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PROS Holdings, Inc. Reports Third Quarter 2023 Financial Results

10/31/2023
  • PROS raises its revenue and profitability outlook for the full year 2023 after exceeding the Company’s Q3 guidance ranges across all metrics.
  • Subscription revenue of $60.0 million, up 16% year-over-year.
  • Total revenue of $77.3 million, up 10% year-over-year.
  • Subscription gross margin of 76% and non-GAAP subscription gross margin of 78%, up 135 basis points year-over-year.

PROS Holdings, Inc. (NYSE: PRO), a leading provider of AI-powered SaaS pricing, CPQ, revenue management, and digital offer marketing solutions, today announced financial results for the third quarter ended September 30, 2023.

“We delivered a strong third quarter, exceeding our guidance ranges across all metrics, delivering 16% subscription revenue growth and more than $17 million of improvement to free cash flow year-over-year,” stated CEO Andres Reiner. “We are delivering on our growth objectives while driving incredible improvements to our operational efficiency, a testament to our team's relentless focus on achieving our goal of being a rule of 40 company by 2026.”

Third Quarter 2023 Financial Highlights

Key financial results for the third quarter 2023 are shown below. Throughout this press release all dollar figures are in millions, except net (loss) earnings per share. Unless otherwise noted, all results are on a reported basis and are compared with the prior-year period.

 

GAAP

 

Non-GAAP

 

Q3 2023

 

Q3 2022

 

Change

 

Q3 2023

 

Q3 2022

 

Change

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

$77.3

 

$70.3

 

10%

 

n/a

 

n/a

 

n/a

Subscription Revenue

$60.0

 

$51.8

 

16%

 

n/a

 

n/a

 

n/a

Subscription and Maintenance Revenue

$64.7

 

$58.8

 

10%

 

n/a

 

n/a

 

n/a

Profitability:

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

$48.8

 

$42.7

 

14%

 

$50.9

 

$45.3

 

12%

Operating (Loss) Income

$(7.8)

 

$(16.2)

 

$8.3

 

$4.5

 

$(3.3)

 

$7.9

Net (Loss) Income

$(13.9)

 

$(13.9)

 

$—

 

$4.0

 

$(2.9)

 

$6.9

Net (Loss) Earnings Per Share

$(0.30)

 

$(0.31)

 

$0.01

 

$0.09

 

$(0.06)

 

$0.15

Adjusted EBITDA

n/a

 

n/a

 

n/a

 

$5.6

 

$(2.2)

 

$7.8

Cash:

 

 

 

 

 

 

 

 

 

 

 

Net Cash Provided by (Used in) Operating Activities

$8.7

 

$(9.0)

 

$17.7

 

n/a

 

n/a

 

n/a

Free Cash Flow

n/a

 

n/a

 

n/a

 

$8.5

 

$(9.1)

 

$17.6

 

The attached table provides a summary of PROS results for the period, including a reconciliation of GAAP to non-GAAP metrics.

Recent Business Highlights

  • Welcomed many new customers who are adopting the PROS Platform such as Genesis Energy, GOL Airlines, JetSMART, SKS Airways, and Trivium Packaging, among others.
  • Expanded adoption of the PROS Platform within existing customers including Air New Zealand, Graybar, Ingredion, Spire Healthcare, and Turkish Airlines, among others.
  • Awarded one of the “Best Technology Companies to Work For” by U.S. News in recognition of our people-first culture; the scorecard cited PROS as having exceptionally high rankings by employees across areas such as company stability, belongingness and esteem, and opportunities for career development.
  • Recently completed the exchange of approximately 85% of PROS outstanding convertible notes due in May 2024 for newly issued convertible notes due in September 2027 under the existing indenture for the 2027 notes; the exchange shifts the maturity of most of PROS debt to 2027 while slightly lowering the total amount of convertible debt outstanding at par value.

Financial Outlook

PROS currently anticipates the following based on an estimated 47.5 million diluted weighted average shares outstanding for the fourth quarter of 2023 and a 22% non-GAAP estimated tax rate for the fourth quarter and full year 2023.

 

Q4 2023 Guidance

 

v. Q4 2022 at Mid
Point

 

Full Year 2023
Guidance

 

v. Prior Year at Mid
Point

Total Revenue

$76.0 to $77.0

 

8%

 

$302.2 to $303.2

 

10%

Subscription Revenue

$60.0 to $60.5

 

13%

 

$233.3 to $233.8

 

14%

Subscription ARR

n/a

 

n/a

 

$251.0 to $254.0

 

11%

Non-GAAP Earnings Per Share

$0.03 to $0.05

 

$0.02

 

n/a

 

n/a

Adjusted EBITDA

$3.0 to $4.0

 

$1.1

 

$6.5 to $7.5

 

$21.9

Free Cash Flow

n/a

 

n/a

 

$3.5 to $6.5

 

$26.7

Conference Call

In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on Tuesday, October 31, 2023, at 4:45 p.m. ET to discuss the Company’s financial results and business outlook. To access this call, dial 1-877-407-9039 (toll-free) or 1-201-689-8470. The live and archived webcasts of this call can be accessed under the “Investor Relations” section of the Company’s website at www.pros.com.

A telephone replay will be available until Tuesday, November 7, 2023, 11:59 PM ET at 1-844-512-2921 (toll-free) or 1-412-317-6671 using the pass code 13741806.

About PROS

PROS Holdings, Inc. (NYSE: PRO) is a leading provider of AI-powered SaaS pricing, CPQ, revenue management, and digital offer marketing solutions. Our vision is to optimize every shopping and selling experience. With over 30 years of industry expertise and a proven track record of success, PROS helps B2B and B2C companies across the globe, in a variety of industries, including airlines, manufacturing, distribution, and services, drive profitable growth. The PROS Platform leverages AI to provide real-time predictive insights that enable businesses to drive revenue and margin improvements. To learn more about PROS and our innovative SaaS solutions, please visit our website at www.pros.com.

Forward-looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about our financial outlook; expectations; ability to achieve future growth and profitability goals; management's confidence and optimism; positioning; customer successes; demand for our software solutions; pipeline; business expansion; revenue; subscription revenue; subscription ARR; non-GAAP earnings (loss) per share; adjusted EBITDA; free cash flow; shares outstanding and effective tax rate. The forward-looking statements contained in this press release are based upon our historical performance and our current plans, estimates and expectations and are not a representation that such plans, estimates or expectations will be achieved. Factors that could cause actual results to differ materially from those described herein include, among others, risks related to: (a) the macroeconomic environment, (b) the effects of inflation, (c) the impact of the COVID-19 pandemic, (d) cyberattacks, data breaches and breaches of security measures within our products, systems and infrastructure or products, systems and infrastructure of third parties upon whom we rely, (e) increasing business from customers and maintaining subscription renewal rates, (f) managing our growth and profit objectives effectively, (g) disruptions from our third party data center, software, data, and other unrelated service providers, (h) implementing our solutions, (i) cloud operations, (j) intellectual property and third-party software, (k) acquiring and integrating businesses and/or technologies, (l) catastrophic events, (m) operating globally, including economic and commercial disruptions, (n) potential downturns in sales and lengthy sales cycles, (o) software innovation, (p) competition, (q) market acceptance of our software innovations, (r) maintaining our corporate culture, (s) personnel risks including loss of any key employees and competition for talent, (t) expanding and training our direct and indirect sales force, (u) evolving data privacy, cyber security and data localization laws, (v) our debt repayment obligations, (w) the timing of revenue recognition and cash flow from operations, (x) migrating customers to our latest cloud solutions, and (y) returning to profitability. Additional information relating to the risks and uncertainties affecting our business is contained in our filings with the SEC. These forward-looking statements represent our expectations as of the date hereof. Subsequent events may cause these expectations to change, and PROS disclaims any obligations to update or alter these forward-looking statements in the future, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

PROS has provided in this release certain non-GAAP financial measures, including non-GAAP gross profit and margin, non-GAAP income (loss) from operations or non-GAAP operating income (loss), subscription annual recurring revenue, adjusted EBITDA, free cash flow, non-GAAP tax rate, non-GAAP net income (loss), and non-GAAP earnings (loss) per share. PROS uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating PROS’ ongoing operational performance and cloud transition. Non-GAAP gross margin can be compared to gross margin which can be calculated from the condensed consolidated statements of loss by dividing gross profit by total revenue. Non-GAAP gross margin is similarly calculated but first adds back to gross profit the portion of certain of the non-GAAP adjustments described below attributable to cost of revenue. Non-GAAP subscription margin can be compared to subscription margin which can be calculated from the condensed consolidated statements of loss by dividing subscription gross profit (subscription revenue minus subscription cost) by subscription revenue. Non-GAAP subscription margin is similarly calculated but first subtracts out from subscription cost the portion of certain of the non-GAAP adjustments described below attributable to cost of subscription. These items and amounts are presented in the Supplemental Schedule of Non-GAAP Financial Measures.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measure as detailed above. A reconciliation of GAAP to the non-GAAP financial measures has been provided in the tables included as part of this press release, and can be found, along with other financial information, in the investor relations portion of our website. PROS' use of non-GAAP financial measures may not be consistent with the presentations by similar companies in PROS' industry. PROS has also provided in this release certain forward-looking non-GAAP financial measures, including non-GAAP income (loss) from operations, subscription annual recurring revenue, non-GAAP earnings (loss) per share, adjusted EBITDA, free cash flow, non-GAAP tax rates, and calculated billings (collectively the "non-GAAP financial measures") as follows:

Non-GAAP income (loss) from operations: Non-GAAP income (loss) from operations excludes the impact of share-based compensation, amortization of acquisition-related intangibles and severance. Non-GAAP income (loss) from operations excludes the following items from non-GAAP estimates:

  • Share-Based Compensation: Although share-based compensation is an important aspect of compensation for our employees and executives, our share-based compensation expense can vary because of changes in our stock price and market conditions at the time of grant, varying valuation methodologies, and the variety of award types. Since share-based compensation expense can vary for reasons that are generally unrelated to our performance during any particular period, we believe this could make it difficult for investors to compare our current financial results to previous and future periods. Therefore, we believe it is useful to exclude share-based compensation in order to better understand our business performance and allow investors to compare our operating results with peer companies.
  • Amortization of Acquisition-Related Intangibles: We view amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company's research and development efforts, trade names, customer lists and customer relationships, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
  • Severance: Severance costs relate to the separation of our Chief Operations Officer in Q1 2022 and costs related to other internal role consolidations as well as severance cost incurred in Q4 2022 and Q1 2023 as the Company reprioritized its investments to focus on supporting key growth areas of its business. As a result of this reprioritization, the Company incurred severance, employee benefits, outplacement and related costs. These amounts are unrelated to our core performance during any particular period, and therefore, we believe it is useful to exclude these amounts in order to better understand our business performance and allow investors to compare our results with peer companies.

Non-GAAP earnings (loss) per share: Non-GAAP net income (loss) excludes the items listed above as excluded from non-GAAP income (loss) from operations and also excludes amortization of debt issuance costs, gain on equity investment, loss on derivatives, loss on debt extinguishment and the taxes related to these items and the items excluded from non-GAAP income (loss) from operations. Estimates of non-GAAP earnings (loss) per share are calculated by dividing estimates for non-GAAP net income (loss) by our estimate of weighted average shares outstanding for the future period. In addition to the items listed above as excluded from non-GAAP income (loss) from operations, non-GAAP net income (loss) excludes the following items from non-GAAP estimates:

  • Amortization of Debt Issuance Costs: Amortization of debt issuance costs are related to our convertible notes. These amounts are unrelated to our core performance during any particular period, and therefore, we believe it is useful to exclude these amounts in order to better understand our business performance and allow investors to compare our results with peer companies.
  • Gain on Equity Investment: Gain on equity investment relate to an observable price change for an equity investment without a readily determinable fair value identified during the quarter ended September 30, 2022. These amounts are unrelated to our core performance during any particular period, and therefore, we believe it is useful to exclude these amounts in order to better understand our business performance and allow investors to compare our results with peer companies.
  • Loss on Derivatives: Loss on derivatives relates to mark to market features identified as part of the exchange of certain of our convertible notes (the "Exchange") and related capped call, non-recurring transactions. These amounts are unrelated to our core performance during any particular period, and therefore, we believe it is useful to exclude these amounts in order to better understand our business performance and allow investors to compare our results with peer companies.
  • Loss on Debt Extinguishment: Loss on debt extinguishment relates to the Notes Exchange, a non-recurring transaction, during the quarter ended September 30, 2023. These amounts are unrelated to our core performance during any particular period, and therefore, we believe it is useful to exclude these amounts in order to better understand our business performance and allow investors to compare our results with peer companies.
  • Taxes: We exclude the tax consequences associated with non-GAAP items to provide investors with a useful comparison of our operating results to prior periods and to our peer companies because such amounts can vary significantly. In the fourth quarter of 2014, we concluded that it is more likely than not that we will be unable to fully realize our deferred tax assets and accordingly, established a valuation allowance against those assets. The ongoing impact of the valuation allowance on our non-GAAP effective tax rate has been eliminated to allow investors to better understand our business performance and compare our operating results with peer companies.

Annual Recurring Revenue: Annual Recurring Revenue ("ARR") is used to assess the trajectory of our cloud business. ARR means, as of a specified date, the contracted recurring revenue, including contracts with a future start date, together with annualized overage fees incurred above contracted minimum transactions, and excluding perpetual and term license agreements. ARR should be viewed independently of revenue and any other GAAP measure. Subscription ARR is calculated in the same manner, but excludes maintenance and support ARR.

Non-GAAP Tax Rate: The estimated non-GAAP effective tax rate adjusts the tax effect to quantify the impact of the excluded non-GAAP items.

Adjusted EBITDA: Adjusted EBITDA is defined as GAAP net income (loss) before interest expense, provision for income taxes, depreciation and amortization, as adjusted to eliminate the effect of stock-based compensation cost, severance, amortization of acquisition-related intangibles, and depreciation and amortization. Adjusted EBITDA should not be considered as an alternative to net income (loss) as an indicator of our operating performance.

Free Cash Flow: Free cash flow is a non-GAAP financial measure which is defined as net cash provided by (used in) operating activities, excluding severance payments, less capital expenditures, purchases of other (non-acquisition-related) intangible assets and capitalized internal-use software development costs.

Calculated Billings: Calculated billings is defined as total subscription, maintenance and support revenue plus the change in recurring deferred revenue in a given period.

These non-GAAP estimates are not measurements of financial performance prepared in accordance with GAAP, and we are unable to reconcile these forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information described above which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.

PROS Holdings, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

September 30, 2023

 

December 31, 2022

Assets:

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

159,080

 

 

$

203,627

 

Trade and other receivables, net of allowance of $681 and $609, respectively

 

 

49,688

 

 

 

48,178

 

Deferred costs, current

 

 

6,306

 

 

 

6,032

 

Prepaid and other current assets

 

 

10,449

 

 

 

9,441

 

Total current assets

 

 

225,523

 

 

 

267,278

 

Restricted cash

 

 

10,000

 

 

 

 

Property and equipment, net

 

 

23,922

 

 

 

25,012

 

Operating lease right-of-use assets

 

 

13,076

 

 

 

17,474

 

Deferred costs, noncurrent

 

 

7,786

 

 

 

8,764

 

Intangibles, net

 

 

12,979

 

 

 

17,851

 

Goodwill

 

 

107,445

 

 

 

107,561

 

Derivative asset, noncurrent

 

 

22,260

 

 

 

 

Other assets, noncurrent

 

 

8,863

 

 

 

9,012

 

Total assets

 

$

431,854

 

 

$

452,952

 

Liabilities and Stockholders’ (Deficit) Equity:

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and other liabilities

 

$

4,741

 

 

$

7,964

 

Accrued liabilities

 

 

16,755

 

 

 

12,854

 

Accrued payroll and other employee benefits

 

 

23,555

 

 

 

23,797

 

Operating lease liabilities, current

 

 

3,998

 

 

 

7,662

 

Deferred revenue, current

 

 

112,311

 

 

 

108,659

 

Current portion of convertible debt, net

 

 

21,635

 

 

 

 

Total current liabilities

 

 

182,995

 

 

 

160,936

 

Deferred revenue, noncurrent

 

 

4,211

 

 

 

8,298

 

Convertible debt, net, noncurrent

 

 

272,542

 

 

 

289,779

 

Operating lease liabilities, noncurrent

 

 

25,794

 

 

 

28,184

 

Other liabilities, noncurrent

 

 

1,190

 

 

 

1,228

 

Total liabilities

 

 

486,732

 

 

 

488,425

 

Stockholders' (deficit) equity:

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued

 

 

 

 

 

 

Common stock, $0.001 par value, 75,000,000 shares authorized; 50,929,132

and 50,318,726 shares issued, respectively; 46,248,409 and 45,638,003 shares outstanding, respectively

 

 

51

 

 

 

50

 

Additional paid-in capital

 

 

617,402

 

 

 

590,475

 

Treasury stock, 4,680,723 common shares, at cost

 

 

(29,847

)

 

 

(29,847

)

Accumulated deficit

 

 

(637,057

)

 

 

(590,898

)

Accumulated other comprehensive loss

 

 

(5,427

)

 

 

(5,253

)

Total stockholders’ (deficit) equity

 

 

(54,878

)

 

 

(35,473

)

Total liabilities and stockholders’ (deficit) equity

 

$

431,854

 

 

$

452,952

 

PROS Holdings, Inc.

Condensed Consolidated Statements of Loss

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

Subscription

 

$

59,987

 

 

$

51,763

 

 

$

173,260

 

 

$

150,914

 

Maintenance and support

 

 

4,693

 

 

 

7,071

 

 

 

15,498

 

 

 

22,175

 

Total subscription, maintenance and support

 

 

64,680

 

 

 

58,834

 

 

 

188,758

 

 

 

173,089

 

Services

 

 

12,570

 

 

 

11,514

 

 

 

37,466

 

 

 

32,113

 

Total revenue

 

 

77,250

 

 

 

70,348

 

 

 

226,224

 

 

 

205,202

 

Cost of revenue:

 

 

 

 

 

 

 

 

Subscription

 

 

14,510

 

 

 

13,829

 

 

 

42,662

 

 

 

41,354

 

Maintenance and support

 

 

1,769

 

 

 

1,952

 

 

 

5,927

 

 

 

6,107

 

Total cost of subscription, maintenance and support

 

 

16,279

 

 

 

15,781

 

 

 

48,589

 

 

 

47,461

 

Services

 

 

12,185

 

 

 

11,829

 

 

 

37,988

 

 

 

35,151

 

Total cost of revenue

 

 

28,464

 

 

 

27,610

 

 

 

86,577

 

 

 

82,612

 

Gross profit

 

 

48,786

 

 

 

42,738

 

 

 

139,647

 

 

 

122,590

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling and marketing

 

 

20,324

 

 

 

22,221

 

 

 

71,214

 

 

 

71,528

 

Research and development

 

 

22,205

 

 

 

23,303

 

 

 

66,343

 

 

 

71,171

 

General and administrative

 

 

14,099

 

 

 

13,395

 

 

 

42,083

 

 

 

41,561

 

Impairment of fixed assets

 

 

 

 

 

 

 

 

 

 

 

1,551

 

Loss from operations

 

 

(7,842

)

 

 

(16,181

)

 

 

(39,993

)

 

 

(63,221

)

Convertible debt interest and amortization

 

 

(1,497

)

 

 

(1,576

)

 

 

(4,649

)

 

 

(4,728

)

Other (expense) income, net

 

 

(4,288

)

 

 

4,158

 

 

 

(1,046

)

 

 

3,738

 

Loss before income tax provision

 

 

(13,627

)

 

 

(13,599

)

 

 

(45,688

)

 

 

(64,211

)

Income tax provision

 

 

241

 

 

 

254

 

 

 

471

 

 

 

688

 

Net loss

 

$

(13,868

)

 

$

(13,853

)

 

$

(46,159

)

 

$

(64,899

)

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.30

)

 

$

(0.31

)

 

$

(1.00

)

 

$

(1.44

)

Weighted average number of shares:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

46,225

 

 

 

45,314

 

 

 

46,084

 

 

 

45,207

 

PROS Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(13,868

)

 

$

(13,853

)

 

$

(46,159

)

 

$

(64,899

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,549

 

 

 

3,395

 

 

 

8,301

 

 

 

11,843

 

Amortization of debt issuance costs

 

 

348

 

 

 

373

 

 

 

1,094

 

 

 

1,119

 

Share-based compensation

 

 

10,933

 

 

 

10,626

 

 

 

31,589

 

 

 

32,617

 

Provision for credit losses

 

 

 

 

 

(71

)

 

 

88

 

 

 

(371

)

Loss on disposal of assets

 

 

16

 

 

 

 

 

 

51

 

 

 

 

Impairment of fixed assets

 

 

 

 

 

 

 

 

 

 

 

1,551

 

Gain on equity investment

 

 

 

 

 

(3,308

)

 

 

 

 

 

(3,308

)

Loss on derivatives

 

 

4,343

 

 

 

 

 

 

4,343

 

 

 

 

Loss on debt extinguishment

 

 

1,779

 

 

 

 

 

 

1,779

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and unbilled receivables

 

 

4,497

 

 

 

(11,341

)

 

 

(1,573

)

 

 

(4,900

)

Deferred costs

 

 

363

 

 

 

598

 

 

 

704

 

 

 

730

 

Prepaid expenses and other assets

 

 

1,480

 

 

 

824

 

 

 

31

 

 

 

(571

)

Operating lease right-of-use assets and liabilities

 

 

(449

)

 

 

(808

)

 

 

(1,686

)

 

 

(1,925

)

Accounts payable and other liabilities

 

 

(2,123

)

 

 

1,282

 

 

 

(3,375

)

 

 

2,911

 

Accrued liabilities

 

 

412

 

 

 

885

 

 

 

1,489

 

 

 

817

 

Accrued payroll and other employee benefits

 

 

3,446

 

 

 

1,756

 

 

 

(242

)

 

 

(7,388

)

Deferred revenue

 

 

(5,008

)

 

 

651

 

 

 

(401

)

 

 

9,838

 

Net cash provided by (used in) operating activities

 

 

8,718

 

 

 

(8,991

)

 

 

(3,967

)

 

 

(21,936

)

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(345

)

 

 

(76

)

 

 

(2,168

)

 

 

(845

)

Purchase of equity securities

 

 

(113

)

 

 

 

 

 

(113

)

 

 

(169

)

Net cash used in investing activities

 

 

(458

)

 

 

(76

)

 

 

(2,281

)

 

 

(1,014

)

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from employee stock plans

 

 

1,033

 

 

 

1,279

 

 

 

2,170

 

 

 

2,722

 

Tax withholding related to net share settlement of stock awards

 

 

(1,163

)

 

 

 

 

 

(6,831

)

 

 

(212

)

Debt issuance cost related to Credit Agreement

 

 

(837

)

 

 

 

 

 

(837

)

 

 

 

Purchase of capped call

 

 

(22,771

)

 

 

 

 

 

(22,771

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(23,738

)

 

 

1,279

 

 

 

(28,269

)

 

 

2,510

 

Effect of foreign currency rates on cash

 

 

(9

)

 

 

(566

)

 

 

(30

)

 

 

(289

)

Net change in cash, cash equivalents and restricted cash

 

 

(15,487

)

 

 

(8,354

)

 

 

(34,547

)

 

 

(20,729

)

Cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

Beginning of period

 

 

184,567

 

 

 

215,178

 

 

 

203,627

 

 

 

227,553

 

End of period

 

$

169,080

 

 

$

206,824

 

 

$

169,080

 

 

$

206,824

 

 

 

 

 

 

 

 

 

 

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

159,080

 

 

$

206,824

 

 

$

159,080

 

 

$

206,824

 

Restricted cash

 

 

10,000

 

 

 

 

 

 

10,000

 

 

 

 

Total cash, cash equivalents and restricted cash

 

$

169,080

 

 

$

206,824

 

 

$

169,080

 

 

$

206,824

 

PROS Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

(Unaudited)

 

We use these non-GAAP financial measures to assist in the management of the Company because we believe that this information provides a more consistent and complete understanding of the underlying results and trends of the ongoing business due to the uniqueness of these charges.

See breakdown of the reconciling line items on page 10.

 

 

 

Three Months Ended
September 30,

 

Quarter
over
Quarter

 

Nine Months Ended
September 30,

 

Year over
Year

 

 

 

2023

 

 

 

2022

 

 

% change

 

 

2023

 

 

 

2022

 

 

% change

GAAP gross profit

 

$

48,786

 

 

$

42,738

 

 

14

%

 

$

139,647

 

 

$

122,590

 

 

14

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of acquisition-related intangibles

 

 

1,099

 

 

 

1,555

 

 

 

 

 

3,679

 

 

 

5,223

 

 

 

Severance

 

 

 

 

 

 

 

 

 

 

749

 

 

 

 

 

 

Share-based compensation

 

 

1,033

 

 

 

1,050

 

 

 

 

 

2,850

 

 

 

2,881

 

 

 

Non-GAAP gross profit

 

$

50,918

 

 

$

45,343

 

 

12

%

 

$

146,925

 

 

$

130,694

 

 

12

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP gross margin

 

 

65.9

%

 

 

64.5

%

 

 

 

 

64.9

%

 

 

63.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP loss from operations

 

$

(7,842

)

 

$

(16,181

)

 

(52

)%

 

$

(39,993

)

 

$

(63,221

)

 

(37

)%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of acquisition-related intangibles

 

 

1,446

 

 

 

2,221

 

 

 

 

 

4,872

 

 

 

7,793

 

 

 

Severance

 

 

 

 

 

 

 

 

 

 

3,586

 

 

 

1,508

 

 

 

Share-based compensation

 

 

10,933

 

 

 

10,626

 

 

 

 

 

31,589

 

 

 

32,617

 

 

 

Total Non-GAAP adjustments

 

 

12,379

 

 

 

12,847

 

 

 

 

 

40,047

 

 

 

41,918

 

 

 

Non-GAAP income (loss) from operations

 

$

4,537

 

 

$

(3,334

)

 

(236

)%

 

$

54

 

 

$

(21,303

)

 

(100

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP income (loss) from operations % of total revenue

 

 

5.9

%

 

 

(4.7

)%

 

 

 

 

%

 

 

(10.4

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(13,868

)

 

$

(13,853

)

 

%

 

$

(46,159

)

 

$

(64,899

)

 

(29

)%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Total Non-GAAP adjustments affecting income (loss) from operations

 

 

12,379

 

 

 

12,847

 

 

 

 

 

40,047

 

 

 

41,918

 

 

 

Amortization of debt issuance costs

 

 

294

 

 

 

373

 

 

 

 

 

1,040

 

 

 

1,119

 

 

 

Gain on equity investment

 

 

 

 

 

(3,308

)

 

 

 

 

 

 

 

(3,308

)

 

 

Loss on derivatives

 

 

4,343

 

 

 

 

 

 

 

 

4,343

 

 

 

 

 

 

Loss on debt extinguishment

 

 

1,779

 

 

 

 

 

 

 

 

1,779

 

 

 

 

 

 

Tax impact related to non-GAAP adjustments

 

 

(895

)

 

 

1,066

 

 

 

 

 

137

 

 

 

6,078

 

 

 

Non-GAAP net income (loss)

 

$

4,032

 

 

$

(2,875

)

 

(240

)%

 

$

1,187

 

 

$

(19,092

)

 

(106

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP earnings (loss) per share

 

$

0.09

 

 

$

(0.06

)

 

 

 

$

0.03

 

 

$

(0.42

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing non-GAAP earnings (loss) per share

 

 

47,397

 

 

 

45,314

 

 

 

 

 

46,823

 

 

 

45,207

 

 

 

PROS Holdings, Inc.

Supplemental Schedule of Non-GAAP Financial Measures

Increase (Decrease) in GAAP Amounts Reported

(In thousands)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2023

 

2022

 

2023

 

2022

Cost of Subscription Items

 

 

 

 

 

 

 

 

Amortization of acquisition-related intangibles

 

 

1,099

 

 

1,555

 

 

3,679

 

 

5,223

Severance

 

 

 

 

 

 

125

 

 

Share-based compensation

 

 

201

 

 

174

 

 

495

 

 

510

Total cost of subscription items

 

$

1,300

 

$

1,729

 

$

4,299

 

$

5,733

 

 

 

 

 

 

 

 

 

Cost of Maintenance Items

 

 

 

 

 

 

 

 

Severance

 

 

 

 

 

 

307

 

 

Share-based compensation

 

 

93

 

 

109

 

 

271

 

 

298

Total cost of maintenance items

 

$

93

 

$

109

 

$

578

 

$

298

 

 

 

 

 

 

 

 

 

Cost of Services Items

 

 

 

 

 

 

 

 

Severance

 

 

 

 

 

 

317

 

 

Share-based compensation

 

 

739

 

 

767

 

 

2,084

 

 

2,073

Total cost of services items

 

$

739

 

$

767

 

$

2,401

 

$

2,073

 

 

 

 

 

 

 

 

 

Sales and Marketing Items

 

 

 

 

 

 

 

 

Amortization of acquisition-related intangibles

 

 

347

 

 

666

 

 

1,193

 

 

2,570

Severance

 

 

 

 

 

 

1,595

 

 

1,444

Share-based compensation

 

 

2,992

 

 

2,897

 

 

9,023

 

 

9,413

Total sales and marketing items

 

$

3,339

 

$

3,563

 

$

11,811

 

$

13,427

 

 

 

 

 

 

 

 

 

Research and Development Items

 

 

 

 

 

 

 

 

Severance

 

 

 

 

 

 

1,008

 

 

Share-based compensation

 

 

2,817

 

 

2,995

 

 

7,840

 

 

9,607

Total research and development items

 

$

2,817

 

$

2,995

 

$

8,848

 

$

9,607

 

 

 

 

 

 

 

 

 

General and Administrative Items

 

 

 

 

 

 

 

 

Severance

 

 

 

 

 

 

234

 

 

64

Share-based compensation

 

 

4,091

 

 

3,684

 

 

11,876

 

 

10,716

Total general and administrative items

 

$

4,091

 

$

3,684

 

$

12,110

 

$

10,780

PROS Holdings, Inc.

Supplemental Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

GAAP Loss from Operations

 

$

(7,842

)

 

$

(16,181

)

 

$

(39,993

)

 

$

(63,221

)

Amortization of acquisition-related intangibles

 

 

1,446

 

 

 

2,221

 

 

 

4,872

 

 

 

7,793

 

Severance

 

 

 

 

 

 

 

 

3,586

 

 

 

1,508

 

Share-based compensation

 

 

10,933

 

 

 

10,626

 

 

 

31,589

 

 

 

32,617

 

Depreciation and other amortization

 

 

1,103

 

 

 

1,174

 

 

 

3,429

 

 

 

4,050

 

Adjusted EBITDA

 

$

5,640

 

 

$

(2,160

)

 

$

3,483

 

 

$

(17,253

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

8,718

 

 

$

(8,991

)

 

$

(3,967

)

 

$

(21,936

)

Severance

 

 

121

 

 

 

 

 

 

3,870

 

 

 

 

Purchase of property and equipment

 

 

(345

)

 

 

(76

)

 

 

(2,168

)

 

 

(845

)

Free Cash Flow

 

$

8,494

 

 

$

(9,067

)

 

$

(2,265

)

 

$

(22,781

)

 

 

 

 

 

 

 

 

 

Guidance

 

 

 

 

 

 

 

 

 

 

Q4 2023 Guidance

 

Full Year 2023 Guidance

 

 

Low

 

High

 

Low

 

High

Adjusted EBITDA

 

 

 

 

 

 

 

 

GAAP Loss from Operations

 

$

(10,400

)

 

$

(9,400

)

 

$

(50,500

)

 

$

(49,500

)

Amortization of acquisition-related intangibles

 

 

1,400

 

 

 

1,400

 

 

 

6,200

 

 

 

6,200

 

Severance

 

 

 

 

 

 

 

 

3,600

 

 

 

3,600

 

Share-based compensation

 

 

10,900

 

 

 

10,900

 

 

 

42,500

 

 

 

42,500

 

Depreciation and other amortization

 

 

1,100

 

 

 

1,100

 

 

 

4,700

 

 

 

4,700

 

Adjusted EBITDA

 

$

3,000

 

 

$

4,000

 

 

$

6,500

 

 

$

7,500

 

 

PROS Investor Relations
Belinda Overdeput
713-335-5879
ir@pros.com

Source: PROS Holdings, Inc.

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