2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying condensed consolidated financial statements include the interim financial statements of Procore Technologies, Inc. and its subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are unaudited. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2021. The condensed consolidated balance sheet information as of December 31, 2021 has been derived from our audited consolidated financial statements. The condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal recurring items, necessary for the fair statement of the condensed consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. Certain balances have been reclassified to conform to current year presentation.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management periodically evaluates its estimates and assumptions for continued reasonableness, primarily with respect to revenue recognition, the period of benefit of contract cost assets, the fair value of assets acquired and liabilities assumed in a business combination, stock-based compensation expense, including the fair value of the Company’s common stock prior to the effective date of the Company’s initial public offering (“IPO”), the recoverability of goodwill and long-lived assets, useful lives of long-lived assets, capitalization of software development costs, income taxes, including related reserves and allowances, and self-insurance reserve estimates. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. Management bases its estimates on historical experience and on various other assumptions that management believes to be reasonable. Actual results could differ from our estimates.

In light of the currently unknown duration and severity of the COVID-19 pandemic, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply our significant accounting policies. As of the date these condensed consolidated financial statements were issued, the impacts of the COVID-19 pandemic did not have a significant impact on our estimates or judgments. Judgments and assumptions may change, as new events occur and additional information is obtained, as well as other factors related to the COVID-19 pandemic and economic recovery that could result in a meaningful impact on our condensed consolidated financial statements in future reporting periods.

We operate as a single operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and assess performance. Our CODM is our Chief Executive Officer. In recent years, we have completed a number of acquisitions which have allowed us to expand our products offered on our platform. While we provide different product offerings, including as a result of the Company's acquisitions, our business operates as one operating segment because our CODM evaluates the Company’s financial information for purposes of assessing financial performance and allocating resources on a consolidated basis.

We hold investments in equity securities of certain privately held companies, which do not have readily determinable fair values. We do not have a controlling interest or significant influence in these companies. We have elected to measure the non-marketable equity securities at cost, with remeasurements to fair value only upon the occurrence of observable price changes in orderly transactions for the identical or similar securities of the same issuer, or in the event of any impairment. This election is reassessed each reporting period to determine whether a non-marketable equity security has a readily determinable fair value, in which case they would no longer be eligible for this election. All gains and losses on such equity securities, realized and unrealized, are recorded in other expense, net on the condensed consolidated statements of operations and comprehensive loss. We evaluate our non-marketable equity securities for impairment at each reporting period based on a qualitative assessment that considers various potential impairment indicators. If an impairment exists, a loss is recognized in the condensed consolidated statements of operations and comprehensive loss for the amount by which the carrying value exceeds the fair value of the investment.

As of June 30, 2022, the Company held investments in equity securities of privately held companies of $7.7 million, including $3.5 million of securities that were converted from certain previously held available-for-sale debt securities during the six months ended June 30, 2022. There were no material gains or losses upon the conversion of the previously held debt securities into equity securities. The Company held $3.8 million of investments in equity securities of privately held companies as of December 31, 2021. Investments in equity securities are recorded in other assets in the condensed consolidated balance sheets. There were no impairments, material changes in fair value, or realized gains or losses related to the investments in equity securities during the periods presented.

We also hold investments in certain limited partnership funds. We do not hold a controlling interest, or significant influence in these limited partnerships. The fair value of such investments are valued using the Net Asset Value (“NAV”) provided by the fund administrator as a practical expedient. As a result, these investments are not included in the fair value hierarchy.

Our investments in limited partnerships were $2.6 million as of June 30, 2022. We held no investments in limited partnerships as of December 31, 2021. There were no material gains or losses in any period presented. All gains and losses on such equity securities, realized and unrealized, are recorded in other expense, net on the condensed consolidated statements of operations and comprehensive loss. In connection with these investments, the Company has a contractual obligation to provide additional investment funding of up to $7.3 million at the option of the investees.

Available-for-sale debt securities are recorded at fair value with changes in fair value recorded in other comprehensive income or loss. We periodically review our available-for-sale debt securities to determine if there has been an other-than-temporary decline in fair value. If the impairment is deemed other-than-temporary, the portion of the impairment related to credit losses is recognized in other expense, net in the accompanying condensed consolidated statements of operations and comprehensive loss, and the portion related to non-credit related losses is recognized as a component of comprehensive loss. The Company held $3.5 million of investments in available-for-sale debt securities of privately held companies as of December 31, 2021, included within other assets in the condensed consolidated balance sheet. As of June 30, 2022, investments in available-for-sale debt securities of privately held companies were immaterial. No changes in fair value or impairments have been recorded for available-for-sale debt securities in any period presented.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value measurements are based on a fair value hierarchy using three levels of inputs, of which the first two are considered observable and the last is considered unobservable, as follows:

Level 1

Quoted prices in active markets for identical assets or liabilities.

Level 2

Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or similar assets or liabilities.

Level 3

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As of June 30, 2022 and December 31, 2021, the carrying value of the Company’s financial instruments included in current assets and current liabilities (including accounts receivable, accounts payable and accrued expenses) approximate fair value due to the short-term nature of such items. The Company classifies its money market funds recorded in cash equivalents within Level 1 of the hierarchy as the values are derived from quoted prices in active markets. As of June 30, 2022 and December 31, 2021, cash equivalents of $493.5 million and $514.9 million, respectively, were held in money market funds.

The Company's investments in equity securities of privately held companies are recorded at fair value on a non-recurring basis. The Company’s investments in limited partnerships are valued using the NAV as a practical expedient and therefore excluded from the fair value hierarchy. The Company’s investments in available-for-sale debt securities are remeasured at fair value each reporting period. The estimation of fair value for these investments requires the use of significant unobservable inputs, and as a result, the Company classifies these assets as Level 3 within the fair value hierarchy. For investments without a readily determinable fair value, the Company looks to observable transactions, such as the issuance of new equity by an investee, as indicators of investee enterprise value and are used to estimate the fair value of the investments.

Contract liabilities consist of revenue that is deferred when we have the contractual right to invoice in advance of transferring services to our customers. The Company recognized revenue of $140.7 million and $103.6 million during the three months ended June 30, 2022 and 2021, respectively, that was included in deferred revenue balances at the beginning of the respective periods. The Company recognized revenue of $214.3 million and $156.1 million during the six months ended June 30, 2022 and 2021, respectively, that was included in deferred revenue balances at the beginning of the respective periods.

The transaction price allocated to remaining performance obligations represents the contracted transaction price that has not yet been recognized as revenue, which includes deferred revenue and amounts under non-cancelable contracts that will be invoiced and recognized as revenue in future periods. As of June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $653.9 million, of which the Company expects to recognize approximately 72% as revenue in the next 12 months and substantially all of the remainder between 12 and 36 months thereafter.

Other than as described below, the accounting policies used in the preparation of these condensed consolidated financial statements are the same as those disclosed in the audited consolidated financial statements and related notes for the year ended December 31, 2021.

In January 2022, the Company elected to partially self-fund its health insurance plan. To reduce its risk related to high-dollar claims, the Company maintains individual stop-loss insurance. The Company estimates its exposure for claims incurred at the end of each reporting period, including claims not yet reported, with the assistance of an independent third-party actuary. As of June 30, 2022, the Company’s net self-insurance accrual was $2.0 million, included within other current liabilities on the condensed consolidated balance sheet.

In connection with our acquisition of Express Lien, Inc. (d/b/a Levelset) (“Levelset”) in November 2021, we assumed a materials financing program, pursuant to which we facilitate the purchase of construction materials from fulfillment partners (our suppliers) on behalf of our customers, allowing such customers to finance their materials purchases from us on deferred payment terms. The fulfillment partner is primarily responsible for fulfilling the materials purchases and we do not have control over such materials. We earn revenues from origination fees and finance charges on the amounts we finance for customers on deferred payment terms, which are typically 120 days. Such fees earned are computed and recognized based on the effective interest method and are presented net of any required reserves and amortization of deferred origination costs.

Receivables outstanding from customers under the materials financing program were $12.0 million and $4.4 million as of June 30, 2022 and December 31, 2021, respectively. Materials financing receivables are recorded within prepaid expenses and other current assets on the condensed consolidated balance sheets. The related allowance recorded on our materials financing receivables is primarily based on expectations of credit losses based on historical loss data as well as macroeconomic factors. The allowance was immaterial in all periods presented.

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The new guidance simplifies the accounting for certain financial instruments by removing certain separation models required under current U.S. GAAP, including the beneficial conversion feature and cash conversion feature. ASU 2020-06 also improves and amends the related Earnings Per Share guidance for both Subtopics. ASU 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021 and interim periods within that fiscal year. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. On January 1, 2022, the Company adopted ASU 2020-06, using the full retrospective approach. The adoption had an immaterial impact on the Company’s condensed consolidated financial statements.