wording

Provision for income taxes consists primarily of income taxes of U.S. state franchise taxes and certain foreign jurisdictions in which we conduct business. As we expand our international operations, we expect to incur increased foreign tax expenses. We have a full valuation allowance for net U.S. deferred tax assets. The U.S. valuation allowance primarily includes net operating loss carryforwards and tax credits related primarily to research and development for our operations in the U.S. We expect to maintain this full valuation allowance for our net U.S. deferred tax assets for the foreseeable future.

Previous 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.

Current wording

*Includes amortization of capitalized stock-based compensation of $2.3 million and $1.2 million, respectively, for the three months ended September 30, 2024 and 2023; and $5.5 million and $3.1 million, respectively, for the nine months ended September 30, 2024 and 2023; which was initially capitalized as capitalized software and cloud-computing arrangement implementation costs.

Previous 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.

Current wording

During the three months ended September 30, 2024, our revenue increased by $48.0 million, or 19%, compared to the three months ended September 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 September 30, 2024. The increase in revenue from existing customers includes the net benefit of a full quarter of subscription revenue in the third quarter of 2024 from customers that were newly acquired or expanded their subscriptions between the beginning of the third quarter of 2023 and the end of the second quarter of 2024 and continued or expanded their subscriptions, as applicable, in the third quarter of 2024.

Previous wording

The increase in cost of revenue during the three months ended June 30, 2024 was primarily attributable to a $3.2 million increase in third-party cloud hosting and related services as we grow our customer base, a $2.5 million increase in amortization of capitalized software development costs, and a $0.7 million increase in amortization of developed technology intangible assets. We decreased our cost of revenue headcount by 5% since June 30, 2023, as we continue to focus on improving operating efficiency.

Current wording

The increase in cost of revenue during the three months ended September 30, 2024 was primarily attributable to a $4.9 million increase in amortization of capitalized software development costs. The increase in cost of revenue was also attributable to a $2.6 million increase in third-party cloud hosting and related services as we grow our customer base; a $2.3 million increase in personnel-related expenses, including increases of $2.0 million in salaries and wages and $0.3 million in stock-based compensation expense; and a $1.2 million increase in amortization of developed technology intangible assets. We decreased our cost of revenue headcount by 6% since September 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 June 30, 2024 was primarily attributable to a $1.0 million increase in professional fees for professional services, including contractors to supplement our staff levels, a $0.5 million increase in acquisition-related expenses, a $0.5 million increase in marketing events and expenses, and a $0.5 million increase in travel costs. The increases in sales and marketing expenses were partially offset by a $0.7 million decrease in personnel-related expenses, including a decrease of $2.1 million in salaries and wages, partially offset by an increase of $1.2 million in stock-based compensation expense. We decreased our sales and marketing headcount by 9% since June 30, 2023, as we continue to focus on improving operating efficiency.

Current wording

The increase in sales and marketing expenses during the three months ended September 30, 2024 was primarily attributable to a $4.4 million increase in professional fees for professional services, including contractors to supplement our staff levels. The increase in sales and marketing expense was also attributable to a $4.1 million increase in marketing events and expenses, a $1.5 million increase in travel costs, and a $1.4 million increase in personnel-related expenses, including an increase of $1.9 million in salaries and wages, partially offset by a decrease of $0.5 million in stock-based compensation expense. We decreased our sales and marketing headcount by 5% since September 30, 2023, as we focused on improving operating efficiency. However, we have started to, and expect that we will continue to, increase our sales and marketing headcount as we continue to invest in the evolution of our GTM operating model.

Previous wording

The decrease in research and development expenses during the three months ended June 30, 2024 was primarily attributable to a $3.9 million decrease in personnel-related expenses, including a decrease of $3.3 million in salaries and wages as a higher percentage of our software development costs were capitalized, and a decrease of $2.0 million in bonus expense, partially offset by an increase of $1.4 million in stock-based compensation expense. The decreases in research and development expenses were partially offset by a $2.1 million increase in professional service fees, including contractors to supplement our staff levels, and a $0.6 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.

Current wording

The increase in research and development expenses during the three months ended September 30, 2024 was primarily attributable to a $3.9 million increase in professional service fees, including contractors to supplement our staff levels. The increase in research and development expenses was also attributable to a $2.6 million increase in personnel-related expenses, including increases of $2.0 million in stock-based compensation expense and $0.7 million in salaries and wages driven by an increase in headcount; and a $0.7 million increase in computer software expenses. We increased our research and development headcount by 20% since September 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 June 30, 2024 was primarily due to a $4.4 million increase in personnel-related expenses, including increases of $4.0 million in stock-based compensation expense and $0.4 million in salaries and wages. The increase in general and administrative expenses was also attributable to a $1.1 million increase in computer software expenses and a $1.1 million increase in professional service fees, including contractors to supplement our staff levels. The increases in general and administrative expenses were partially offset by a $1.7 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.

Current wording

The increase in general and administrative expenses during the three months ended September 30, 2024 was primarily due to a $4.4 million increase in personnel-related expenses, including increases of $3.0 million in salaries and wages and $1.6 million in stock-based compensation expense. The increase in general and administrative expenses was also attributable to a $2.4 million increase in professional service fees, including contractors to supplement our staff levels, and a $0.7 million increase in computer software expenses. The increase in general and administrative expenses was partially offset by a $4.2 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. Our general and administrative headcount has remained consistent since September 30, 2023.

Previous 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.

Current wording

During the three months ended September 30, 2024, our interest income increased by $1.2 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 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.

Current wording

During the three months ended September 30, 2024, accretion income, net increased by $0.9 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

During the six months ended June 30, 2024, our revenue increased by $111.7 million, or 25%, compared to the six months ended June 30, 2023, of which approximately 80% was attributable to revenue from existing customers and approximately 20% was attributable to revenue from new customers acquired during the six months ended June 30, 2024. The increase in revenue from existing customers includes the net benefit of a full six months of subscription revenue in the first half of 2024 from customers that were newly acquired or expanded their subscriptions in 2023 and continued or expanded their subscriptions, as applicable, in the first half of 2024.

Current wording

During the nine months ended September 30, 2024, our revenue increased by $159.7 million, or 23%, compared to the nine months ended September 30, 2023, of which approximately 73% was attributable to revenue from existing customers and approximately 27% was attributable to revenue from new customers acquired during the nine months ended September 30, 2024. The increase in revenue from existing customers includes the net benefit of a full nine months of subscription revenue in the first nine months of 2024 from customers that were newly acquired or expanded their subscriptions in 2023 and continued or expanded their subscriptions, as applicable, in the first nine months of 2024.

Previous 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.

Current wording

The increase in cost of revenue during the nine months ended September 30, 2024 was primarily attributable to a $9.5 million increase in amortization of capitalized software development costs. The increase in cost of revenue was also attributable to a $7.8 million increase in third-party cloud hosting and related services as we grow our customer base; a $3.2 million in personnel-related expenses, including increases of $2.2 million in salaries and wages, $0.7 million in stock-based compensation expense, and $0.3 million in severance costs incurred related to the restructuring event in January 2024; and a $2.2 million increase in amortization of developed technology intangible assets. We decreased our cost of revenue headcount by 6% since September 30, 2023, as we continue to focus on improving operating efficiency.

Previous 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.

Current wording

The increase in sales and marketing expenses during the nine months ended September 30, 2024 was primarily attributable to a $6.6 million increase in professional fees for professional services, including contractors to supplement our staff levels. The increase in sales and marketing expenses was also attributable to a $4.3 million increase in personnel-related expenses, including increases of $2.1 million in salaries and wages, $1.3 million in severance costs incurred related to the restructuring event in January 2024, and $0.5 million in stock-based compensation expense; a $3.3 million increase in marketing events and expenses; a $2.2 million increase in travel costs; and a $1.5 million increase in computer software expenses. We decreased our sales and marketing headcount by 5% since September 30, 2023, as we focused on improving operating efficiency. However, we have started to, and expect that we will continue to, increase our sales and marketing headcount as we continue to invest in the evolution of our GTM operating model.

Previous 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.

Current wording

The decrease in research and development expenses during the nine months ended September 30, 2024 was primarily 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 decrease in research and development expenses was also attributable to a decrease of $5.8 million in personnel-related expenses, including a decrease of $5.0 million in salaries and wages as a higher percentage of our software development costs were capitalized and $2.7 million in stock-based compensation expense, 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 $6.4 million increase in professional fees for professional services, including contractors to supplement our staff levels, and a $2.2 million increase in computer software expenses. We increased our research and development headcount by 20% since September 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 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.

Current wording

The increase in general and administrative expenses during the nine months ended September 30, 2024 was primarily due to a $14.6 million increase in personnel-related expenses, including increases of $6.9 million in stock-based compensation expense, $6.8 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 $4.5 million increase in professional fees for professional services, including contractors to supplement our staff levels, and a $1.8 million increase in computer software expenses. The increase in general and administrative expenses was partially offset by a $8.5 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. Our general and administrative headcount has remained consistent since September 30, 2023.

Previous wording

During the six months ended June 30, 2024, our interest income increased by $1.9 million due to an increase in the balances of our money market funds, cash savings accounts, and marketable securities.

Current wording

During the nine months ended September 30, 2024, our interest income increased by $3.1 million due to an increase in the balances of our money market funds, cash savings accounts, and marketable securities.

Previous wording

During the six months ended June 30, 2024, accretion income, net increased by $3.2 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 nine months ended September 30, 2024, accretion income, net increased by $4.1 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

Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Expenses, Non-GAAP Income (Loss) from Operations, and Non-GAAP Operating Margin

Current wording

Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Expenses, Non-GAAP Income from Operations, and Non-GAAP Operating Margin

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 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.

Current wording

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 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 ou…

Excerpt shortened here; the source contains the full paragraph.

Previous 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.

Current wording

As of September 30, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $809.2 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 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.

Current wording

As of September 30, 2024, we had outstanding letters of credit, on an unsecured basis, totaling approximately $4.4 million to secure various leased office facilities in the U.S. and Australia.

Previous 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.

Current wording

During the nine months ended September 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 September 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

This assessment is a forward-looking statement and involves risks and uncertainties. Our additional future capital requirements will depend on many factors, including our revenue growth rate, new customer acquisition and subscription renewal activity, timing of billing activities, our ability to integrate the companies or technologies we acquire and realize strategic and financial benefits from our investments and acquisitions, other strategic transactions or investments we may enter into, the timing and extent of spending to support further sales and marketing and research and development efforts, general and administrative expenses to support our growth, including international expansion, and inflation. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing to fund these activities. If we are unable to raise additional capital when desired, or on acceptable terms, our business, results of operations, and financial condition could be materially adversely affected.

Current wording

This assessment is a forward-looking statement and involves risks and uncertainties. Our additional future capital requirements will depend on many factors, including our revenue growth rate, new customer acquisition and subscription renewal activity, timing of billing activities, our ability to integrate the companies or technologies we acquire and realize strategic and financial benefits from our investments and acquisitions, other strategic transactions or investments we may enter into, the volume and timing of any stock repurchases under our stock repurchase program, the timing and extent of spending to support further sales and marketing and research and development efforts, general and administrative expenses to support our growth, including international expansion, and inflation. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing to fund these activities. If we are unable to raise additional capital when desired, or on acceptable terms, our business, results of operations, and financial condition could be materially adversely affected.

Previous 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:

Current wording

Net cash provided by operating activities was $167.1 million during the nine months ended September 30, 2024 which resulted from a net loss of $43.7 million, adjusted for non-cash charges of $201.7 million and a net cash inflow of $9.0 million from changes in operating expenses and liabilities. The $9.0 million of net cash inflows provided as a result of changes in our operating assets and liabilities primarily reflected the following:

Previous wording

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

Current wording

•a $34.3 million decrease in accounts receivable primarily due to timing of billings and cash receipts from customers; and

Previous wording

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

Current wording

•a $11.0 million increase in accounts payable primarily due to timing of cash payments to our vendors.

Previous 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;

Current wording

•a $8.5 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 $10.9 million decrease in deferred revenue primarily due to timing of billings and seasonality;

Current wording

•a $6.3 million decrease in deferred revenue primarily due to timing of billings and seasonality;

Previous wording

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

Current wording

•a $6.2 million decrease in operating lease liabilities related to lease payments; and

Previous wording

•a $2.1 million increase in deferred contract cost assets related to commissions as a result of additional customer contracts closed during the period.

Current wording

•a $3.2 million increase in deferred contract cost assets related to commissions as a result of additional customer contracts closed during the period.

Previous 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:

Current wording

Net cash provided by operating activities was $51.3 million during the nine months ended September 30, 2023, which resulted from a net loss of $160.2 million, adjusted for non-cash charges of $194.1 million and net cash inflows of $17.4 million from changes in operating assets and liabilities. The $17.4 million of net cash inflows provided as a result of changes in our operating assets and liabilities primarily reflected the following:

Previous wording

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

Current wording

•a $29.1 million increase in deferred revenue primarily due to the growth of our business and timing of billings;

Previous wording

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

Current wording

•a $3.1 million decrease in accounts receivable primarily due to timing of billings and cash receipts from customers; and