Spyglass Portfolio -- Megatrends

0 New Position: Procore Technologies, Inc. (PCOR) PROCORE Procore Meets Spyglass's Seven Core Investment Criteria • · Leadership position in secular growth industry →> Dominant vertical software player in construction market; low single-digit penetration in core project management software with proven ability to upsell / cross-sell new and adjacent software products within construction market Results-oriented, entrepreneurial management team with long-term focus and proven track record -> Procore's founder, Tooey Courtemanche, has been building the business for the last 20 years and is widely thought of as the technological leader within this vertical; the Company's CFO, Howard Fu, brings deep experience in running a multi-product business from his time at Salesforce Sustainable competitive advantage Near-monopoly within construction software with network effects as users beget new users given pricing model This user growth ultimately results in further differentiation with data moat that is unparalleled within construction and should position itself well with the emergence of generative Al technology Above-average long-term revenue growth Procore has grown at many times construction market growth since founding, and we think this will continue given the Company believes it is still in the early innings of market penetration → Spyglass estimates a CAGR of approximately 25% topline growth over the next five years Above-average long-term earnings growth Management has committed to an average of 3.5% margin expansion per year which will enable earning growth to far exceed revenue growth for years to come, as long as growth remains in the high 20s, and management had committed to increasing margins at substantially faster rates as topline growth slows Financially sound With $600 million of cash on the balance sheet and operating at FCF breakeven, we believe Procore is in a solid financial position Attractive valuation →> Procore currently trades at 7.7x 2024 sales, or 22x mature state FCF margins, for a company that should see growth in the high 20s/low 30s with material margin expansion vs. high-growth peers at 9.8x → Spyglass Base Case model suggests the potential for a 25% annual return over the next five years 20

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