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PROS Holdings, Inc. Reports Second Quarter 2019 Financial Results

HOUSTON--(BUSINESS WIRE)--

  • Total revenue of $63.9 million, up 35% year-over-year.
  • Subscription revenue of $33.1 million, up 50% year-over-year.
  • Subscription gross margins of 70% and non-GAAP subscription margin of 73%, up more than 700 basis points year-over-year. 

PROS Holdings, Inc. (PRO), a provider of AI-powered solutions that optimize selling in the digital economy, today announced financial results for the second quarter ended June 30, 2019.

“Companies across industries are realizing they must transform how they sell in today’s digital economy,” stated CEO Andres Reiner. “These companies are turning to our AI solutions to power their digital selling strategies, which is accelerating our growth. We’re also proud to be recognized as the clear market leader in G2 Crowd’s Summer 2019 Evaluation of Pricing Optimization & Management Software.”

Second Quarter 2019 Financial Highlights

Key financial results for the second quarter 2019 are shown below. Throughout this press release, all dollar figures are in millions, except net loss per share. Unless otherwise noted, all results are on a reported basis and are compared with the prior-year period.

 

GAAP

 

Non-GAAP

 

Q2 2019

 

Q2 2018

 

Change

 

Q2 2019

 

Q2 2018

 

Change

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

$63.9

 

$47.4

 

35%

 

n/a

 

n/a

 

n/a

Subscription Revenue

$33.1

 

$22.0

 

50%

 

n/a

 

n/a

 

n/a

Subscription and Maintenance Revenue

$48.1

 

$38.3

 

26%

 

n/a

 

n/a

 

n/a

Profitability:

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

$40.3

 

$28.7

 

40%

 

$41.9

 

$30.3

 

39%

Operating Loss

$(12.1)

 

$(13.0)

 

$0.9

 

$(3.9)

 

$(5.6)

 

$1.8

Net Loss

$(17.5)

 

$(16.8)

 

$(0.7)

 

$(2.8)

 

$(5.2)

 

$2.4

Net Loss Per Share

$(0.44)

 

$(0.52)

 

$0.08

 

$(0.07)

 

$(0.16)

 

$0.09

Adjusted EBITDA

n/a

 

n/a

 

n/a

 

$(1.8)

 

$(5.4)

 

$3.7

Cash:

 

 

 

 

 

 

 

 

 

 

 

Net Cash Used in Operating Activities

$(3.5)

 

$(3.6)

 

$0.0

 

n/a

 

n/a

 

n/a

Free Cash Flow

n/a

 

n/a

 

n/a

 

$(5.2)

 

$(5.2)

 

$(0.1)

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

Recent Business Highlights

  • Increased attendance of the PROS 2019 Outperform Customer Conference by more than 25% year-over-year as business leaders from nearly 40 countries gathered to learn how to transform a company’s selling experience to win in the digital economy.
  • Released the findings of PROS global survey of more than 1,000 procurement and purchasing leaders named “What B2B Buyers Want in 2019: Speed, Personalization and Intelligence”, which reveals that as buying needs have shifted, respondents prioritize self-service, value personalized experiences and expect fast responses to their quote requests.
  • Successfully completed an offering of $143.8 million aggregate principal amount of convertible senior notes due in 2024 in a private placement and used a significant portion of the net proceeds from the offering to retire the majority of PROS’ outstanding 2.0% Convertible Senior Notes due in 2019.

Financial Outlook

PROS anticipates the following based on an estimated 40.2 million basic weighted average shares outstanding for the third quarter of 2019 and a 22% non-GAAP estimated tax rate for the third quarter and full year 2019:

 

Q3 2019 Guidance

 

v. Q3 2018 at Mid-
Point

 

Full Year 2019
Guidance

 

v. Prior Year at Mid-
Point

Total Revenue

$63.0 to $63.5

 

29%

 

$247.0 to $248.0

 

26%

Subscription Revenue

$36.0 to $36.5

 

52%

 

$137.5 to $138.5

 

45%

ARR

n/a

 

n/a

 

$220.0 to $222.0

 

17%

Non-GAAP Loss Per Share

$(0.09) to $(0.07)

 

$0.05

 

n/a

 

n/a

Adjusted EBITDA

$(2.5) to $(1.5)

 

$2.9

 

$(9.5) to $(8.5)

 

$10.0

Free Cash Flow

n/a

 

n/a

 

$0.0 to $2.0

 

$1.5

Conference Call

In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on Thursday, July 25, 2019, 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 Thursday, August 8, 2019, at 1-844-512-2921 (toll-free) or 1-412-317-6671 using the pass code 13691741.

About PROS

PROS Holdings, Inc. (PRO) provides AI solutions that power commerce in the digital economy. PROS solutions bring intelligence to commerce by providing companies with predictive and prescriptive guidance that enables them to dynamically price, configure and sell their products and services across all channels with speed, precision and consistency. To learn more, visit www.pros.com.

Forward-looking Statements

This press release contains forward-looking statements, including statements about our future financial performance; positioning; management's confidence and optimism; customer successes; demand for enterprise sales, pricing, configure-price-quote, revenue management, shopping and merchandising generally and our modern commerce software solutions in particular; business expansion; business predictability; ARR; revenue; 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 risks related to: (a) threats to the security of our or our customer’s data, (b) potential business or service disruptions from our third party data centers, cloud platform providers or other unrelated service providers, (c) evolving data privacy, cyber security and data localization laws and regulations, (d) our ability to manage our cloud operations, (e) our ability to migrate customers with on-premise software licenses to our latest cloud solutions; (f) our ability to return to profitability following our transition to a cloud strategy; (g) the risk that the markets for our software do not grow as anticipated, (h) the length of our sales cycles, (i) the risk that we will not be able to maintain historical subscription, maintenance, and support renewal rates, (j) competition from vendors of sales, pricing, revenue management, shopping and merchandising, and configure-price-quote solutions, (k) potential unauthorized or improper actions of our personnel, (l) the risk that acquisitions we have and may enter into in the future may be difficult to integrate, fail to achieve our objectives, disrupt our business, dilute stockholder value or divert management attention, (m) any downturn in sales to our target markets, (n) potential delays or other challenges related to the implementation of our solutions, (o) personnel risks associated with growing a business generally, (p) the impact that a slowdown in the world or any particular economy has on our business sales cycles, prospects’ and customers’ spending decisions, timing of implementation decisions, payment and renewal decision, (q) our debt repayment obligations, (r) the impact of currency fluctuations on our results of operations, and (s) civil and political unrest in geographic regions in which we operate. Additional information relating to the uncertainty affecting PROS’ business is contained in our filings with the Securities and Exchange Commission. These forward-looking statements represent PROS’ expectations as of the date of this press release. 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 income (loss) from operations, annual recurring revenue, adjusted EBITDA, free cash flow, non-GAAP tax rate, non-GAAP net income (loss) and diluted 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.

PROS also presents certain information in “constant currency,” which is also a non-GAAP financial measure. Since PROS has operations outside of the United States reporting in currencies other than the U.S. dollar, the comparability of our operating results reported in U.S. Dollars is affected by foreign currency exchange rate fluctuations because the underlying currencies in which we transact change in value over time compared to the U.S. Dollar. These fluctuations may have a significant effect on our reported results. As such, this release contains references to constant currency measures, which are calculated based on currency rates set at the start of a year and held constant throughout the year. Management believes this supplemental information is useful to investors as a framework for facilitating period-to-period comparisons of our business performance excluding the effects of foreign currency exchange rate fluctuations.

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, annual recurring revenue, 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, acquisition-related expenses, amortization of debt discount and issuance costs, new headquarters noncash rent expense, debt extinguishment fees, loss on debt extinguishment and related taxes. 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.
  • Acquisition-Related Expenses: Acquisition-related expenses include integration costs and other one-time direct costs associated with our acquisitions. These amounts are unrelated to our core performance during any particular period and are impacted by the timing and size of the acquisitions. We exclude acquisition-related expenses to provide investors a method to compare our operating results to prior periods and to peer companies because such amounts can vary significantly based on the frequency of acquisitions and magnitude of acquisition expenses.
  • Amortization of Debt Discount and Issuance Costs: Amortization of debt discount and 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.
  • New Headquarters Noncash Rent Expense: Noncash rent expense is related to our new corporate headquarters and is incurred prior to occupation of this facility. These amounts are unrelated to our core performance during any particular period and 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 the noncash rent expense on the preoccupied new headquarters in order for investors to better understand our business performance and allow investors to compare our operating results with peer companies.
  • Debt extinguishment fees: Debt extinguishment fees relate to third party fees incurred in connection with the partial retirement of our senior convertible notes due in December 2019. These amounts are unrelated to our core performance during any particular period and 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 the debt extinguishment fees in order for investors to better understand our business performance and allow investors to compare our operating results with peer companies.
  • Loss on debt extinguishment: Loss on debt extinguishment relates to the partial retirement of our senior convertible notes due in December 2019. This amounts is unrelated to our core performance during any particular period and 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 the loss on debt extinguishment in order for investors to better understand our business performance and allow investors to compare our operating 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 recognized as license revenue in accordance with GAAP. ARR should be viewed independently of revenue and any other GAAP measure.

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, amortization of acquisition-related intangibles, depreciation and amortization, integration costs and other one-time direct costs associated with our acquisitions, new headquarters noncash rent expense and capitalized internal-use software development costs. 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, less capital expenditures (excluding expenditures for PROS new headquarters), 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)

 

 

 

June 30, 2019

 

December 31, 2018

Assets:

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

329,562

 

 

$

295,476

 

Trade and other receivables, net of allowance of $977 and $978, respectively

 

53,069

 

 

41,822

 

Deferred costs, current

 

4,927

 

 

4,089

 

Prepaid and other current assets

 

7,692

 

 

4,756

 

Total current assets

 

395,250

 

 

346,143

 

Property and equipment, net

 

15,128

 

 

14,676

 

Operating lease right-of-use assets

 

23,215

 

 

 

Deferred costs, noncurrent

 

14,468

 

 

13,373

 

Intangibles, net

 

15,845

 

 

19,354

 

Goodwill

 

38,161

 

 

38,231

 

Other assets, noncurrent

 

5,832

 

 

5,190

 

Total assets

 

$

507,899

 

 

$

436,967

 

Liabilities and Stockholders’ Equity:

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and other liabilities

 

$

6,948

 

 

$

6,934

 

Accrued liabilities

 

13,314

 

 

9,506

 

Accrued payroll and other employee benefits

 

18,499

 

 

22,519

 

Operating lease liabilities, current

 

5,326

 

 

 

Deferred revenue, current

 

113,808

 

 

99,262

 

Current portion of convertible debt, net

 

21,121

 

 

136,529

 

Total current liabilities

 

179,016

 

 

274,750

 

Deferred revenue, noncurrent

 

14,795

 

 

17,903

 

Convertible debt, net, noncurrent

 

198,428

 

 

88,661

 

Operating lease liabilities, noncurrent

 

19,415

 

 

 

Other liabilities, noncurrent

 

751

 

 

754

 

Total liabilities

 

412,405

 

 

382,068

 

Stockholders' 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; 44,601,308 and 41,573,491 shares issued, respectively; 40,183,723 and 37,155,906 shares outstanding, respectively

 

45

 

 

42

 

Additional paid-in capital

 

439,995

 

 

364,877

 

Treasury stock, 4,417,585 common shares, at cost

 

(13,938

)

 

(13,938

)

Accumulated deficit

 

(327,142

)

 

(292,708

)

Accumulated other comprehensive loss

 

(3,466

)

 

(3,374

)

Total stockholders’ equity

 

95,494

 

 

54,899

 

Total liabilities and stockholders’ equity

 

$

507,899

 

 

$

436,967

 

PROS Holdings, Inc.

Condensed Consolidated Statements of Income (Loss)

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Revenue:

 

 

 

 

 

 

 

 

Subscription

 

$

33,080

 

 

$

22,038

 

 

$

63,495

 

 

$

42,988

 

Maintenance and support

 

15,040

 

 

16,225

 

 

30,367

 

 

32,799

 

Total subscription, maintenance and support

 

48,120

 

 

38,263

 

 

93,862

 

 

75,787

 

License

 

2,028

 

 

695

 

 

2,534

 

 

1,761

 

Services

 

13,730

 

 

8,468

 

 

23,613

 

 

17,788

 

Total revenue

 

63,878

 

 

47,426

 

 

120,009

 

 

95,336

 

Cost of revenue:

 

 

 

 

 

 

 

 

Subscription

 

9,779

 

 

8,491

 

 

19,504

 

 

17,255

 

Maintenance and support

 

2,835

 

 

2,953

 

 

5,637

 

 

5,910

 

Total cost of subscription, maintenance and support

 

12,614

 

 

11,444

 

 

25,141

 

 

23,165

 

License

 

40

 

 

64

 

 

101

 

 

137

 

Services

 

10,929

 

 

7,216

 

 

19,131

 

 

14,943

 

Total cost of revenue

 

23,583

 

 

18,724

 

 

44,373

 

 

38,245

 

Gross profit

 

40,295

 

 

28,702

 

 

75,636

 

 

57,091

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling and marketing

 

22,945

 

 

18,590

 

 

44,430

 

 

36,158

 

General and administrative

 

12,040

 

 

10,145

 

 

23,707

 

 

20,834

 

Research and development

 

17,455

 

 

12,960

 

 

33,254

 

 

27,744

 

Acquisition-related

 

 

 

 

 

 

 

95

 

Loss from operations

 

(12,145

)

 

(12,993

)

 

(25,755

)

 

(27,740

)

Convertible debt interest and amortization

 

(4,274

)

 

(4,226

)

 

(8,630

)

 

(8,405

)

Other (expense) income, net

 

(862

)

 

244

 

 

409

 

 

446

 

Loss before income tax provision (benefit)

 

(17,281

)

 

(16,975

)

 

(33,976

)

 

(35,699

)

Income tax provision (benefit)

 

236

 

 

(131

)

 

458

 

 

1

 

Net loss

 

$

(17,517

)

 

$

(16,844

)

 

$

(34,434

)

 

$

(35,700

)

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.44

)

 

$

(0.52

)

 

$

(0.89

)

 

$

(1.10

)

Weighted average number of shares:

 

 

 

 

 

 

 

 

Basic and diluted

 

39,413

 

 

32,651

 

 

38,518

 

 

32,514

 

PROS Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(17,517

)

 

$

(16,844

)

 

$

(34,434

)

 

$

(35,700

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

3,504

 

 

3,256

 

 

6,829

 

 

6,620

 

Amortization of debt discount and issuance costs

 

3,179

 

 

2,988

 

 

6,295

 

 

5,929

 

Share-based compensation

 

5,979

 

 

5,462

 

 

12,025

 

 

11,398

 

Deferred income tax, net

 

 

 

(252

)

 

 

 

(252

)

Provision for doubtful accounts

 

 

 

215

 

 

 

 

215

 

Loss on disposal of assets

 

 

 

2

 

 

 

 

37

 

Loss on debt extinguishment

 

2,266

 

 

 

 

2,266

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and unbilled receivables

 

(7,474

)

 

(10,556

)

 

(11,247

)

 

(7,102

)

Deferred costs

 

(1,040

)

 

(880

)

 

(1,933

)

 

(642

)

Prepaid expenses and other assets

 

(1,458

)

 

1,513

 

 

(3,523

)

 

(62

)

Accounts payable and other liabilities

 

(1,133

)

 

1,039

 

 

(568

)

 

1,729

 

Accrued liabilities

 

2,597

 

 

3,529

 

 

5,231

 

 

2,114

 

Accrued payroll and other employee benefits

 

7,759

 

 

3,854

 

 

(4,020

)

 

(4,327

)

Deferred revenue

 

(211

)

 

3,096

 

 

11,435

 

 

11,733

 

Net cash used in operating activities

 

(3,549

)

 

(3,578

)

 

(11,644

)

 

(8,310

)

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

(1,696

)

 

(409

)

 

(2,307

)

 

(1,187

)

Capitalized internal-use software development costs

 

 

 

(1,168

)

 

(868

)

 

(2,484

)

Purchase of equity securities

 

(68

)

 

 

 

(68

)

 

 

Purchase of intangible asset

 

 

 

 

 

(50

)

 

 

Net cash used in investing activities

 

(1,764

)

 

(1,577

)

 

(3,293

)

 

(3,671

)

Financing activities:

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

 

326

 

 

 

 

1,201

 

Proceeds from employee stock plans

 

 

 

 

 

943

 

 

834

 

Tax withholding related to net share settlement of stock awards

 

(4,403

)

 

(1,713

)

 

(18,642

)

 

(8,968

)

Payments of notes payable

 

 

 

3

 

 

 

 

(55

)

Proceeds from issuance of convertible debt, net

 

140,156

 

 

 

 

140,156

 

 

 

Debt issuance costs related to convertible debt

 

(648

)

 

 

 

(648

)

 

 

Purchase of capped call

 

(16,445

)

 

 

 

(16,445

)

 

 

Retirement of convertible debt

 

(75,958

)

 

 

 

(75,958

)

 

 

Proceeds from termination of bond hedge

 

64,819

 

 

 

 

64,819

 

 

 

Payment for termination of warrant

 

(45,243

)

 

 

 

(45,243

)

 

 

Net cash provided by (used in) financing activities

 

62,278

 

 

(1,384

)

 

48,982

 

 

(6,988

)

Effect of foreign currency rates on cash

 

(39

)

 

260

 

 

41

 

 

331

 

Net change in cash and cash equivalents

 

56,926

 

 

(6,279

)

 

34,086

 

 

(18,638

)

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Beginning of period

 

272,636

 

 

148,146

 

 

295,476

 

 

160,505

 

End of period

 

$

329,562

 

 

$

141,867

 

 

$

329,562

 

 

$

141,867

 

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 June 30,

 

Quarter
over
Quarter

 

Six Months Ended June 30,

 

Year over
Year

 

 

2019

 

2018

 

% change

 

2019

 

2018

 

% change

GAAP gross profit

 

$

40,295

 

 

$

28,702

 

 

40

%

 

$

75,636

 

 

$

57,091

 

 

32

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

160

 

 

 

 

 

 

313

 

 

 

 

 

Amortization of acquisition-related intangibles

 

993

 

 

1,181

 

 

 

 

2,027

 

 

2,422

 

 

 

Share-based compensation

 

494

 

 

398

 

 

 

 

1,032

 

 

880

 

 

 

Non-GAAP gross profit

 

$

41,942

 

 

$

30,281

 

 

39

%

 

$

79,008

 

 

$

60,393

 

 

31

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP gross margin

 

65.7

%

 

63.8

%

 

 

 

65.8

%

 

63.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP loss from operations

 

$

(12,145

)

 

$

(12,993

)

 

(7

)%

 

$

(25,755

)

 

$

(27,740

)

 

(7

)%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition-related expenses

 

 

 

 

 

 

 

 

 

95

 

 

 

Debt extinguishment fees

 

319

 

 

 

 

 

 

319

 

 

 

 

 

New headquarters noncash rent expense

 

555

 

 

 

 

 

 

1,109

 

 

 

 

 

Amortization of acquisition-related intangibles

 

1,425

 

 

1,897

 

 

 

 

3,008

 

 

3,912

 

 

 

Share-based compensation

 

5,979

 

 

5,462

 

 

 

 

12,025

 

 

11,398

 

 

 

Total Non-GAAP adjustments

 

8,278

 

 

7,359

 

 

 

 

16,461

 

 

15,405

 

 

 

Non-GAAP loss from operations

 

$

(3,867

)

 

$

(5,634

)

 

(31

)%

 

$

(9,294

)

 

$

(12,335

)

 

(25

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP loss from operations % of total revenue

 

(6.1

)%

 

(11.9

)%

 

 

 

(7.7

)%

 

(12.9

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(17,517

)

 

$

(16,844

)

 

4

%

 

$

(34,434

)

 

$

(35,700

)

 

(4

)%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Total Non-GAAP adjustments affecting loss from operations

 

8,278

 

 

7,359

 

 

 

 

16,461

 

 

15,405

 

 

 

Amortization of debt discount and issuance costs

 

3,168

 

 

2,976

 

 

 

 

6,274

 

 

5,905

 

 

 

Loss on debt extinguishment

 

2,266

 

 

 

 

 

 

2,266

 

 

 

 

 

Tax impact related to non-GAAP adjustments

 

1,022

 

 

1,330

 

 

 

 

2,433

 

 

3,167

 

 

 

Non-GAAP net loss

 

$

(2,783

)

 

$

(5,179

)

 

(46

)%

 

$

(7,000

)

 

$

(11,223

)

 

(38

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP diluted loss per share

 

$

(0.07

)

 

$

(0.16

)

 

 

 

$

(0.18

)

 

$

(0.35

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing non-GAAP loss per share

 

39,413

 

 

32,651

 

 

 

 

38,518

 

 

32,514

 

 

 

PROS Holdings, Inc.

Supplemental Schedule of Non-GAAP Financial Measures

Increase (Decrease) in GAAP Amounts Reported

(In thousands)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Cost of Subscription Items

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

16

 

 

 

 

32

 

 

 

Amortization of acquisition-related intangibles

 

821

 

 

997

 

 

1,680

 

 

2,050

 

Share-based compensation

 

68

 

 

35

 

 

139

 

 

88

 

Total cost of subscription items

 

$

905

 

 

$

1,032

 

 

$

1,851

 

 

$

2,138

 

 

 

 

 

 

 

 

 

 

Cost of Maintenance Items

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

28

 

 

 

 

56

 

 

 

Amortization of acquisition-related intangibles

 

162

 

 

172

 

 

326

 

 

349

 

Share-based compensation

 

44

 

 

54

 

 

104

 

 

132

 

Total cost of maintenance items

 

$

234

 

 

$

226

 

 

$

486

 

 

$

481

 

 

 

 

 

 

 

 

 

 

Cost of License Items

 

 

 

 

 

 

 

 

Amortization of acquisition-related intangibles

 

10

 

 

12

 

 

21

 

 

23

 

Total cost of license items

 

$

10

 

 

$

12

 

 

$

21

 

 

$

23

 

 

 

 

 

 

 

 

 

 

Cost of Services Items

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

116

 

 

 

 

225

 

 

 

Share-based compensation

 

382

 

 

309

 

 

789

 

 

660

 

Total cost of services items

 

$

498

 

 

$

309

 

 

$

1,014

 

 

$

660

 

 

 

 

 

 

 

 

 

 

Sales and Marketing Items

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

103

 

 

 

 

206

 

 

 

Amortization of acquisition-related intangibles

 

432

 

 

716

 

 

981

 

 

1,490

 

Share-based compensation

 

1,414

 

 

1,284

 

 

2,814

 

 

2,568

 

Total sales and marketing items

 

$

1,949

 

 

$

2,000

 

 

$

4,001

 

 

$

4,058

 

 

 

 

 

 

 

 

 

 

General and Administrative Items

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

88

 

 

 

 

181

 

 

 

Debt extinguishment fees

 

319

 

 

 

 

319

 

 

 

Share-based compensation

 

2,808

 

 

2,688

 

 

5,620

 

 

5,567

 

Total general and administrative items

 

$

3,215

 

 

$

2,688

 

 

$

6,120

 

 

$

5,567

 

 

 

 

 

 

 

 

 

 

Research and Development Items

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

204

 

 

 

 

409

 

 

 

Share-based compensation

 

1,263

 

 

1,092

 

 

2,559

 

 

2,383

 

Total research and development items

 

$

1,467

 

 

$

1,092

 

 

$

2,968

 

 

$

2,383

 

 

 

 

 

 

 

 

 

 

Acquisition-related expenses

 

$

 

 

$

 

 

$

 

 

$

95

 

 

PROS Holdings, Inc.

Supplemental Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Adjusted EBITDA

 

 

 

 

 

 

 

 

GAAP Loss from Operations

 

$

(12,145

)

 

$

(12,993

)

 

$

(25,755

)

 

$

(27,740

)

Acquisition-related expenses

 

 

 

 

 

 

 

95

 

Amortization of acquisition-related intangibles

 

1,425

 

 

1,897

 

 

3,008

 

 

3,912

 

New headquarters noncash rent expense

 

555

 

 

 

 

1,109

 

 

 

Debt extinguishment fees

 

319

 

 

 

 

319

 

 

 

Share-based compensation

 

5,979

 

 

5,462

 

 

12,025

 

 

11,398

 

Depreciation and other amortization

 

2,079

 

 

1,359

 

 

3,821

 

 

2,708

 

Capitalized internal-use software development costs

 

 

 

(1,168

)

 

(868

)

 

(2,484

)

Adjusted EBITDA

 

$

(1,788

)

 

$

(5,443

)

 

$

(6,341

)

 

$

(12,111

)

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

$

(3,549

)

 

$

(3,578

)

 

$

(11,644

)

 

$

(8,310

)

Purchase of property and equipment (excluding new headquarters)

 

(1,658

)

 

(409

)

 

(2,269

)

 

(1,187

)

Purchase of intangible asset

 

 

 

 

 

(50

)

 

 

Capitalized internal-use software development costs

 

 

 

(1,168

)

 

(868

)

 

(2,484

)

Free Cash Flow

 

$

(5,207

)

 

$

(5,155

)

 

$

(14,831

)

 

$

(11,981

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guidance

 

Q3 2019 Guidance

 

Full Year 2019 Guidance

 

 

Low

 

High

 

Low

 

High

Adjusted EBITDA

 

 

 

 

 

 

 

 

GAAP Loss from Operations

 

$

(13,000

)

 

$

(12,000

)

 

$

(49,500

)

 

$

(48,500

)

Amortization of acquisition-related intangibles

 

1,400

 

 

1,400

 

 

5,700

 

 

5,700

 

New headquarters noncash rent expense

 

600

 

 

600

 

 

2,000

 

 

2,000

 

Share-based compensation

 

6,200

 

 

6,200

 

 

24,500

 

 

24,500

 

Depreciation and other amortization

 

2,300

 

 

2,300

 

 

8,300

 

 

8,300

 

Capitalized internal-use software development costs

 

 

 

 

 

(500

)

 

(500

)

Adjusted EBITDA

 

$

(2,500

)

 

$

(1,500

)

 

$

(9,500

)

 

$

(8,500

)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190725005825/en/