Levelset from Procore buys a “Trojan horse” in the fight for market dominance

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Procore CEO Tooey Courtemanche (Procore, iStock)

Procore, the manufacturer of construction management software that went public this year, could set itself apart from its competitors after its largest acquisition to date.

The Californian company provided $ 500 million in September to purchase Levelset, a lien payment platform. The deal expands an economic rift around the company and opens up prospects for future business in other areas of construction management, analysts said.

Levelset could prove to be a “Trojan horse” that allows Procore to distract itself from specialist companies, the biggest users of construction management software, and one that no one has cracked before, said Brian Schwartz, analyst at Oppenheimer & Co. Due to complex deposit structures and inefficient manual work processes, contractors often wait more than three months for their payment.

“This could open up a whole new monetization opportunity for the largest users,” said Schwartz, who rated the company as a “Buy”.

Procore, founded in 2002, battled its way through years of slow sales before reaching a “unicorn” valuation of $ 1 billion in 2016. Then, when the IPO appeared imminent, the pandemic struck and paralyzed the construction industry along with the rest of the economy.

The tenor had changed by spring 2021, when construction projects that had stalled went online again. According to ResearchAndMarkets.com, the construction industry is projected to experience an average annual growth rate of 4.7% between 2021 and 2025.

Procore’s stock eventually traded above expected range, rising more than 30 percent on its first day of trading.

The company has invested in platform flexibility that allows users to customize many tools and workflows on a single platform – an offering that sets the company apart from its competitors, said Wyatt Jenkins, senior vice president of product at Procore.

“Because of the flexibility of Procore, we find it increasingly easy to expand our platform to different stakeholders and to expand our platform to different countries,” said Jenkins in an interview.

In the coming quarters, Procore aims to diversify revenue to sources outside of North America, which now account for 15 percent of total volume, and expand its user base to include landowners, subcontractors and general contractor material suppliers, he said.

Procore’s evolution has grown from that of Textura, a competitor in construction contracts and payment management cloud services that struggled to scale after going public in 2014, and has shrunk since it was bought by Oracle in 2016, Schwartz said.

“We heard that Textura’s innovation and capabilities – they just dwindled within Oracle,” he said.

The price Procore paid for Levelset is “reasonable,” given the synergies between the two companies and the additional functionality the company is likely to add to the platform, said Bhuvan Suri, an analyst at William Blair, who shares the stock Rated as “outperform”. ”

The company’s core platform may support “sustained” revenue growth for the next several years, and the arrival of a potentially large number of new customers signals additional growth opportunities, the analyst said.

“This acquisition helps lay the seeds for future opportunities in areas such as contractor insurance, payment facilities and contractor finance by leveraging data aggregated about the platform’s 1.6 million+ users today,” said Suri.

Procore announced this week that it will add a new report generator that will allow users to compare data from active and inactive projects, as well as a new global workflow engine that will facilitate custom approval workflows. The new services will bring “cross-platform insights” that improve efficiency in calculation and quotation processes, the company said.

Procore’s stock is up about 4.5% since going public, while the S&P 500 is up nearly 6%. The Levelset acquisition is expected to be completed in the fourth quarter.


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