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PROS Holdings, Inc. Reports Third Quarter 2022 Financial Results

  • Subscription revenue of $51.8 million, up 17% year-over-year.
  • Subscription gross margin of 73% and non-GAAP subscription gross margin of 77%, up over 500 basis points year-over-year.

PROS Holdings, Inc. (NYSE: PRO), the CFO’s best-kept secret for profitable growth, today announced financial results for the third quarter ended September 30, 2022.

“I’m proud of our team for delivering 17% subscription revenue growth along with strong improvements to profitability in the quarter,” stated CEO Andres Reiner. “Year-to-date we more than doubled our deal count as compared to last year; the momentum we’re seeing in our business reflects the unique value proposition of the PROS Platform which generates significant revenue uplift and margin improvements for our customers, fueling profitable growth.”

Third Quarter 2022 Financial Highlights

Key financial results for the third quarter 2022 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 2022

 

Q3 2021

 

Change

 

Q3 2022

 

Q3 2021

 

Change

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

$70.3

 

$62.7

 

12%

 

n/a

 

n/a

 

n/a

Subscription Revenue

$51.8

 

$44.1

 

17%

 

n/a

 

n/a

 

n/a

Subscription and Maintenance Revenue

$58.8

 

$52.6

 

12%

 

n/a

 

n/a

 

n/a

Profitability:

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

$42.7

 

$36.6

 

17%

 

$45.3

 

$38.0

 

19%

Operating Loss

$(16.2)

 

$(15.8)

 

$(0.4)

 

$(3.3)

 

$(6.3)

 

$3.0

Net Loss

$(13.9)

 

$(17.5)

 

$3.7

 

$(2.9)

 

$(5.9)

 

$3.1

Net Loss Per Share

$(0.31)

 

$(0.39)

 

$0.08

 

$(0.06)

 

$(0.13)

 

$0.07

Adjusted EBITDA

n/a

 

n/a

 

n/a

 

$(2.2)

 

$(4.4)

 

$2.3

Cash:

 

 

 

 

 

 

 

 

 

 

 

Net Cash Used in Operating Activities

$(9.0)

 

$(8.2)

 

$(0.8)

 

n/a

 

n/a

 

n/a

Free Cash Flow

n/a

 

n/a

 

n/a

 

$(9.1)

 

$(8.5)

 

$(0.5)

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 new customers who are adopting PROS solutions such as ABB, GE Healthcare, Phillips Pet Food, Rapido Group, Summit Electric Supply, and Vistara, among others.
  • Published our customer value assessment results on pros.com, highlighting that our solutions generate for our customers, on average, 8% revenue uplift, 200 basis points of margin improvement, and 67% improvement in efficiency gain.
  • Extended our digital offer marketing solutions with the launch of the EveryMundo Marketplace, an application store that connects third party developers building eCommerce applications on the EveryMundo platform to enterprise customers.
  • Launched buildwith.pros.com, our new developer portal, to give customers and partners access to our library of PROS APIs empowering them to integrate with and embed PROS data, insights, and services within enterprise applications, decreasing development time and accelerating time-to-market. Learn more by watching this YouTube video.

Financial Outlook

PROS currently anticipates the following based on an estimated 45.5 million basic weighted average shares outstanding for the fourth quarter of 2022 and a 22% non-GAAP estimated tax rate for the fourth quarter and full year 2022. For the full year 2022, we are raising our guidance for total revenue, subscription revenue, and adjusted EBITDA.

 

Q4 2022 Guidance

 

v. Q4 2021 at Mid-

Point

 

Full Year 2022

Guidance

 

v. Prior Year at Mid-

Point

Total Revenue

$68.5 to $69.5

 

6%

 

$273.75 to $274.75

 

9%

Subscription Revenue

$52.1 to $52.6

 

11%

 

$203.0 to $203.5

 

14%

ARR

n/a

 

n/a

 

$246.0 to $250.0

 

9%

Subscription ARR

n/a

 

n/a

 

$224.0 to $228.0

 

16%

Non-GAAP Loss Per Share

$(0.14) to $(0.11)

 

$0.04

 

n/a

 

n/a

Adjusted EBITDA

$(5.2) to $(4.2)

 

$1.7

 

$(22.5) to $(21.5)

 

$2.8

Free Cash Flow

n/a

 

n/a

 

$(25.0) to $(21.0)

 

$(2.8)

Conference Call

In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on Tuesday, November 1, 2022, at 4:45 p.m. EDT 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 15, 2022, 11:59 PM EDT at 1-844-512-2921 (toll-free) or 1-412-317-6671 using the pass code 13733111.

About PROS

PROS Holdings, Inc. (NYSE: PRO) is your company’s best-kept secret for profitable growth. Viewed as a market-leader by both Gartner and IDC for its CPQ and price optimization capabilities, PROS advanced AI delivers results to the world’s top brands including Cargill, Etihad, Honeywell, HP, Lenovo, Lufthansa, Siemens and more. With more than 30 million AI models, PROS award winning AI is the driving force in processing more than 2 trillion transactions per year. PROS customers report up to 96% efficiency gain, up to 5% margin improvement and up to 20% revenue lift, according to a recent ROI study. To learn more, visit 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 macroeconomic conditions, the impact of the coronavirus (COVID-19) pandemic; our financial outlook; expectations; ability to achieve future growth and profitability; management's confidence and optimism; positioning; customer successes; demand for our software solutions; pipeline; business expansion; revenue; subscription revenue; ARR; 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, among others, risks related to: (a) the impact of the COVID-19 pandemic, such as the scope and duration of the outbreak, including variants, and, among other effects, the timeframe for recovery of the travel industry, (b) 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, (c) increasing business from customers and maintaining subscription renewal rates, (d) managing our growth effectively, (e) disruptions from our third party data center, software, data, and other unrelated service providers, (f) implementing our solutions, (g) cloud operations, (h) intellectual property and third-party software, (i) acquiring and integrating businesses and/or technologies, (j) catastrophic events, (k) operating globally, including economic and commercial disruptions, (l) potential downturns in sales and lengthy sales cycles, (m) software innovation, (n) competition, (o) market acceptance of our software innovations, (p) maintaining our corporate culture, (q) personnel risks including loss of any key employees and competition for talent, (r) expanding and training our direct and indirect sales force, (s) evolving data privacy, cyber security and data localization laws, (t) our debt repayment obligations, (u) the timing of revenue recognition and cash flow from operations, (v) migrating customers to our latest cloud solutions, and (w) 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 loss from operations or non-GAAP operating loss, annual recurring revenue, adjusted EBITDA, free cash flow, non-GAAP tax rate, non-GAAP net loss, and basic 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 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 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 loss from operations: Non-GAAP loss from operations excludes the impact of share-based compensation, amortization of acquisition-related intangibles and severance. Non-GAAP 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. 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 loss per share: Non-GAAP net loss excludes the items listed above as excluded from non-GAAP loss from operations and also excludes amortization of debt issuance costs, gain on equity investment and the taxes related to these items and the items excluded from non-GAAP loss from operations. Estimates of non-GAAP loss per share are calculated by dividing estimates for non-GAAP 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 loss from operations, non-GAAP net 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.
  • 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. 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 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, depreciation and amortization and capitalized internal-use software development costs. Adjusted EBITDA should not be considered as an alternative to net 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, 2022

 

December 31, 2021

Assets:

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

206,824

 

 

$

227,553

 

Trade and other receivables, net of allowance of $529 and $1,206, respectively

 

 

45,918

 

 

 

40,581

 

Deferred costs, current

 

 

5,946

 

 

 

5,772

 

Prepaid and other current assets

 

 

11,706

 

 

 

9,623

 

Total current assets

 

 

270,394

 

 

 

283,529

 

Property and equipment, net

 

 

26,128

 

 

 

30,958

 

Operating lease right-of-use assets

 

 

18,096

 

 

 

25,732

 

Deferred costs, noncurrent

 

 

8,606

 

 

 

9,510

 

Intangibles, net

 

 

19,825

 

 

 

27,618

 

Goodwill

 

 

106,751

 

 

 

108,133

 

Other assets, noncurrent

 

 

11,092

 

 

 

9,003

 

Total assets

 

$

460,892

 

 

$

494,483

 

Liabilities and Stockholders’ (Deficit) Equity:

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and other liabilities

 

$

6,926

 

 

$

4,034

 

Accrued liabilities

 

 

13,389

 

 

 

12,631

 

Accrued payroll and other employee benefits

 

 

24,630

 

 

 

31,994

 

Operating lease liabilities, current

 

 

7,135

 

 

 

8,457

 

Deferred revenue, current

 

 

109,262

 

 

 

97,713

 

Total current liabilities

 

 

161,342

 

 

 

154,829

 

Deferred revenue, noncurrent

 

 

6,929

 

 

 

8,553

 

Convertible debt, net, noncurrent

 

 

289,406

 

 

 

288,287

 

Operating lease liabilities, noncurrent

 

 

29,898

 

 

 

38,034

 

Other liabilities, noncurrent

 

 

999

 

 

 

1,196

 

Total liabilities

 

 

488,574

 

 

 

490,899

 

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; 50,002,828

and 49,201,265 shares issued, respectively; 45,322,105 and 44,520,542 shares outstanding, respectively

 

 

50

 

 

 

49

 

Additional paid-in capital

 

 

581,819

 

 

 

546,693

 

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

 

 

(29,847

)

 

 

(29,847

)

Accumulated deficit

 

 

(573,551

)

 

 

(508,652

)

Accumulated other comprehensive loss

 

 

(6,153

)

 

 

(4,659

)

Total stockholders’ (deficit) equity

 

 

(27,682

)

 

 

3,584

 

Total liabilities and stockholders’ (deficit) equity

 

$

460,892

 

 

$

494,483

 

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,

 

 

2022

 

2021

 

2022

 

2021

Revenue:

 

 

 

 

 

 

 

 

Subscription

 

$

51,763

 

 

$

44,119

 

 

$

150,914

 

 

$

130,991

 

Maintenance and support

 

 

7,071

 

 

 

8,477

 

 

 

22,175

 

 

 

26,721

 

Total subscription, maintenance and support

 

 

58,834

 

 

 

52,596

 

 

 

173,089

 

 

 

157,712

 

Services

 

 

11,514

 

 

 

10,075

 

 

 

32,113

 

 

 

28,738

 

Total revenue

 

 

70,348

 

 

 

62,671

 

 

 

205,202

 

 

 

186,450

 

Cost of revenue:

 

 

 

 

 

 

 

 

Subscription

 

 

13,829

 

 

 

13,122

 

 

 

41,354

 

 

 

40,512

 

Maintenance and support

 

 

1,952

 

 

 

2,044

 

 

 

6,107

 

 

 

6,459

 

Total cost of subscription, maintenance and support

 

 

15,781

 

 

 

15,166

 

 

 

47,461

 

 

 

46,971

 

Services

 

 

11,829

 

 

 

10,886

 

 

 

35,151

 

 

 

31,977

 

Total cost of revenue

 

 

27,610

 

 

 

26,052

 

 

 

82,612

 

 

 

78,948

 

Gross profit

 

 

42,738

 

 

 

36,619

 

 

 

122,590

 

 

 

107,502

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling and marketing

 

 

22,221

 

 

 

21,025

 

 

 

71,528

 

 

 

63,779

 

Research and development

 

 

23,303

 

 

 

19,467

 

 

 

71,171

 

 

 

60,846

 

General and administrative

 

 

13,395

 

 

 

11,935

 

 

 

41,561

 

 

 

35,581

 

Impairment of fixed assets

 

 

 

 

 

 

 

 

1,551

 

 

 

 

Loss from operations

 

 

(16,181

)

 

 

(15,808

)

 

 

(63,221

)

 

 

(52,704

)

Convertible debt interest and amortization

 

 

(1,576

)

 

 

(1,576

)

 

 

(4,728

)

 

 

(4,728

)

Other income (expense), net

 

 

4,158

 

 

 

(71

)

 

 

3,738

 

 

 

219

 

Loss before income tax provision

 

 

(13,599

)

 

 

(17,455

)

 

 

(64,211

)

 

 

(57,213

)

Income tax provision

 

 

254

 

 

 

70

 

 

 

688

 

 

 

387

 

Net loss

 

$

(13,853

)

 

$

(17,525

)

 

$

(64,899

)

 

$

(57,600

)

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.31

)

 

$

(0.39

)

 

$

(1.44

)

 

$

(1.30

)

Weighted average number of shares:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

45,314

 

 

 

44,386

 

 

 

45,207

 

 

 

44,318

 

PROS Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2022

 

2021

 

2022

 

2021

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(13,853

)

 

$

(17,525

)

 

$

(64,899

)

 

$

(57,600

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,395

 

 

 

2,736

 

 

 

11,843

 

 

 

8,828

 

Amortization of debt issuance costs

 

 

373

 

 

 

373

 

 

 

1,119

 

 

 

1,119

 

Share-based compensation

 

 

10,626

 

 

 

8,634

 

 

 

32,617

 

 

 

25,410

 

Provision for doubtful accounts

 

 

(71

)

 

 

(388

)

 

 

(371

)

 

 

(2,078

)

Impairment of fixed assets

 

 

 

 

 

 

 

 

1,551

 

 

 

 

Gain on equity investment

 

 

(3,308

)

 

 

 

 

 

(3,308

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and unbilled receivables

 

 

(11,341

)

 

 

(1,398

)

 

 

(4,900

)

 

 

8,521

 

Deferred costs

 

 

598

 

 

 

887

 

 

 

730

 

 

 

2,296

 

Prepaid expenses and other assets

 

 

824

 

 

 

(698

)

 

 

(571

)

 

 

397

 

Operating lease right-of-use assets and liabilities

 

 

(808

)

 

 

9

 

 

 

(1,925

)

 

 

35

 

Accounts payable and other liabilities

 

 

1,282

 

 

 

(306

)

 

 

2,911

 

 

 

593

 

Accrued liabilities

 

 

885

 

 

 

(338

)

 

 

817

 

 

 

(539

)

Accrued payroll and other employee benefits

 

 

1,756

 

 

 

3,190

 

 

 

(7,388

)

 

 

215

 

Deferred revenue

 

 

651

 

 

 

(3,347

)

 

 

9,838

 

 

 

(4,782

)

Net cash used in operating activities

 

 

(8,991

)

 

 

(8,171

)

 

 

(21,936

)

 

 

(17,585

)

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(76

)

 

 

(347

)

 

 

(845

)

 

 

(2,432

)

Purchase of equity securities

 

 

 

 

 

(2,169

)

 

 

(169

)

 

 

(2,670

)

Net cash used in investing activities

 

 

(76

)

 

 

(2,516

)

 

 

(1,014

)

 

 

(5,102

)

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from employee stock plans

 

 

1,279

 

 

 

1,515

 

 

 

2,722

 

 

 

3,111

 

Tax withholding related to net share settlement of stock awards

 

 

 

 

 

 

 

 

(212

)

 

 

(352

)

Payments of notes payable

 

 

 

 

 

(288

)

 

 

 

 

 

(288

)

Net cash provided by financing activities

 

 

1,279

 

 

 

1,227

 

 

 

2,510

 

 

 

2,471

 

Effect of foreign currency rates on cash

 

 

(566

)

 

 

(224

)

 

 

(289

)

 

 

(276

)

Net change in cash and cash equivalents

 

 

(8,354

)

 

 

(9,684

)

 

 

(20,729

)

 

 

(20,492

)

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Beginning of period

 

 

215,178

 

 

 

318,326

 

 

 

227,553

 

 

 

329,134

 

End of period

 

$

206,824

 

 

$

308,642

 

 

$

206,824

 

 

$

308,642

 

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

 

 

2022

 

2021

 

% change

 

2022

 

2021

 

% change

GAAP gross profit

 

$

42,738

 

 

$

36,619

 

 

17

%

 

$

122,590

 

 

$

107,502

 

 

14

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of acquisition-related intangibles

 

 

1,555

 

 

 

384

 

 

 

 

 

5,223

 

 

 

1,196

 

 

 

Share-based compensation

 

 

1,050

 

 

 

951

 

 

 

 

 

2,881

 

 

 

2,753

 

 

 

Non-GAAP gross profit

 

$

45,343

 

 

$

37,954

 

 

19

%

 

$

130,694

 

 

$

111,451

 

 

17

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP gross margin

 

 

64.5

%

 

 

60.6

%

 

 

 

 

63.7

%

 

 

59.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP loss from operations

 

$

(16,181

)

 

$

(15,808

)

 

2

%

 

$

(63,221

)

 

$

(52,704

)

 

20

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of acquisition-related intangibles

 

 

2,221

 

 

 

845

 

 

 

 

 

7,793

 

 

 

2,597

 

 

 

Severance

 

 

 

 

 

 

 

 

 

 

1,508

 

 

 

 

 

 

Share-based compensation

 

 

10,626

 

 

 

8,634

 

 

 

 

 

32,617

 

 

 

25,410

 

 

 

Total Non-GAAP adjustments

 

 

12,847

 

 

 

9,479

 

 

 

 

 

41,918

 

 

 

28,007

 

 

 

Non-GAAP loss from operations

 

$

(3,334

)

 

$

(6,329

)

 

(47

)%

 

$

(21,303

)

 

$

(24,697

)

 

(14

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP loss from operations % of total revenue

 

 

(4.7

)%

 

 

(10.1

)%

 

 

 

 

(10.4

)%

 

 

(13.2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(13,853

)

 

$

(17,525

)

 

(21

)%

 

$

(64,899

)

 

$

(57,600

)

 

13

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Total Non-GAAP adjustments affecting loss from operations

 

 

12,847

 

 

 

9,479

 

 

 

 

 

41,918

 

 

 

28,007

 

 

 

Amortization of debt issuance costs

 

 

373

 

 

 

373

 

 

 

 

 

1,119

 

 

 

1,119

 

 

 

Gain on equity investment

 

 

(3,308

)

 

 

 

 

 

 

 

(3,308

)

 

 

 

 

 

Tax impact related to non-GAAP adjustments

 

 

1,066

 

 

 

1,744

 

 

 

 

 

6,078

 

 

 

6,569

 

 

 

Non-GAAP net loss

 

$

(2,875

)

 

$

(5,929

)

 

(52

)%

 

$

(19,092

)

 

$

(21,905

)

 

(13

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP diluted loss per share

 

$

(0.06

)

 

$

(0.13

)

 

 

 

$

(0.42

)

 

$

(0.49

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing non-GAAP loss per share

 

 

45,314

 

 

 

44,386

 

 

 

 

 

45,207

 

 

 

44,318

 

 

 

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,

 

 

2022

 

2021

 

2022

 

2021

Cost of Subscription Items

 

 

 

 

 

 

 

 

Amortization of acquisition-related intangibles

 

 

1,555

 

 

384

 

 

5,223

 

 

1,183

Share-based compensation

 

 

174

 

 

182

 

 

510

 

 

508

Total cost of subscription items

 

$

1,729

 

$

566

 

$

5,733

 

$

1,691

 

 

 

 

 

 

 

 

 

Cost of Maintenance Items

 

 

 

 

 

 

 

 

Amortization of acquisition-related intangibles

 

 

 

 

 

 

 

 

13

Share-based compensation

 

 

109

 

 

131

 

 

298

 

 

362

Total cost of maintenance items

 

$

109

 

$

131

 

$

298

 

$

375

 

 

 

 

 

 

 

 

 

Cost of Services Items

 

 

 

 

 

 

 

 

Share-based compensation

 

 

767

 

 

638

 

 

2,073

 

 

1,883

Total cost of services items

 

$

767

 

$

638

 

$

2,073

 

$

1,883

 

 

 

 

 

 

 

 

 

Sales and Marketing Items

 

 

 

 

 

 

 

 

Amortization of acquisition-related intangibles

 

 

666

 

 

461

 

 

2,570

 

 

1,401

Severance

 

 

 

 

 

 

1,444

 

 

Share-based compensation

 

 

2,897

 

 

2,600

 

 

9,413

 

 

7,334

Total sales and marketing items

 

$

3,563

 

$

3,061

 

$

13,427

 

$

8,735

 

 

 

 

 

 

 

 

 

Research and Development Items

 

 

 

 

 

 

 

 

Share-based compensation

 

 

2,995

 

 

1,924

 

 

9,607

 

 

5,867

Total research and development items

 

$

2,995

 

$

1,924

 

$

9,607

 

$

5,867

 

 

 

 

 

 

 

 

 

General and Administrative Items

 

 

 

 

 

 

 

 

Severance

 

 

 

 

 

 

64

 

 

Share-based compensation

 

 

3,684

 

 

3,159

 

 

10,716

 

 

9,456

Total general and administrative items

 

$

3,684

 

$

3,159

 

$

10,780

 

$

9,456

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,

 

 

2022

 

2021

 

2022

 

2021

Adjusted EBITDA

 

 

 

 

 

 

 

 

GAAP Loss from Operations

 

$

(16,181

)

 

$

(15,808

)

 

$

(63,221

)

 

$

(52,704

)

Amortization of acquisition-related intangibles

 

 

2,221

 

 

 

845

 

 

 

7,793

 

 

 

2,597

 

Severance

 

 

 

 

 

 

 

 

1,508

 

 

 

 

Share-based compensation

 

 

10,626

 

 

 

8,634

 

 

 

32,617

 

 

 

25,410

 

Depreciation and other amortization

 

 

1,174

 

 

 

1,891

 

 

 

4,050

 

 

 

6,231

 

Adjusted EBITDA

 

$

(2,160

)

 

$

(4,438

)

 

$

(17,253

)

 

$

(18,466

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

$

(8,991

)

 

$

(8,171

)

 

$

(21,936

)

 

$

(17,585

)

Purchase of property and equipment (excluding new headquarters)

 

 

(76

)

 

 

(347

)

 

 

(845

)

 

 

(1,291

)

Free Cash Flow

 

$

(9,067

)

 

$

(8,518

)

 

$

(22,781

)

 

$

(18,876

)

 

 

 

 

 

 

 

 

 

Guidance

 

 

 

 

 

 

 

 

 

 

Q4 2022 Guidance

 

Full Year 2022 Guidance

 

 

Low

 

High

 

Low

 

High

Adjusted EBITDA

 

 

 

 

 

 

 

 

GAAP Loss from Operations

 

$

(24,100

)

 

$

(23,100

)

 

$

(87,300

)

 

$

(86,300

)

Amortization of acquisition-related intangibles

 

 

2,000

 

 

 

2,000

 

 

 

9,700

 

 

 

9,700

 

Severance

 

 

5,000

 

 

 

5,000

 

 

 

6,500

 

 

 

6,500

 

Share-based compensation

 

 

10,700

 

 

 

10,700

 

 

 

43,400

 

 

 

43,400

 

Depreciation and other amortization

 

 

1,200

 

 

 

1,200

 

 

 

5,200

 

 

 

5,200

 

Adjusted EBITDA

 

$

(5,200

)

 

$

(4,200

)

 

$

(22,500

)

 

$

(21,500

)

 

Contacts

Investor Contact:

PROS Investor Relations

Belinda Overdeput

713-335-5879

ir@pros.com

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