Watching construction tech software company Procore go public today after pricing above its range makes the IPO slowdown look like the deceleration that wasn’t.
Investors quickly bid up the company’s value in trading, giving Procore a higher valuation than it might have anticipated, along with a boost of confidence for the IPO market in general.
Procore initially set an IPO range of $60 to $65 per share before pricing at $67 per share last night. Its debut was worth gross proceeds north of $600 million and a fully diluted valuation of $9.6 billion. As of early afternoon today, shares were trading at a solid $85.25.
In light of Procore’s debut, TechCrunch is digging quickly into the company’s new valuation and its resulting revenue multiples.
Following, we have notes from a chat we had with CEO Tooey Courtemanche regarding his company’s debut, what it intends to do with its new capital and how it expects its partner platform to evolve and mature.
First, the numbers.
Procore’s new price
Starting with Procore’s $9.6 billion, fully diluted valuation that it set in its IPO pricing, the company is richly valued. It generated revenues of $113.9 million in Q1 2021, putting it on a run-rate of $455.8 million. As you can calculate, that valued the company at around 20x its run rate; more precisely, at 21.2x.
But if we do some modest extrapolation of the company’s current value in light of its trading appreciation, Procore is now worth around $12.3 billion on a fully diluted basis. That gives it a run-rate multiple of around 27x.
Procore is thus being valued like a high-growth, high-margin software company. But it is not one that anticipates a rapid ramp to profitability. As Courtemanche told TechCrunch, the company’s recent strong operating cash flow will regress as Procore looks to accelerate, or at least maintain its growth rate.
And it didn’t need more cash to do so, he said.
On the record with Courtemanche
TechCrunch spoke with founder and chief executive Courtemanche midday on Thursday, when the company’s stock was managing its way through its first day as a public company. But Procore wasn’t cash-strapped heading into its IPO, he said, which made its slightly above-range pricing less material than it might have been for more cash-consumptive concerns.
“We went into this IPO not needing the cash. We actually had lots of cash on hand so this is just an additional ability for us to have more resources because more resources means more flexibility and opportunity to execute when opportunities arise,” Courtemanche said. “We’re just getting started.”
As Mary Ann noted during our conversation, the company had initially planned to go public early last year, but Procore’s IPO was caught up in the onset of COVID-19, leading to its delay. Per its CEO, it was very close to getting out before the pandemic settled onto the economy.
“We were very much prepared [to go public] last March. In fact, my bags were back to the top of the stairs when we had to make that difficult decision to send all of our employees home,” he recalled. “I felt like my highest calling at that moment and the rest of the leadership team was to focus on the health and well-being of our employees and back then there was so much uncertainty as to what the future was going to hold.”
But as the year went on, delayed construction projects became shovel-ready, and perhaps even more importantly, the inability to freely visit construction sites helped drive demand for Procore’s software.
“Last spring was the bottom of the trough and then construction started coming back quarter after quarter and so we just realized it was time to reengage in this process and move forward,” said Courtemanche. Because Procore is not focused on any one sector of the massive construction industry, it is able to serve a broad range of customers, Courtemanche continued.
“The industry is huge, and growing to $14 trillion by 2025, so it’s not a monolith. Even if there are sectors that get hurt, from time to time there are sectors that do really, really well that no one ever talks about, like data centers and warehousing,” he said. “We’re in pretty good analog to the construction economy in general.”
As to whether the company would continue its strategy of acquiring others in the space, Courtemanche said it definitely is –- but in a disciplined, strategic manner. For example, Procore has 13 products and more than 250 partners on its platform. It’s paying attention to which of those partners are getting the most engagement and love from its customers. It then decides which to invest in, and potentially acquire.
As we’ve noted in the past, construction tech may not be as glamorous as space travel, but it’s a massive industry that’s fraught with inefficiencies. And those inefficiencies mean lost time — and money. That means that Procore has a sizable market ahead of it, and investors are betting that it’s one that the company will perform well in over the coming years.
As Procore looks to nearly double its private valuation, the IPO market shows signs of life
Comment