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PROS Holdings, Inc. Reports Third Quarter 2019 Financial Results

HOUSTON--(BUSINESS WIRE)--

  • Total revenue of $64.2 million, up 31% year-over-year.
  • Subscription revenue of $37.5 million, up 57% year-over-year.
  • Subscription gross margins of 71% and non-GAAP subscription margin of 73%, up nearly 650 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 third quarter ended September 30, 2019.

“As buyers’ expectations change in the digital economy, Global 2000 companies across industries are turning to us to power their digital sales transformations,” stated CEO Andres Reiner. “Our innovations are resonating in the market, which is leading us to increase our sales pipeline, grow our revenue, and deliver more customer value than ever before. We have the right team, strategy and solutions in place to continue to build upon our market momentum and deliver a strong finish to 2019.”

Third Quarter 2019 Financial Highlights

Key financial results for the third 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

 

Q3 2019

 

Q3 2018

 

Change

 

Q3 2019

 

Q3 2018

 

Change

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

$64.2

 

$49.1

 

31%

 

n/a

 

n/a

 

n/a

Subscription Revenue

$37.5

 

$23.9

 

57%

 

n/a

 

n/a

 

n/a

Subscription and Maintenance Revenue

$51.9

 

$40.1

 

29%

 

n/a

 

n/a

 

n/a

Profitability:

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

$37.8

 

$29.6

 

28%

 

$39.4

 

$31.2

 

26%

Operating Loss

$(12.5)

 

$(11.9)

 

$(0.6)

 

$(4.1)

 

$(5.1)

 

$1.0

Net Loss

$(17.3)

 

$(15.8)

 

$(1.6)

 

$(2.5)

 

$(4.6)

 

$2.1

Net Loss Per Share

$(0.42)

 

$(0.44)

 

$0.02

 

$(0.06)

 

$(0.13)

 

$0.07

Adjusted EBITDA

n/a

 

n/a

 

n/a

 

$(2.2)

 

$(4.9)

 

$2.7

Cash:

 

 

 

 

 

 

 

 

 

 

 

Net Cash Provided by (Used in) Operating Activities

$4.0

 

$(1.2)

 

$5.2

 

n/a

 

n/a

 

n/a

Free Cash Flow

n/a

 

n/a

 

n/a

 

$3.0

 

$(2.6)

 

$5.6

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

Recent Business Highlights

  • Launched a completely redesigned user interface for PROS Control that empowers B2B customers to deploy even more sophisticated and dynamic pricing strategies in an intuitive, self-serve manner.
  • Strengthened PROS travel technology leadership position with the acquisition of Travelaer SAS and the launch of PROS Retail for Travel, an end-to-end e-Commerce solution that empowers carriers to deliver a best-in-class buying experience and personalized offers to travelers with IATA New Distribution Capability (NDC) Level 4 capabilities.
  • Established a global alliance with Ernst & Young (EY) to help customers accelerate their digital commerce transformations and value recognition by combining EY’s strategy and process design acumen with PROS AI-powered solutions; under the alliance, EY is building a global PROS practice to augment and lead the delivery of PROS Pricing and Configure-Price-Quote solutions.
  • Received several prestigious honors in recognition of our AI-powered digital selling innovations, including being named to the 2019 Constellation ShortList™ for Price Optimization Solutions and Configure, Price, Quote (CPQ) Software and to the 2019/2020 Microsoft Business Applications Inner Circle in addition to winning the Golden Bridge Gold Business-to-Business Products Award and the Bronze Stevie® Business-to-Business Best New Product Award.
  • Announced that the PROS Outperform 2020 Conference, the premier event for pricing leaders, digital executives and industry strategists from across the globe, will take place October 6 - 8, 2020 in Orlando.
  • Appointed John Allessio as Chief Customer Officer to lead PROS global delivery, customer success, and customer and partner enablement efforts as PROS further commits to deepening customer engagement and delivering exceptional customer value at scale.

Financial Outlook

PROS anticipates the following based on an estimated 42.1 million basic weighted average shares outstanding for the fourth quarter of 2019 and a 22% non-GAAP estimated tax rate for the fourth quarter and full year 2019:

 

Q4 2019 Guidance

 

v. Q4 2018 at Mid-
Point

 

Full Year 2019
Guidance

 

v. Prior Year at Mid-
Point

Total Revenue

$63.85 to $64.35

 

22%

 

$248.0 to $248.5

 

26%

Subscription Revenue

$38.55 to $39.05

 

37%

 

$139.5 to $140.0

 

47%

ARR

n/a

 

n/a

 

$220.0 to $222.0

 

17%

Non-GAAP Loss Per Share

$(0.10) to $(0.08)

 

$(0.03)

 

n/a

 

n/a

Adjusted EBITDA

$(3.0) to $(2.0)

 

$(0.5)

 

$(11.5) to $(10.5)

 

$8.0

Free Cash Flow

n/a

 

n/a

 

$(2.0) to $0.0

 

$(0.5)

Conference Call

In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on Thursday, October 24, 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, November 7, 2019, at 1-844-512-2921 (toll-free) or 1-412-317-6671 using the pass code 13695098.

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; subscription revenue; non-GAAP 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 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 completed 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 decisions, (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 or non-GAAP operating loss, annual recurring revenue, adjusted EBITDA, free cash flow, non-GAAP subscription revenue, non-GAAP tax rate, non-GAAP net income (loss) or non-GAAP net loss, and diluted earnings (loss) per share or non-GAAP net 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 subscription margin can be compared to subscription margin which can be calculated from the income statement 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 in the definition of Non-GAAP income (loss) from operations attributable to cost of subscription. These items and amounts are presented in the Supplemental Schedule of Non-GAAP Financial Measures.

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, non-GAAP 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, 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.

Non-GAAP 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 discount and issuance costs, 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 loss per share are calculated by dividing estimates for non-GAAP loss by our estimate of 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 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.
  • Loss on debt extinguishment: Loss on debt extinguishment relates to the partial retirement of our senior convertible notes due in December 2019. This amount 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, debt extinguishment fees 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)

 

 

 

September 30, 2019

 

December 31, 2018

Assets:

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

319,162

 

 

$

295,476

 

Trade and other receivables, net of allowance of $968 and $978, respectively

 

55,986

 

 

41,822

 

Deferred costs, current

 

5,415

 

 

4,089

 

Prepaid and other current assets

 

8,764

 

 

4,756

 

Total current assets

 

389,327

 

 

346,143

 

Property and equipment, net

 

13,972

 

 

14,676

 

Operating lease right-of-use assets

 

28,548

 

 

 

Deferred costs, noncurrent

 

15,172

 

 

13,373

 

Intangibles, net

 

16,191

 

 

19,354

 

Goodwill

 

48,878

 

 

38,231

 

Other assets, noncurrent

 

6,650

 

 

5,190

 

Total assets

 

$

518,738

 

 

$

436,967

 

Liabilities and Stockholders’ Equity:

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and other liabilities

 

$

7,003

 

 

$

6,934

 

Accrued liabilities

 

17,433

 

 

9,506

 

Accrued payroll and other employee benefits

 

27,420

 

 

22,519

 

Operating lease liabilities, current

 

7,222

 

 

 

Deferred revenue, current

 

113,430

 

 

99,262

 

Current portion of convertible debt, net

 

42,343

 

 

136,529

 

Total current liabilities

 

214,851

 

 

274,750

 

Deferred revenue, noncurrent

 

14,502

 

 

17,903

 

Convertible debt, net, noncurrent

 

109,024

 

 

88,661

 

Operating lease liabilities, noncurrent

 

23,377

 

 

 

Other liabilities, noncurrent

 

1,032

 

 

754

 

Total liabilities

 

362,786

 

 

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; 46,460,212
and 41,573,491 shares issued, respectively; 42,042,627 and 37,155,906 shares outstanding, respectively

 

47

 

 

42

 

Additional paid-in capital

 

518,456

 

 

364,877

 

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

 

(13,938

)

 

(13,938

)

Accumulated deficit

 

(344,489

)

 

(292,708

)

Accumulated other comprehensive loss

 

(4,124

)

 

(3,374

)

Total stockholders’ equity

 

155,952

 

 

54,899

 

Total liabilities and stockholders’ equity

 

$

518,738

 

 

$

436,967

 

PROS Holdings, Inc.

Condensed Consolidated Statements of Income (Loss)

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Revenue:

 

 

 

 

 

 

 

 

Subscription

 

$

37,463

 

 

$

23,888

 

 

$

100,958

 

 

$

66,876

 

Maintenance and support

 

14,405

 

 

16,238

 

 

44,772

 

 

49,037

 

Total subscription, maintenance and support

 

51,868

 

 

40,126

 

 

145,730

 

 

115,913

 

License

 

1,129

 

 

1,093

 

 

3,663

 

 

2,854

 

Services

 

11,153

 

 

7,856

 

 

34,766

 

 

25,644

 

Total revenue

 

64,150

 

 

49,075

 

 

184,159

 

 

144,411

 

Cost of revenue:

 

 

 

 

 

 

 

 

Subscription

 

11,039

 

 

9,053

 

 

30,543

 

 

26,308

 

Maintenance and support

 

2,632

 

 

2,852

 

 

8,269

 

 

8,762

 

Total cost of subscription, maintenance and support

 

13,671

 

 

11,905

 

 

38,812

 

 

35,070

 

License

 

51

 

 

63

 

 

152

 

 

200

 

Services

 

12,661

 

 

7,508

 

 

31,792

 

 

22,451

 

Total cost of revenue

 

26,383

 

 

19,476

 

 

70,756

 

 

57,721

 

Gross profit

 

37,767

 

 

29,599

 

 

113,403

 

 

86,690

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling and marketing

 

21,600

 

 

17,513

 

 

66,030

 

 

53,671

 

General and administrative

 

11,553

 

 

10,179

 

 

35,260

 

 

31,013

 

Research and development

 

16,878

 

 

13,773

 

 

50,132

 

 

41,517

 

Acquisition-related

 

248

 

 

 

 

248

 

 

95

 

Loss from operations

 

(12,512

)

 

(11,866

)

 

(38,267

)

 

(39,606

)

Convertible debt interest and amortization

 

(3,717

)

 

(4,266

)

 

(12,347

)

 

(12,671

)

Other (expense) income, net

 

(1,010

)

 

521

 

 

(601

)

 

967

 

Loss before income tax provision

 

(17,239

)

 

(15,611

)

 

(51,215

)

 

(51,310

)

Income tax provision

 

108

 

 

175

 

 

566

 

 

176

 

Net loss

 

$

(17,347

)

 

$

(15,786

)

 

$

(51,781

)

 

$

(51,486

)

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.42

)

 

$

(0.44

)

 

$

(1.31

)

 

$

(1.53

)

Weighted average number of shares:

 

 

 

 

 

 

 

 

Basic and diluted

 

41,276

 

 

35,676

 

 

39,438

 

 

33,568

 

PROS Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(17,347

)

 

$

(15,786

)

 

$

(51,781

)

 

$

(51,486

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

3,435

 

 

3,165

 

 

10,264

 

 

9,785

 

Amortization of debt discount and issuance costs

 

2,864

 

 

3,029

 

 

9,159

 

 

8,958

 

Share-based compensation

 

6,209

 

 

4,957

 

 

18,234

 

 

16,355

 

Deferred income tax, net

 

 

 

 

 

 

 

(252

)

Provision for doubtful accounts

 

 

 

 

 

 

 

215

 

Loss on disposal of assets

 

 

 

 

 

 

 

37

 

Loss on debt extinguishment

 

2,734

 

 

 

 

5,000

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and unbilled receivables

 

(2,641

)

 

(6,796

)

 

(13,888

)

 

(13,898

)

Deferred costs

 

(1,191

)

 

(875

)

 

(3,124

)

 

(1,517

)

Prepaid expenses and other assets

 

(1,059

)

 

(1,822

)

 

(4,582

)

 

(1,884

)

Accounts payable and other liabilities

 

76

 

 

840

 

 

(492

)

 

2,569

 

Accrued liabilities

 

4,646

 

 

(2,647

)

 

9,877

 

 

(533

)

Accrued payroll and other employee benefits

 

6,737

 

 

3,985

 

 

2,717

 

 

(342

)

Deferred revenue

 

(426

)

 

10,775

 

 

11,009

 

 

22,508

 

Net cash provided by (used in) operating activities

 

4,037

 

 

(1,175

)

 

(7,607

)

 

(9,485

)

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

(1,053

)

 

(219

)

 

(3,360

)

 

(1,406

)

Capitalized internal-use software development costs

 

(153

)

 

(1,202

)

 

(1,021

)

 

(3,686

)

Acquisition of Travelaer, net of cash acquired

 

(10,510

)

 

 

 

(10,510

)

 

 

Purchase of equity securities

 

(112

)

 

 

 

(180

)

 

 

Purchase of intangible asset

 

 

 

 

 

(50

)

 

 

Net cash used in investing activities

 

(11,828

)

 

(1,421

)

 

(15,121

)

 

(5,092

)

Financing activities:

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

 

(59

)

 

 

 

1,142

 

Proceeds from employee stock plans

 

1,052

 

 

886

 

 

1,995

 

 

1,720

 

Tax withholding related to net share settlement of stock awards

 

(2,956

)

 

(185

)

 

(21,598

)

 

(9,153

)

Proceeds from Secondary Offering, net

 

 

 

141,954

 

 

 

 

141,954

 

Payments of notes payable

 

 

 

1

 

 

 

 

(54

)

Proceeds from issuance of convertible debt, net

 

 

 

 

 

140,156

 

 

 

Debt issuance costs related to convertible debt

 

(212

)

 

 

 

(860

)

 

 

Purchase of capped call

 

 

 

 

 

(16,445

)

 

 

Retirement of convertible debt

 

(60

)

 

 

 

(76,018

)

 

 

Proceeds from termination of bond hedge

 

 

 

 

 

64,819

 

 

 

Payment for termination of warrant

 

 

 

 

 

(45,243

)

 

 

Net cash (used in) provided by financing activities

 

(2,176

)

 

142,597

 

 

46,806

 

 

135,609

 

Effect of foreign currency rates on cash

 

(433

)

 

21

 

 

(392

)

 

352

 

Net change in cash and cash equivalents

 

(10,400

)

 

140,022

 

 

23,686

 

 

121,384

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Beginning of period

 

329,562

 

 

141,867

 

 

295,476

 

 

160,505

 

End of period

 

$

319,162

 

 

$

281,889

 

 

$

319,162

 

 

$

281,889

 

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 11.

 

 

 

Three Months Ended
September 30,

 

Quarter
over
Quarter

 

Nine Months Ended
September 30,

 

Year over
Year

 

 

2019

 

2018

 

% change

 

2019

 

2018

 

% change

GAAP gross profit

 

$

37,767

 

 

$

29,599

 

 

28

%

 

$

113,403

 

 

$

86,690

 

 

31

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

166

 

 

 

 

 

 

479

 

 

 

 

 

Amortization of acquisition-related intangibles

 

961

 

 

1,125

 

 

 

 

2,988

 

 

3,547

 

 

 

Share-based compensation

 

503

 

 

445

 

 

 

 

1,535

 

 

1,325

 

 

 

Non-GAAP gross profit

 

$

39,397

 

 

$

31,169

 

 

26

%

 

$

118,405

 

 

$

91,562

 

 

29

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP gross margin

 

61.4

%

 

63.5

%

 

 

 

64.3

%

 

63.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP loss from operations

 

$

(12,512

)

 

$

(11,866

)

 

5

%

 

$

(38,267

)

 

$

(39,606

)

 

(3

)%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition-related expenses

 

248

 

 

 

 

 

 

248

 

 

95

 

 

 

Debt extinguishment fees

 

 

 

 

 

 

 

319

 

 

 

 

 

New headquarters noncash rent expense

 

554

 

 

 

 

 

 

1,663

 

 

 

 

 

Amortization of acquisition-related intangibles

 

1,425

 

 

1,790

 

 

 

 

4,433

 

 

5,702

 

 

 

Share-based compensation

 

6,209

 

 

4,957

 

 

 

 

18,234

 

 

16,355

 

 

 

Total Non-GAAP adjustments

 

8,436

 

 

6,747

 

 

 

 

24,897

 

 

22,152

 

 

 

Non-GAAP loss from operations

 

$

(4,076

)

 

$

(5,119

)

 

(20

)%

 

$

(13,370

)

 

$

(17,454

)

 

(23

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP loss from operations % of total revenue

 

(6.4

)%

 

(10.4

)%

 

 

 

(7.3

)%

 

(12.1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(17,347

)

 

$

(15,786

)

 

10

%

 

$

(51,781

)

 

$

(51,486

)

 

1

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Total Non-GAAP adjustments affecting loss from operations

 

8,436

 

 

6,747

 

 

 

 

24,897

 

 

22,152

 

 

 

Amortization of debt discount and issuance costs

 

2,855

 

 

3,016

 

 

 

 

9,129

 

 

8,921

 

 

 

Loss on debt extinguishment

 

2,734

 

 

 

 

 

 

5,000

 

 

 

 

 

Tax impact related to non-GAAP adjustments

 

815

 

 

1,461

 

 

 

 

3,248

 

 

4,628

 

 

 

Non-GAAP net loss

 

$

(2,507

)

 

$

(4,562

)

 

(45

)%

 

$

(9,507

)

 

$

(15,785

)

 

(40

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP diluted loss per share

 

$

(0.06

)

 

$

(0.13

)

 

 

 

$

(0.24

)

 

$

(0.47

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing non-GAAP loss per share

 

41,276

 

 

35,676

 

 

 

 

39,438

 

 

33,568

 

 

 

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,

 

 

2019

 

2018

 

2019

 

2018

Cost of Subscription Items

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

16

 

 

 

 

48

 

 

 

Amortization of acquisition-related intangibles

 

791

 

 

947

 

 

2,471

 

 

2,997

 

Share-based compensation

 

71

 

 

77

 

 

210

 

 

165

 

Total cost of subscription items

 

$

878

 

 

$

1,024

 

 

$

2,729

 

 

$

3,162

 

 

 

 

 

 

 

 

 

 

Cost of Maintenance Items

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

27

 

 

 

 

83

 

 

Amortization of acquisition-related intangibles

 

160

 

 

168

 

 

486

 

 

517

 

Share-based compensation

 

48

 

 

53

 

 

152

 

 

185

 

Total cost of maintenance items

 

$

235

 

 

$

221

 

 

$

721

 

 

$

702

 

 

 

 

 

 

 

 

 

 

Cost of License Items

 

 

 

 

 

 

 

 

Amortization of acquisition-related intangibles

 

10

 

 

10

 

 

31

 

 

33

 

Total cost of license items

 

$

10

 

 

$

10

 

 

$

31

 

 

$

33

 

 

 

 

 

 

 

 

 

 

Cost of Services Items

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

123

 

 

 

 

348

 

 

 

Share-based compensation

 

384

 

 

315

 

 

1,173

 

 

975

 

Total cost of services items

 

$

507

 

 

$

315

 

 

$

1,521

 

 

$

975

 

 

 

 

 

 

 

 

 

 

Sales and Marketing Items

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

99

 

 

 

 

305

 

 

 

Amortization of acquisition-related intangibles

 

464

 

 

665

 

 

1,445

 

 

2,155

 

Share-based compensation

 

1,515

 

 

779

 

 

4,329

 

 

3,347

 

Total sales and marketing items

 

$

2,078

 

 

$

1,444

 

 

$

6,079

 

 

$

5,502

 

 

 

 

 

 

 

 

 

 

General and Administrative Items

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

91

 

 

 

 

272

 

 

 

Debt extinguishment fees

 

 

 

 

 

319

 

 

 

Share-based compensation

 

2,901

 

 

2,635

 

 

8,521

 

 

8,202

 

Total general and administrative items

 

$

2,992

 

 

$

2,635

 

 

$

9,112

 

 

$

8,202

 

 

 

 

 

 

 

 

 

 

Research and Development Items

 

 

 

 

 

 

 

 

New headquarters noncash rent expense

 

198

 

 

 

 

607

 

 

 

Share-based compensation

 

1,290

 

 

1,098

 

 

3,849

 

 

3,481

 

Total research and development items

 

$

1,488

 

 

$

1,098

 

 

$

4,456

 

 

$

3,481

 

 

 

 

 

 

 

 

 

 

Acquisition-related expenses

 

$

248

 

 

$

 

 

$

248

 

 

$

95

 

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,

 

 

2019

 

2018

 

2019

 

2018

Adjusted EBITDA

 

 

 

 

 

 

 

 

GAAP Loss from Operations

 

$

 

(12,512

)

 

$

 

(11,866

)

 

$

 

(38,267

)

 

$

 

(39,606

)

Acquisition-related expenses

 

 

248

 

 

 

 

 

248

 

 

 

95

 

Amortization of acquisition-related intangibles

 

 

1,425

 

 

 

1,790

 

 

 

4,433

 

 

 

5,702

 

New headquarters noncash rent expense

 

 

554

 

 

 

 

 

1,663

 

 

 

Debt extinguishment fees

 

 

 

 

 

 

319

 

 

 

Share-based compensation

 

 

6,209

 

 

 

4,957

 

 

 

18,234

 

 

 

16,355

 

Depreciation and other amortization

 

 

2,010

 

 

 

1,375

 

 

 

5,831

 

 

 

4,083

 

Capitalized internal-use software development costs

 

 

(153

)

 

 

(1,202

)

 

 

(1,021

)

 

 

(3,686

)

Adjusted EBITDA

 

$

 

(2,219

)

 

$

 

(4,946

)

 

$

 

(8,560

)

 

$

 

(17,057

)

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

 

4,037

 

 

$

 

(1,175

)

 

$

 

(7,607

)

 

$

 

(9,485

)

Purchase of property and equipment (excluding new headquarters)

 

 

(876

)

 

 

(219

)

 

 

(3,145

)

 

 

(1,406

)

Purchase of intangible asset

 

 

 

 

 

 

(50

)

 

 

Capitalized internal-use software development costs

 

 

(153

)

 

 

(1,202

)

 

 

(1,021

)

 

 

(3,686

)

Free Cash Flow

 

$

 

3,008

 

 

$

 

(2,596

)

 

$

 

(11,823

)

 

$

 

(14,577

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guidance

 

Q4 2019 Guidance

 

Full Year 2019 Guidance

 

 

Low

 

High

 

Low

 

High

Adjusted EBITDA

 

 

 

 

 

 

 

 

GAAP Loss from Operations

 

$

 

(13,200

)

 

$

 

(12,200

)

 

$

 

(50,800

)

 

$

 

(49,800

)

Amortization of acquisition-related intangibles

 

 

1,300

 

 

 

1,300

 

 

 

5,700

 

 

 

5,700

 

New headquarters noncash rent expense

 

 

600

 

 

 

600

 

 

 

2,300

 

 

 

2,300

 

Share-based compensation

 

 

6,400

 

 

 

6,400

 

 

 

24,600

 

 

 

24,600

 

Depreciation and other amortization

 

 

2,300

 

 

 

2,300

 

 

 

8,200

 

 

 

8,200

 

Capitalized internal-use software development costs

 

 

(400

)

 

 

(400

)

 

 

(1,500

)

 

 

(1,500

)

Adjusted EBITDA

 

$

 

(3,000

)

 

$

 

(2,000

)

 

$

 

(11,500

)

 

$

 

(10,500

)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191024005967/en/