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Procore makes its biggest acquisition yet

By   /   Thursday, September 23rd, 2021  /   Comments Off on Procore makes its biggest acquisition yet

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Procore Technologies announced its first acquisition since going public in May, and it’s the largest one in company history.

The Carpinteria-based construction software company said on Sept. 22 that it is purchasing Levelset, a New Orleans-based construction software company, for $500 million: $425 million in cash and $75 million in the form of Procore common stock.

The deal is expected to close in the fourth quarter of this year, with D.A. Davison acting as the exclusive financial advisor and Jones Walker LLP acting as the legal counsel for Levelset, Procore said in a news release.

The announcement came after the markets closed on Sept. 22. Procore opened at $92.33 the next morning,  up 1.9% from the previous day’s closing price.

“Our vision is to improve the lives of everyone in construction, and we believe the best way to achieve our mission is by connecting everyone in construction on a global platform,” Procore CEO Craig “Tooey” Courtemanche said during a conference call on the acquisition.

Levelset’s big addition to the Procore platform will be lien rights management, enabling Procore to manage complex compliance workflows and improve the payment process in construction.

“Getting paid is a painful and cumbersome process,” Courtemanche said. “Levelset is solving a key problem within construction by automating various compliance workflows, which is key to helping our customers get paid in a timely manner, which is particularly related to liens and lien waivers that ultimately help stakeholders get paid faster.”

contractor In the United States, liens are foundational to the compliance workflows and construction stakeholders spend a lot of time and effort managing lien rights, which vary from state to state, Courtemanche said.

“We believe the risk and complexity of moving money between stakeholders trap trillions of dollars in working capital annually,” he said. “This causes cash stress to contractors, constrains working capital, increases bonding expenses while negatively impacting construction jobs. Burdensome compliance workloads contribute to an average payment cycle greater than 90 days, which is the slowest of all industries globally.”

Ultimately, Courtemanche said solving and better streamlining the lien process will help Procore’s efforts to improve the entire payment process.

“We will get to payments in due time,” he said. “It’s a massive undertaking, one that cannot be done well, until we build out, and streamline these compliance workflows. Liens are an important component of doing just that.”

With the acquisition, Levelset brings about 3,000 customers to Procore, most of whom are not yet on the Procore platform, Courtemanche said.

This purchase also brings future growth opportunities for Procore, including capitalizing on the companies’ complementary data assets, Procore said in its news release.

Procore also did not rule out the possibility of more acquisitions in the future during the conference call.

“While we are bullish on our organic drivers, we do believe that thoughtful M&A can be extremely strategic and complimentary to our mission of improving the lives of everyone in construction,” Procore CFO Paul Lyandres said. “When we have historically acquired companies, we have primarily pursued small opportunities within our marketplace that are complementary to our current capabilities. … We still believe that this will be our primary avenue when it comes to M&A and Levelset is an excellent example of this.”

This is Procore’s first acquisition since going public earlier this year. Procore raised nearly $635 million in its May 20 IPO, and the company’s shares shot up almost 34% on the first day of trading. 
At its current price, Procore has a market cap of $11.8 billion, making it the fifth largest publicly traded company in the Tri-Counties.

Procore reported record revenue growth in the second quarter of 2021, but rising operating expenses hurt its overall earnings. Revenue was at $122.8 million for the quarter, a 27.7% jump year-over-year, but operating expenses ballooned to $246.3 million, nearly a 200% rise, partially due to preparations for the company’s IPO.

Procore reported a net loss of $149.7 million, or $2.07 per share, in the second quarter.

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