6. Procore Technologies Inc. (NYSE:PCOR)
Market Capitalization as of September 11: $7.86 billion
Number of Hedge Fund Holders: 47
Procore Technologies Inc. (NYSE:PCOR) is an American construction management software as a service company that provides construction management software. It offers a cloud-based platform that helps construction professionals streamline their operations, improve collaboration, and manage projects more efficiently, providing a central hub for construction teams.
Total revenue in Q2 was $284.35 million, up 24.42% year-over-year, and international revenue grew 31% year-over-year. The company earned $4 million more than it expected for this quarter due to successful project implementations. Without this additional revenue, the growth would have been 22.8%. However, management says they don’t expect to earn this much from project implementations in the second half of 2024.
Number of customers contributing ~$100,000 in annual recurring revenue grew 20% year-over-year to 2,191. Overall, Procore Technologies Inc. (NYSE:PCOR) added 152 net new organic customers this quarter, ending with a total of 16,750 organic customers.
The company is actively working to sell to government agencies and expand its partnerships. It’s also making changes to its sales and marketing teams. Such expansions improve investor sentiments. It is currently held by 47 hedge funds. The largest stakeholder is XN Exponent Advisors with a position of $186,215,124.
Significant innovations to the Procore platform, including enhancements to Maps and Locations and a new Microsoft Teams integration, were announced on June 12. Procore Technologies launched the FedRAMP authorization process on July 16. The company was recognized by US News as one of the Best Companies to Work For on August 1.
The company’s full-year revenue guidance is over $1 billion. Procore Technologies Inc.’s (NYSE:PCOR) new model is designed to strengthen customer relationships, improve product adoption, and enhance overall efficiency. This strategic shift will position the company for continued growth and leadership in the construction industry.
Baron Discovery Fund stated the following regarding Procore Technologies, Inc. (NYSE:PCOR) in its Q2 2024 investor letter:
“We initiated an investment in Procore Technologies, Inc. (NYSE:PCOR) during the quarter. Founded in 2002, Procore provides cloud-based construction management software that helps general contractors, subcontractors, and asset owners manage every step of the construction process. Procore’s product suite includes project execution (storing and updating blueprints, designs, work orders and project schedules in a single system of record), pre-construction (managing bids, permitting, and approvals), workforce management (scheduling worker hours and recording safety compliance), financial management (budgeting and invoicing), and data analytics. Together these products help contractors execute projects more efficiently, plan more accurately, avoid costly rework, improve worker safety, and generate better margins. This has led to exceptionally low customer churn.
Procore serves a large and growing addressable market – annual construction volume exceeds $2 trillion in the U.S. alone – that is still in the early innings of digitization and technology adoption. The company has a leading market share in the sector, with more than 16,500 construction firms and asset owners using its software to manage billions of dollars of annual project volume. Yet Procore is still only 12% penetrated in terms of U.S. construction volume and 2% penetrated internationally. We believe the company has several competitive advantages that will drive further share capture and strong growth. First, Procore is the only cloud-native technology vendor that addresses all stages of the project life cycle with a single, integrated interface and data model. Second, Procore was the first vendor to price its platform using a “take-rate” model, charging a percentage fee against its customers’ total construction volume. Compared to seat-based license models offered by many competitors, this approach has encouraged far more industry practitioners to trial and use Procore products. As of last year, over 500,000 collaborator companies were interacting with its product, driving a strong pipeline for new customer wins.
We see a long runway for growth through new customer additions and expansion in existing accounts. The company has maintained low to mid-double-digit revenue expansion rates for existing customers by managing more project volume and by cross-selling additional product modules. Recent product innovations like Procore Pay (managing payments for the various vendors and subcontractors on a given project) and geospatial mapping (for larger civil engineering projects) should improve the company’s wallet share over time. Procore is cash flow positive today and has been increasing its margins meaningfully over the past two years. We think the business can continue to grow at a healthy rate while further expanding free cash flow margins to north of 20% as it benefits from market share capture, higher take rates, and operating leverage. This should lead to good earnings growth and bode well for the stock long term.”
