$PCOR CC musings

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I just read over their CC from last week; here are my thoughts, in no particular order:

  1. They describe a dynamic that’s been in place for two quarters now: on a percentage basis, fewer of their customers are renewing contracts at current spending levels. There is a sort of stratification happening where on a percentage basis more customers spending LESS, but they also see an increase in the percentage of customers spending MORE.

  2. The overall effect of 1), above, is that total spending is increasing, though seemingly just in the rounding-error range.

  3. They have an Investor conference they call “Ground Break” coming up (…September 19 and 20 in Chicago), and the CEO hinted they “might” have announcements concerning their Insurance and Payments products as well as AI initiatives and/or strategies. He was waxing somewhat euphoric regarding the quality and quantity of customer data they have; I imagine he’ll have some things to say about how they’ll put that data feedstock to use.

  4. The market doesn’t seem to be thrilled with their revenue (they beat by a small margin) or their guidance (…a smidge over consensus); $PCOR is down by about 11% since their earnings call.

  5. The CEO seems very confident about their execution, their place in their Industry, their greenfield opportunity / lack of serious competition, etc. If he is correct, then the long-term thesis is definitely intact and on-track.

  6. It sounds to me like their Sales process is OK, but not especially efficient, especially their International Sales process/personnel, which they mentioned in the previous CC needed tweaking. This CC they claimed some incremental improvement but nothing all that inspiring imo. They don’t really have a land-and-expand approach; it’s more old-school one-on-one direct Sales.

Not sure how concerned I should be about their ARR; typically we prefer something up over 120% 'round here. It’s usage-based so revenue is subject to macro stuff more that true SAAS. But if the greenfield is as vast as the CEO claims, and if Customer adoption of adjacent add-on products is as good as he says, why has ARR been stuck at a constant 94-95% for so long?

I trimmed; it’s down to a 1% position. I’m still interested though.

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ARR usually means annual recurring revenue. So I think you mean NRR (net retention, which is usually 120%+ for the best of the best) – but I believe you’re confusing that with “gross retention rate,” which is never more than high 90’s (absolute limit is 100% if zero customers leave). Usually a GRR in the mid to high 90’s is great. 94 is getting a little low, but with SMB customers, it just happens sometimes.

I’ve actually been adding. All the “some customers’ spending is way up, others down” stuff seems like noise when you just look at their numbers. Raising guidance every quarter. Guiding for less of a loss every quarter (still sandbagging, because they’ve been EPS-positive, though just barely above break-even, for both Q1 and Q2).

I’ve got this one around 5%.

Bear

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