Form 8-K PROS Holdings, Inc. For: Jul 28
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 28, 2022
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
| Item 2.02. | Results of Operations and Financial Condition. | ||||
On July 28, 2022, PROS Holdings, Inc. (the "Company") issued a press release announcing financial results for its quarter ended June 30, 2022. A copy of the press release, dated as of July 28, 2022, is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The press release contains forward looking statements regarding the Company and includes cautionary statements identifying important factors that could cause actual results to differ materially from those anticipated.
The information in this Current Report, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any registration statement or other document filed with the Securities and Exchange Commission ("SEC") by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
| Item 7.01. | Regulation FD Disclosure. | ||||
On July 28, 2022, the Company published the Q2 2022 Earnings Presentation ("Investor Presentation") on the Investor Relations section of the Company’s website located at https://ir.pros.com/. From time to time, the Company may also present and/or distribute the Investor Presentation to the investment community to provide updates and summaries of its business. Copy of the Q2 2022 Earnings Presentation are furnished herewith as Exhibits 99.2. Investors should note that the Company uses the Investor Relations section of its corporate website to announce material information to investors and the marketplace. While not all of the information that the Company posts on its corporate website is of a material nature, some information could be deemed to be material. Accordingly, the Company encourages investors, the media, and others interested in the Company to review the information that it shares on the Investor Relations section of our website.
The information contained in the Investor Presentation is summary information that is intended to be considered in the context of the Company's SEC filings and other public announcements that the Company may make, by press release or otherwise, from time to time. The Company undertakes no duty or obligation to publicly update or revise the information contained in this report, although it may do so from time to time as its management believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.
The information in this Current Report, including Exhibits 99.2 attached hereto, shall not be deemed "filed" for the purpose of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. The information contained herein and in the accompanying exhibits shall not be incorporated by reference into any registration statement or other document filed with the SEC by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01. | Financial Statements and Exhibits. | ||||
(d) Exhibits
| Exhibit No. | Exhibit Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL (included as Exhibit 101). | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
PROS HOLDINGS, INC. | ||||||||
| July 28, 2022 | /s/ Stefan Schulz | |||||||
Stefan Schulz | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
EXHIBIT 99.1
PROS HOLDINGS, INC. REPORTS SECOND QUARTER 2022 FINANCIAL RESULTS
•Raised full year 2022 guidance for total revenue and subscription revenue.
•Subscription revenue of $50.4 million, up 14% year-over-year.
•Subscription gross margin of 73% and non-GAAP subscription gross margin of 76%, up over 580 basis points year-over-year.
HOUSTON – July 28, 2022 — PROS Holdings, Inc. (NYSE: PRO), a market-leading provider of SaaS solutions optimizing shopping and selling experiences, today announced financial results for the second quarter ended June 30, 2022.
“I’m proud of our team for delivering another strong quarter in which we more than doubled our deal count year-over-year, booking more deals in the first half of 2022 than we did all last year, while exceeding the high-end of our guidance range across all metrics,” stated CEO Andres Reiner. “Our award-winning AI algorithms and market-leading platform capabilities are helping our customers achieve record-level profits, even in an inflationary environment. I believe our solutions are more relevant than ever as businesses look to accelerate profitable revenue growth in the face of cost pressures and supply chain volatility.”
Second Quarter 2022 Financial Highlights
Key financial results for the second 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 | ||||||||||||||||||||||||||||||||||
| Q2 2022 | Q2 2021 | Change | Q2 2022 | Q2 2021 | Change | ||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||
| Total Revenue | $68.4 | $62.4 | 10% | n/a | n/a | n/a | |||||||||||||||||||||||||||||
| Subscription Revenue | $50.4 | $44.2 | 14% | n/a | n/a | n/a | |||||||||||||||||||||||||||||
| Subscription and Maintenance Revenue | $57.6 | $52.8 | 9% | n/a | n/a | n/a | |||||||||||||||||||||||||||||
| Profitability: | |||||||||||||||||||||||||||||||||||
| Gross Profit | $40.7 | $36.0 | 13% | $43.4 | $37.4 | 16% | |||||||||||||||||||||||||||||
| Operating Loss | $(20.5) | $(16.3) | $(4.2) | $(7.2) | $(6.8) | $(0.4) | |||||||||||||||||||||||||||||
| Net Loss | $(22.4) | $(18.0) | $(4.4) | $(6.5) | $(6.3) | $(0.3) | |||||||||||||||||||||||||||||
| Net Loss Per Share | $(0.50) | $(0.41) | $(0.09) | $(0.14) | $(0.14) | $— | |||||||||||||||||||||||||||||
| Adjusted EBITDA | n/a | n/a | n/a | $(6.0) | $(4.7) | $(1.3) | |||||||||||||||||||||||||||||
| Cash: | |||||||||||||||||||||||||||||||||||
| Net Cash Used in Operating Activities | $(1.9) | $(5.0) | $3.1 | n/a | n/a | n/a | |||||||||||||||||||||||||||||
| Free Cash Flow | n/a | n/a | n/a | $(2.2) | $(5.7) | $3.5 | |||||||||||||||||||||||||||||
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 Aurora Auto Parts, BORG Automotive, Celeste Airlines, Lyons Magnus, Qatar Airways Cargo, Securitas, Three Ireland and Uponor, among others.
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•Expanded our partnerships with airlines such as All Nippon Airways and Turkish Airways, among others, who chose to migrate to the cloud to drive revenue acceleration with PROS latest airline innovations.
•Won the 2022 AI Breakthrough Award for Best AI-Based Solution for Sales and the 2022 Golden Bridge Business and Innovation Awards’ Silver Globee for Business Intelligence Innovation, demonstrating PROS innovation leadership in building best-of-breed AI solutions that generate significant and measurable efficiency gains, margin improvement, and revenue uplift for our customers.
•Named one of three finalists in the 2022 Microsoft Partner of the Year Awards, recognizing PROS as a top Global Independent Software Vendor; PROS Smart CPQ combined with the Microsoft Dynamics ecosystem provides a highly differentiated solution to businesses looking to configure and deliver personalized quotes that improve win rates and drive efficiency through automation.
•Certified as a 2022 Most Loved Workplace® which is determined based on surveys that assess overall employee satisfaction and happiness, a testament to PROS authentic company culture and focus on building an environment where all employees feel a sense of belonging and can reach their full potential.
Financial Outlook
PROS currently anticipates the following based on an estimated 45.3 million basic weighted average shares outstanding for the third quarter of 2022 and a 22% non-GAAP estimated tax rate for the third quarter and full year 2022.
| Q3 2022 Guidance | v. Q3 2021 at Mid-Point | Full Year 2022 Guidance | v. Prior Year at Mid-Point | ||||||||||||||||||||
| Total Revenue | $68.0 to $69.0 | 9% | $270.5 to $272.5 | 8% | |||||||||||||||||||
| Subscription Revenue | $50.5 to $51.0 | 15% | $201.5 to $202.5 | 13% | |||||||||||||||||||
| 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 | $(0.18) to $(0.15) | $(0.04) | n/a | n/a | |||||||||||||||||||
| Adjusted EBITDA | $(7.5) to $(6.5) | $(2.6) | $(28.0) to $(25.0) | $(1.7) | |||||||||||||||||||
| 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 Thursday, July 28, 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 Thursday, August 11, 2022, 11:59 PM EDT at 1-844-512-2921 (toll-free) or 1-412-317-6671 using the pass code 13731435.
About PROS
PROS Holdings, Inc. (NYSE: PRO) is a market-leading provider of SaaS solutions that optimize shopping and selling experiences. Built on the PROS Platform, these intelligent solutions leverage business AI, intuitive user experiences and process automation to deliver frictionless, personalized purchasing experiences designed to meet the real-time demands of today’s B2B and B2C omnichannel shoppers, regardless of industry. 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
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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,
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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 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.
•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.
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Investor Contact:
PROS Investor Relations
Belinda Overdeput
Belinda Overdeput
713-335-5879
ir@pros.com
Media Contact:
Amy Williams
713-335-5978
awilliams@pros.com
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PROS Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
| June 30, 2022 | December 31, 2021 | |||||||||||||
Assets: | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 215,178 | $ | 227,553 | ||||||||||
| Trade and other receivables, net of allowance of $1,044 and $1,206, respectively | 34,415 | 40,581 | ||||||||||||
Deferred costs, current | 5,961 | 5,772 | ||||||||||||
Prepaid and other current assets | 11,935 | 9,623 | ||||||||||||
Total current assets | 267,489 | 283,529 | ||||||||||||
Property and equipment, net | 27,341 | 30,958 | ||||||||||||
Operating lease right-of-use assets | 20,195 | 25,732 | ||||||||||||
Deferred costs, noncurrent | 9,189 | 9,510 | ||||||||||||
Intangibles, net | 22,046 | 27,618 | ||||||||||||
Goodwill | 107,334 | 108,133 | ||||||||||||
Other assets, noncurrent | 8,156 | 9,003 | ||||||||||||
Total assets | $ | 461,750 | $ | 494,483 | ||||||||||
Liabilities and Stockholders’ (Deficit) Equity: | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable and other liabilities | $ | 5,978 | $ | 4,034 | ||||||||||
Accrued liabilities | 12,697 | 12,631 | ||||||||||||
Accrued payroll and other employee benefits | 22,862 | 31,994 | ||||||||||||
Operating lease liabilities, current | 7,393 | 8,457 | ||||||||||||
Deferred revenue, current | 108,207 | 97,713 | ||||||||||||
Total current liabilities | 157,137 | 154,829 | ||||||||||||
Deferred revenue, noncurrent | 7,278 | 8,553 | ||||||||||||
Convertible debt, net, noncurrent | 289,033 | 288,287 | ||||||||||||
Operating lease liabilities, noncurrent | 32,327 | 38,034 | ||||||||||||
Other liabilities, noncurrent | 1,065 | 1,196 | ||||||||||||
Total liabilities | 486,840 | 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; 49,928,002 and 49,201,265 shares issued, respectively; 45,247,279 and 44,520,542 shares outstanding, respectively | 50 | 49 | ||||||||||||
Additional paid-in capital | 569,914 | 546,693 | ||||||||||||
| Treasury stock, 4,680,723 common shares, at cost | (29,847) | (29,847) | ||||||||||||
Accumulated deficit | (559,698) | (508,652) | ||||||||||||
Accumulated other comprehensive loss | (5,509) | (4,659) | ||||||||||||
Total stockholders’ (deficit) equity | (25,090) | 3,584 | ||||||||||||
Total liabilities and stockholders’ (deficit) equity | $ | 461,750 | $ | 494,483 | ||||||||||
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PROS Holdings, Inc.
Condensed Consolidated Statements of Loss
(In thousands, except per share data)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||
| Subscription | $ | 50,386 | $ | 44,224 | $ | 99,151 | $ | 86,872 | ||||||||||||||||||
| Maintenance and support | 7,249 | 8,570 | 15,104 | 18,244 | ||||||||||||||||||||||
| Total subscription, maintenance and support | 57,635 | 52,794 | 114,255 | 105,116 | ||||||||||||||||||||||
| Services | 10,727 | 9,607 | 20,599 | 18,663 | ||||||||||||||||||||||
| Total revenue | 68,362 | 62,401 | 134,854 | 123,779 | ||||||||||||||||||||||
| Cost of revenue: | ||||||||||||||||||||||||||
| Subscription | 13,746 | 13,589 | 27,525 | 27,390 | ||||||||||||||||||||||
| Maintenance and support | 1,988 | 2,157 | 4,155 | 4,415 | ||||||||||||||||||||||
| Total cost of subscription, maintenance and support | 15,734 | 15,746 | 31,680 | 31,805 | ||||||||||||||||||||||
| Services | 11,907 | 10,658 | 23,322 | 21,091 | ||||||||||||||||||||||
| Total cost of revenue | 27,641 | 26,404 | 55,002 | 52,896 | ||||||||||||||||||||||
| Gross profit | 40,721 | 35,997 | 79,852 | 70,883 | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Selling and marketing | 24,020 | 21,190 | 49,307 | 42,754 | ||||||||||||||||||||||
| Research and development | 23,401 | 20,454 | 47,868 | 41,379 | ||||||||||||||||||||||
| General and administrative | 13,837 | 10,659 | 28,166 | 23,646 | ||||||||||||||||||||||
| Impairment of fixed assets | — | — | 1,551 | — | ||||||||||||||||||||||
| Loss from operations | (20,537) | (16,306) | (47,040) | (36,896) | ||||||||||||||||||||||
| Convertible debt interest and amortization | (1,576) | (1,576) | (3,152) | (3,152) | ||||||||||||||||||||||
| Other (expense) income, net | (2) | 4 | (420) | 290 | ||||||||||||||||||||||
| Loss before income tax provision | (22,115) | (17,878) | (50,612) | (39,758) | ||||||||||||||||||||||
| Income tax provision | 291 | 168 | 434 | 317 | ||||||||||||||||||||||
| Net loss | $ | (22,406) | $ | (18,046) | $ | (51,046) | $ | (40,075) | ||||||||||||||||||
| Net loss per share: | ||||||||||||||||||||||||||
| Basic and diluted | $ | (0.50) | $ | (0.41) | $ | (1.13) | $ | (0.90) | ||||||||||||||||||
| Weighted average number of shares: | ||||||||||||||||||||||||||
| Basic and diluted | 45,222 | 44,321 | 45,154 | 44,283 | ||||||||||||||||||||||
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PROS Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
Operating activities: | ||||||||||||||||||||||||||
Net loss | $ | (22,406) | $ | (18,046) | $ | (51,046) | $ | (40,075) | ||||||||||||||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||||||||||||
Depreciation and amortization | 3,801 | 3,024 | 8,448 | 6,092 | ||||||||||||||||||||||
| Amortization of debt issuance costs | 373 | 373 | 746 | 746 | ||||||||||||||||||||||
Share-based compensation | 10,766 | 8,606 | 21,991 | 16,776 | ||||||||||||||||||||||
Provision for doubtful accounts | (209) | (1,131) | (300) | (1,690) | ||||||||||||||||||||||
Impairment of fixed assets | — | — | 1,551 | — | ||||||||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||||||||
Accounts and unbilled receivables | 18,571 | 13,529 | 6,441 | 9,919 | ||||||||||||||||||||||
Deferred costs | 180 | 542 | 132 | 1,409 | ||||||||||||||||||||||
Prepaid expenses and other assets | (1,133) | 1,490 | (1,395) | 1,095 | ||||||||||||||||||||||
| Operating lease right-of-use assets and liabilities | (378) | 199 | (1,117) | 26 | ||||||||||||||||||||||
Accounts payable and other liabilities | (2,274) | (1,113) | 1,629 | 899 | ||||||||||||||||||||||
Accrued liabilities | 41 | (4,119) | (68) | (201) | ||||||||||||||||||||||
Accrued payroll and other employee benefits | 4,102 | 4,598 | (9,144) | (2,975) | ||||||||||||||||||||||
Deferred revenue | (13,365) | (12,937) | 9,187 | (1,435) | ||||||||||||||||||||||
| Net cash used in operating activities | (1,931) | (4,985) | (12,945) | (9,414) | ||||||||||||||||||||||
Investing activities: | ||||||||||||||||||||||||||
Purchases of property and equipment | (308) | (785) | (769) | (2,085) | ||||||||||||||||||||||
Purchase of equity securities | (169) | — | (169) | (501) | ||||||||||||||||||||||
| Net cash used in investing activities | (477) | (785) | (938) | (2,586) | ||||||||||||||||||||||
Financing activities: | ||||||||||||||||||||||||||
| Proceeds from employee stock plans | — | — | 1,443 | 1,596 | ||||||||||||||||||||||
Tax withholding related to net share settlement of stock awards | — | — | (212) | (352) | ||||||||||||||||||||||
| Net cash provided by financing activities | — | — | 1,231 | 1,244 | ||||||||||||||||||||||
| Effect of foreign currency rates on cash | 193 | 167 | 277 | (52) | ||||||||||||||||||||||
| Net change in cash and cash equivalents | (2,215) | (5,603) | (12,375) | (10,808) | ||||||||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||||||||||||
Beginning of period | 217,393 | 323,929 | 227,553 | 329,134 | ||||||||||||||||||||||
End of period | $ | 215,178 | $ | 318,326 | $ | 215,178 | $ | 318,326 | ||||||||||||||||||
8
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 | ||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | % change | 2022 | 2021 | % change | ||||||||||||||||||||||||||||||||||||
GAAP gross profit | $ | 40,721 | $ | 35,997 | 13 | % | $ | 79,852 | $ | 70,883 | 13 | % | |||||||||||||||||||||||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||||||||
Amortization of acquisition-related intangibles | 1,685 | 391 | 3,668 | 812 | |||||||||||||||||||||||||||||||||||||
Share-based compensation | 1,006 | 976 | 1,831 | 1,802 | |||||||||||||||||||||||||||||||||||||
Non-GAAP gross profit | $ | 43,412 | $ | 37,364 | 16 | % | $ | 85,351 | $ | 73,497 | 16 | % | |||||||||||||||||||||||||||||
Non-GAAP gross margin | 63.5 | % | 59.9 | % | 63.3 | % | 59.4 | % | |||||||||||||||||||||||||||||||||
GAAP loss from operations | $ | (20,537) | $ | (16,306) | 26 | % | $ | (47,040) | $ | (36,896) | 27 | % | |||||||||||||||||||||||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||||||||
Amortization of acquisition-related intangibles | 2,597 | 885 | 5,572 | 1,752 | |||||||||||||||||||||||||||||||||||||
Severance | — | — | 1,508 | — | |||||||||||||||||||||||||||||||||||||
Share-based compensation | 10,766 | 8,606 | 21,991 | 16,776 | |||||||||||||||||||||||||||||||||||||
Total Non-GAAP adjustments | 13,363 | 9,491 | 29,071 | 18,528 | |||||||||||||||||||||||||||||||||||||
Non-GAAP loss from operations | $ | (7,174) | $ | (6,815) | 5 | % | $ | (17,969) | $ | (18,368) | (2) | % | |||||||||||||||||||||||||||||
Non-GAAP loss from operations % of total revenue | (10.5) | % | (10.9) | % | (13.3) | % | (14.8) | % | |||||||||||||||||||||||||||||||||
GAAP net loss | $ | (22,406) | $ | (18,046) | 24 | % | $ | (51,046) | $ | (40,075) | 27 | % | |||||||||||||||||||||||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||||||||
Total Non-GAAP adjustments affecting loss from operations | 13,363 | 9,491 | 29,071 | 18,528 | |||||||||||||||||||||||||||||||||||||
Amortization of debt issuance costs | 373 | 373 | 746 | 746 | |||||||||||||||||||||||||||||||||||||
Tax impact related to non-GAAP adjustments | 2,132 | 1,930 | 5,012 | 4,825 | |||||||||||||||||||||||||||||||||||||
Non-GAAP net loss | $ | (6,538) | $ | (6,252) | 5 | % | $ | (16,217) | $ | (15,976) | 2 | % | |||||||||||||||||||||||||||||
Non-GAAP diluted loss per share | $ | (0.14) | $ | (0.14) | $ | (0.36) | $ | (0.36) | |||||||||||||||||||||||||||||||||
Shares used in computing non-GAAP loss per share | 45,222 | 44,321 | 45,154 | 44,283 | |||||||||||||||||||||||||||||||||||||
9
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, | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
Cost of Subscription Items | |||||||||||||||||||||||||||||||||||
Amortization of acquisition-related intangibles | 1,685 | 391 | 3,668 | 799 | |||||||||||||||||||||||||||||||
Share-based compensation | 185 | 178 | 336 | 326 | |||||||||||||||||||||||||||||||
Total cost of subscription items | $ | 1,870 | $ | 569 | $ | 4,004 | $ | 1,125 | |||||||||||||||||||||||||||
Cost of Maintenance Items | |||||||||||||||||||||||||||||||||||
Amortization of acquisition-related intangibles | — | — | — | 13 | |||||||||||||||||||||||||||||||
Share-based compensation | 98 | 127 | 189 | 231 | |||||||||||||||||||||||||||||||
Total cost of maintenance items | $ | 98 | $ | 127 | $ | 189 | $ | 244 | |||||||||||||||||||||||||||
Cost of Services Items | |||||||||||||||||||||||||||||||||||
Share-based compensation | 723 | 671 | 1,306 | 1,245 | |||||||||||||||||||||||||||||||
Total cost of services items | $ | 723 | $ | 671 | $ | 1,306 | $ | 1,245 | |||||||||||||||||||||||||||
Sales and Marketing Items | |||||||||||||||||||||||||||||||||||
Amortization of acquisition-related intangibles | 912 | 494 | 1,904 | 940 | |||||||||||||||||||||||||||||||
Severance | — | — | 1,444 | — | |||||||||||||||||||||||||||||||
Share-based compensation | 3,276 | 2,510 | 6,516 | 4,734 | |||||||||||||||||||||||||||||||
Total sales and marketing items | $ | 4,188 | $ | 3,004 | $ | 9,864 | $ | 5,674 | |||||||||||||||||||||||||||
Research and Development Items | |||||||||||||||||||||||||||||||||||
Share-based compensation | 2,899 | 2,117 | 6,612 | 3,943 | |||||||||||||||||||||||||||||||
Total research and development items | $ | 2,899 | $ | 2,117 | $ | 6,612 | $ | 3,943 | |||||||||||||||||||||||||||
General and Administrative Items | |||||||||||||||||||||||||||||||||||
Severance | — | — | 64 | — | |||||||||||||||||||||||||||||||
Share-based compensation | 3,585 | 3,003 | 7,032 | 6,297 | |||||||||||||||||||||||||||||||
Total general and administrative items | $ | 3,585 | $ | 3,003 | $ | 7,096 | $ | 6,297 | |||||||||||||||||||||||||||
10
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, | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | |||||||||||||||||||||||||||||||||||
GAAP Loss from Operations | $ | (20,537) | $ | (16,306) | $ | (47,040) | $ | (36,896) | |||||||||||||||||||||||||||
Amortization of acquisition-related intangibles | 2,597 | 885 | 5,572 | 1,752 | |||||||||||||||||||||||||||||||
Severance | — | — | 1,508 | — | |||||||||||||||||||||||||||||||
Share-based compensation | 10,766 | 8,606 | 21,991 | 16,776 | |||||||||||||||||||||||||||||||
Depreciation and other amortization | 1,204 | 2,139 | 2,876 | 4,340 | |||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | (5,970) | $ | (4,676) | $ | (15,093) | $ | (14,028) | |||||||||||||||||||||||||||
| Net cash used in operating activities | $ | (1,931) | $ | (4,985) | $ | (12,945) | $ | (9,414) | |||||||||||||||||||||||||||
Purchase of property and equipment (excluding new headquarters) | (308) | (741) | (769) | (944) | |||||||||||||||||||||||||||||||
Free Cash Flow | $ | (2,239) | $ | (5,726) | $ | (13,714) | $ | (10,358) | |||||||||||||||||||||||||||
| Guidance | |||||||||||||||||||||||||||||||||||
| Q3 2022 Guidance | Full Year 2022 Guidance | ||||||||||||||||||||||||||||||||||
| Low | High | Low | High | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | |||||||||||||||||||||||||||||||||||
GAAP Loss from Operations | $ | (22,600) | $ | (21,600) | $ | (89,600) | $ | (86,600) | |||||||||||||||||||||||||||
Amortization of acquisition-related intangibles | 2,200 | 2,200 | 9,800 | 9,800 | |||||||||||||||||||||||||||||||
Severance | — | — | 1,500 | 1,500 | |||||||||||||||||||||||||||||||
Share-based compensation | 11,700 | 11,700 | 45,100 | 45,100 | |||||||||||||||||||||||||||||||
Depreciation and other amortization | 1,200 | 1,200 | 5,200 | 5,200 | |||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | (7,500) | $ | (6,500) | $ | (28,000) | $ | (25,000) | |||||||||||||||||||||||||||
11
PROS Holdings, Inc. Second Quarter 2022 Investor Presentation Updated July 28, 2022 [email protected]
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 2 Disclaimer / Forward-Looking Statements This presentation 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 presentation 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. This presentation includes certain supplemental non-GAAP financial measures, that we believe are useful to investors as useful tools for assessing the comparability between periods as well as company by company. Our computation of these measures may not be comparable to other similarly titled measures computed by other companies. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, our financial information and results prepared in accordance with U.S. GAAP included in our periodic filings made with the SEC. Further information relevant to the interpretation of non-GAAP financial measures, and reconciliations of these non-GAAP financial measures to the most comparable GAAP measures, may be found in the Appendix to this presentation.
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 3 To optimize every shopping and selling experience. Our vision…
Business Overview
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 5 PROS at a Glance $260mm+ Total Revenue TTM Q2 ‘22 84% Recurring Revenue as a % of Q2 ‘22 Total Revenue $30B+ Underpenetrated, Addressable Market Subscription Revenue Growth YoY Q2 ‘22 60+ Countries with Customers 14% 93%+ Customer Gross Revenue Retention Rate TTM Q2 ‘22 Avg. Revenue Uplift Customers Generate Using PROS 6%+ 15+ Awards & Accolades Received in 20211 (1) For a complete list of awards, visit our website.
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 6 We believe the combination of artificial intelligence and omnichannel, digital selling technology is critical for businesses to meet buyers’ expectations and thrive in today’s everchanging markets.
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 7 The Customer Buying Experience: The New Battlefield for Businesses of businesses expect to compete mainly on customer experience, up from just 36% in 2010 Source: Gartner What qualities define a good customer experience? Speed – Fast responses to inquiries, easy product search, easy to use self-service website Transparency – Product and pricing information are always accessible Personalized – Tailored recommendations, personalized pricing, personalized browsing experience Consistency – Harmonized buying experience, consistent recommendations and offers across channels
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 8 THE CUSTOMER eCOMMERCECRM API+ ACTIONABLE INSIGHTS ACTIONABLE INSIGHTS Common Data Model Connected Selling Workflows Shared UX Design System Artificial Intelligence uniquely enables companies to consolidate the development, management and delivery of product and price information to internal systems that drive commerce so that buyers can receive fast and personalized product and pricing offers in their preferred sales channel. Robust Product Catalogs Product and Service Configuration Performance Quoting Streamlined Sales Agreements Sales Opportunity Insights Omnichannel Price Management Customer-Specific Price Optimization Real-Time Price Delivery
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 9 THE PASSENGER MobileAirline.com NDC API Revenue Management Dynamic Pricing Ancillary Merchandising Bundling & Segmentation Group & Corporate Sales Pricing & Shopping Digital Retailing Booking, Ticketing & Servicing ACTIONABLE INSIGHTS ACTIONABLE INSIGHTS GDS for Travel powers an airline’s offer marketing, revenue management, sales, distribution, and digital retail strategies to create and distribute revenue optimal offers while maintaining the ability to scale the business across both direct and NDC channels. PROS is uniquely able to deliver an end-to-end solution that enables airlines as retailers – to optimize every shopping and selling experience an airline owns. Digital Offer Marketing Common Data Model Connected Selling Workflows Shared UX Design System Artificial Intelligence
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 10 Built on an AI Architecture to Drive Offer Personalization PROS’ flagship AI algorithms have been developed and trained over decades enabling us to provide you with the most personalized offer recommendations which drive sales wins. Data gathered across multiple channels compound the number of dimensions sellers must keep track of The exponential growth of relevant data must be parsed and included in the decision process—AI is a requirement Only AI has the accuracy and consistency, across huge volumes of data, fast enough to meet customer demands.
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 11 Leading Companies Across Industries Choose PROS to Power Commerce Travel TechnologyHealthcare Chemicals & Energy Food & ConsumablesB2B Services Automotive & Industrial
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 12 Our AI-Powered Solutions Power Companies to Win in Today’s Economy This is the first time in our company’s recorded history that we’ve had inflationary pressures and actually been able to increase our margins – and that’s because of PROS.” VP of Pricing Fortune 500 Distributor Our industry certainly has been faced with rising material costs, transportation costs, constraints of supply, throw in a global pandemic, why don't you. The need for technology that's dynamic and flexible, it's critical for businesses in today's day and age. And having PROS be part of our technology ecosystem. That solution has allowed us to continue to be flexible. Murrae-Anne Carlson WESCO Anixter Senior Director, Pricing Solutions In the emerging digital selling landscape, customers are looking for frictionless buying experiences, with immediate responses about pricing and delivery. PROS has proved to be an excellent partner, committed to our success. Jean-Phillippe Bitouzet Saint Gobain Director, Supply Chain & Business Model See more customer case studies and testimonials here There are small cost investment, large impact, like Salesforce, PROS as a pricing tool, Tableau as an analytical tool. Lance Fritz Union Pacific CEO, Q2 2020 Earnings Call
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 13 PROS TAM is Massive, Global and Growing $30B+ Underpenetrated, Addressable Market(1) Strategic Industries and Geographies +$9B Emerging Industries and Geographies$21B $2.4B Automotive & Industrial $1.6B Food & Consumables $1.3B Healthcare $1.2B Travel $1.0B B2B Services $800mm Technology $700mm Chemicals & Energy (1) TAM represents our estimated global total revenue and market opportunity but does not represent the actual market opportunity that we may target or ultimately service or otherwise derive revenue from. Our estimate of TAM may be revised in the future depending on a variety of factors, including competitive dynamics, our sales efforts, customer needs, industry shifts and other economic factors.
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 14 Numerous Vectors for Growth Large, Underpenetrated Addressable Market Significant Expansion Opportunities in Existing Customer Base Migrate Legacy Customers to Cloud Strategic M&A
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 15 Stability through the COVID-19 Pandemic 93%+ Customer Gross Revenue Retention Rate1 84% Recurring Revenue as a % of Total Revenue2 (1) TTM Customer Gross Revenue Retention Rate as of Q2 2022. (2) Recurring Revenue as a percent of Q2 2022 Total Revenue. • Pre-COVID PROS was outgrowing other airline RM providers at a faster rate • During COVID PROS retained more revenue than other airline RM providers 28% Subscription Revenue CAGR 2017 to 2021 100.0% 100.8% 100.4% 100.0% 36.3% 45.2% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 2019 2020 2021 PROS vs. Other Airline Revenue Management (RM) Providers (Total Annual Revenue as a % of 2019 Total Revenue) PROS Other Airline RM Providers
Financial Overview
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 17 66.1 98.7 145.3 170.5 178.0 202.0 2017 2018 2019 2020 2021 2022E Subscription Revenue Growth Trajectory ($mm, % YoY Growth) 49% 17% 47% 4% 13% • 28% CAGR 2017 through 2021 • Continued growth through the COVID-19 pandemic • Expecting re-acceleration in 20221 1 1) 2022 dollar value and growth rate based on the mid-point of the Subscription Revenue 2022 Guidance. 2022 expectations are forward-looking statements. Given the risks, uncertainties and assumptions related to PROS’ business and operations, PROS’ actual future results may differ materially from these expectations. Investors should review the Company’s cautionary statements and risk factors referred to in this presentation.
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 18 Non-GAAP Subscription Gross Margin1 Growth Trend – Last 6 Quarters 1) For definitions of non-GAAP measures or reconciliation of non-GAAP to GAAP measures, please refer to the appendix of this presentation. 69% 71% 72% 75% 76% 76% 64% 66% 68% 70% 72% 74% 76% 78% Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 N o n- G A A P S u bs cr ip tio n G ro ss M a rg in
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 19 Second Quarter 2022 Earnings Recap $mm (Except Per Share) Q2 2022 Q2 2021 Delta TTM 6/30/2022 TTM 6/30/2021 Delta Total Revenue $68.4 $62.4 10% $262.5 $246.1 7% Subscription Revenue $50.4 $44.2 14% $190.3 $171.8 11% Adjusted EBITDA ($6.0) ($4.7) ($1.3) ($25.9) ($24.4) ($1.5) Free Cash Flow ($2.2) ($5.7) $3.5 ($23.6) ($14.7) ($8.9) Non-GAAP Net Loss Per Share ($0.14) ($0.14) $-- ($0.64) ($0.65) $0.01 For a reconciliation of non-GAAP to GAAP metrics refer to the appendix.
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 20 Guidance Summary Q3 2022 Guidance v. Q3 2021 at Mid-Point Full Year 2022 Guidance v. Prior Year at Mid-Point Total Revenue $68.0 to $69.0 9% $270.5 to $272.5 8% Subscription Revenue $50.5 to $51.0 15% $201.5 to $202.5 13% 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 $(0.18) to $(0.15) $(0.04) n/a n/a Adjusted EBITDA $(7.5) to $(6.5) $(2.6) $(28.0) to $(25.0) $(1.7) Free Cash Flow n/a n/a $(25.0) to $(21.0) $(2.8) Notes: • The 2022 Guidance shown here are forward-looking statements. Given the risks, uncertainties and assumptions related to PROS’ business and operations, PROS’ actual future results may differ materially from these expectations. Investors should review the Company’s cautionary statements and risk factors referred to in this presentation. • Based on an estimated 45.3 million basic weighted average shares outstanding for the third quarter of 2022 and a 22% non-GAAP estimated tax rate for the third quarter and full year 2022. • Please see appendix for a reconciliation of these non-GAAP metrics to GAAP metrics.
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 21 Supplemental Business Metrics Revenue Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Subscription $ 42,029 $ 42,897 $ 42,648 $ 44,224 $ 44,119 $ 47,015 $ 48,765 $ 50,386 Maintenance and Support $ 10,765 $ 9,663 $ 9,674 $ 8,570 $ 8,477 $ 8,390 $ 7,855 $ 7,249 Recurring Revenue $ 52,794 $ 52,560 $ 52,322 $ 52,794 $ 52,596 $ 55,405 $ 56,620 $ 57,635 Services $ 8,714 $ 8,298 $ 9,056 $ 9,607 $ 10,075 $ 9,568 $ 9,872 $ 10,727 Total Revenue $ 61,508 $ 60,858 $ 61,378 $ 62,401 $ 62,671 $ 64,973 $ 66,492 $ 68,362 Recurring Revenue % 86% 86% 85% 85% 84% 85% 85% 84% Revenue by Geography Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 United States $ 19,960 $ 19,824 $ 20,876 $ 21,875 $ 23,275 $ 22,866 $ 23,194 $ 23,908 Europe $ 18,827 $ 18,497 $ 18,692 $ 18,562 $ 18,571 $ 20,659 $ 20,823 $ 20,865 Rest of World $ 22,721 $ 22,537 $ 21,810 $ 21,964 $ 20,825 $ 21,448 $ 22,475 $ 23,589
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 22 Supplemental Business Metrics Financial & Operating Metrics Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Non-GAAP Gross Margin1 62% 61% 59% 60% 61% 63% 63% 64% Non-GAAP Subscription Gross Margin1 71% 70% 69% 71% 72% 75% 76% 76% Non-GAAP Recurring Revenue Gross Margin1 74% 72% 71% 71% 72% 75% 76% 76% Adjusted EBIDTA1 $ (6,223) $ (4,175) $ (9,352) $ (4,676) $ (4,438) $ (6,356) $ (9,123) $ (5,970) Cash and Cash Equivalents $ 322,352 $ 329,134 $ 323,929 $ 318,326 $ 308,642 $ 227,553 $ 217,393 $ 215,178 Recurring Deferred Revenue $ 105,298 $ 95,551 $ 109,504 $ 97,510 $ 95,774 $ 96,133 $ 116,948 $ 103,510 Total Deferred Revenue $ 118,040 $ 110,528 $ 122,006 $ 109,131 $ 105,764 $ 106,266 $ 128,802 $ 115,485 TTM Recurring Calculated Billings1 $ 211,100 $ 185,572 $ 196,329 $ 203,468 $ 200,748 $ 213,699 $ 224,858 $ 228,255 Remaining Performance Obligations2 $ 366,800 $ 389,700 $ 401,300 $ 390,500 $ 373,000 $ 360,500 $ 433,100 $ 434,900 Remaining Performance Obligations - Current $ 175,400 $ 178,900 $ 191,000 $ 190,300 $ 180,500 $ 184,600 $ 201,100 $ 197,400 Free Cash Flow1 $ (15,729) $ 11,430 $ (4,632) $ (5,726) $ (8,518) $ (1,334) $ (11,475) $ (2,239) Total Headcount (including contractors) 1,424 1,403 1,409 1,409 1,401 1,545 1,541 1,597 Quota-carrying Personnel – New Business 65 51 54 56 64 67 64 58 1) For definitions of non-GAAP measures or reconciliation of non-GAAP to GAAP measures, please refer to the appendix of this presentation. 2) Remaining performance obligation represents contracted revenue that has not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue in future periods.
Our Values
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 24 Our Mission: To Help People and Companies Outperform We are INNOVATORS Thinking creatively to find new paths to success for our people, our customers, and our business. We CARE Putting people first - our customers, employees, partners, and community - it’s how our company was started, and how we’ll always run it. Looking for every opportunity to create a better PROS and a better experience for our customers, and we hold ourselves accountable. We are OWNERS Learn more about our incredible culture
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 25 Diversity & Inclusion PROS Employee Resource Groups (ERGs) Our ERGs are formed and led by employees, with company support, and any interested employee may join any group. Organized around common life experiences and backgrounds, they serve to champion our diversity initiatives and facilitate a workplace culture of equity and inclusion. Committed to a Diverse & Inclusive Environment We welcome and celebrate diverse perspectives, cultures and experiences. We are truly a ‘people first’ culture where every person is encouraged to bring their authentic selves to work and feel they belong and are valued. Our diversity in thought and action is what makes PROS a special place. Learn more 27% 30% 30% 29% 33% 32% 35% 35% 36% 36% 2017 2018 2019 2020 2021 25% 25% 27% 26% 26% 17% 21% 23% 24% 25% 2017 2018 2019 2020 2021 Overall Representation % of All Employees Globally Management % of All Managers Globally Overall Representation % of All Employees U.S. Management % of All Managers U.S. Women at PROS Underrepresented Minorities in the U.S. 2021 figures based on 1,210 global employees as of 12/31/21 2021 figures based on 805 employees in the U.S. as of 12/31/21 Note: Underrepresented Minorities include AA, Hispanic and Multicultural For further disclosures on D&I at PROS, read our ESG report.
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 26 Governance, Security, & Environmental Sustainability Governance • LEED Silver certified global HQ • Sustainable data centers worldwide through our partnership with Microsoft • Recycling program in all offices Security PROS Board of Directors and Executive team are committed to adhering to the highest ethical values and promoting transparency. For more detail and a complete list of governance documents and charters, visit the governance page of our website. For further disclosures, read our ESG report. At PROS, security is the responsibility of everyone. We take data security and privacy seriously. ISO 27001 Certified ISO 27018 Certified SOC1 Type 2 Certified SOC2 Type 2 Certified Cloud Security Alliance Compliant GDPR Compliant For more detail on security and compliance, including detail on all certifications we hold, visit the trust and security page of our website. Environmental Sustainability
Thank You pros.com
Appendix
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 29 Supplemental Information – Explanation of Non-GAAP Measures PROS has provided certain financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP gross profit, non-GAAP gross margin, non-GAAP subscription gross margin, non-GAAP recurring revenue gross margin, adjusted EBITDA and free cash flow. 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 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. A reconciliation of GAAP to the non-GAAP financial measures has been provided in these tables and in the earnings press release. PROS' use of non-GAAP financial measures may not be consistent with the presentations by similar companies in PROS' industry. Non-GAAP gross profit: Non-GAAP gross profit is defined as GAAP gross profit less the portion of new headquarters noncash rent expense, amortization of acquisition-related intangibles and share-based compensation costs allocated to cost of subscription, maintenance and support, and services. Non-GAAP gross margin is calculated as the percentage of non-GAAP gross profit divided by total revenue. Non-GAAP subscription gross margin and recurring revenue gross margin are similarly calculated to compare the non-GAAP gross profit of subscription revenue and recurring revenue (subscription, maintenance and support revenue), respectively, to total subscription and recurring revenue, respectively. In calculating the non-GAAP gross profit of subscription revenue, the total costs of subscription are adjusted to reduce such costs by the portion of new headquarters noncash rent expense, amortization of acquisition-related intangibles and share-based compensation costs allocated to cost of subscription. In calculating the non- GAAP gross profit of recurring revenue, the total costs of subscription, maintenance and support are adjusted to reduce such costs by the portion of new headquarters noncash rent expense, amortization of acquisition-related intangibles and share-based compensation costs allocated to cost of subscription and cost of maintenance and support. 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, acquisition-related expenses, amortization of acquisition-related intangibles, depreciation and amortization, new headquarters noncash rent expense, severance 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.
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 30 Supplemental Information - GAAP to Non-GAAP Reconciliations (unaudited) Gross Profit Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 GAAP Gross Profit $ 36,871 $ 35,539 $ 34,886 $ 35,997 $ 36,619 $ 38,996 $ 39,131 $ 40,721 New headquarters noncash rent expense 99 - - - - - - - Amortization of acquisition-related intangibles 910 886 421 391 384 752 1,983 1,685 Share-based compensation 519 587 826 976 951 926 825 1,006 Non-GAAP Gross Profit $ 38,399 $ 37,012 $ 36,133 $ 37,364 $ 37,954 $ 40,674 $ 41,939 $ 43,412 Non-GAAP Gross Margin 62% 61% 59% 60% 61% 63% 63% 64% Subscription Gross Profit Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 GAAP Subscription Gross Profit 29,132 29,377 28,847 30,635 30,997 34,109 34,986 36,640 New headquarters noncash rent expense 13 - - - - - - - Amortization of acquisition-related intangibles 742 714 408 391 384 752 1,983 1,685 Share-based compensation 119 126 148 178 182 207 151 185 Non-GAAP Subscription Gross Profit $ 30,006 $ 30,217 $ 29,403 $ 31,204 $ 31,563 $ 35,068 $ 37,120 $ 38,510 Non-GAAP Subscription Gross Margin 71% 70% 69% 71% 72% 75% 76% 76% Recurring Revenue Gross Profit Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 GAAP Recurring Revenue Gross Profit 37,720 36,737 36,263 37,048 37,430 40,446 40,674 41,901 New headquarters noncash rent expense 26 - - - - - - - Amortization of acquisition-related intangibles 910 886 421 391 384 752 1,983 1,685 Share-based compensation 169 190 252 305 313 343 242 283 Non-GAAP Recurring Revenue Gross Profit $ 38,825 $ 37,813 $ 36,936 $ 37,744 $ 38,127 $ 41,541 $ 42,899 $ 43,869 Non-GAAP Recurring Revenue Gross Margin 74% 72% 71% 71% 72% 75% 76% 76% Adjusted EBITDA Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 GAAP Loss From Operations $ (16,163) $ (13,426) $ (20,590) $ (16,306) $ (15,808) $ (21,639) $ (26,503) $ (20,537) Acquisition-related expenses - - - - - 2,386 - - Amortization of acquisition-related intangibles 1,386 1,363 867 885 845 1,420 2,975 2,597 Severance - - - - - - 1,508 - New headquarters noncash rent expense 370 - - - - - - - Share-based compensation 6,378 5,922 8,170 8,606 8,634 9,665 11,225 10,766 Depreciation and other amortization 2,265 2,387 2,201 2,139 1,891 1,812 1,672 1,204 Capitalized internal-use software development costs (459) (421) - - - - - - Adjusted EBITDA $ (6,223) $ (4,175) $ (9,352) $ (4,676) $ (4,438) $ (6,356) $ (9,123) $ (5,970) Free Cash Flow Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Cash Flow From Operations $ (14,886) $ 12,452 $ (4,429) $ (4,985) $ (8,171) $ (970) $ (11,014) $ (1,931) Purchase of property and equipment (excluding new headquarters) (384) (601) (203) (741) (347) (364) (461) (308) Capitalized internal-use software development costs (459) (421) - - - - - - Free Cash Flow $ (15,729) $ 11,430 $ (4,632) $ (5,726) $ (8,518) $ (1,334) $ (11,475) $ (2,239)
©2022 PROS, Inc. All rights reserved. Confidential and Proprietary page 31 Supplemental Reconciliation of GAAP to Non-GAAP Financial Measures – Guidance (In thousands, Unaudited) Low High Adjusted EBITDA GAAP Loss from Operations $ (22,600) $ (21,600) Amortization of acquisition-related intangibles 2,200 2,200 Share-based compensation 11,700 11,700 Depreciation and other amortization 1,200 1,200 Adjusted EBITDA $ (7,500) $ (6,500) Q3 2022 Guidance Low High Adjusted EBITDA GAAP Loss from Operations $ (89,600) $ (86,600) Amortization of acquisition-related intangibles 9,800 9,800 Severance 1,500 1,500 Share-based compensation 45,100 45,100 Depreciation and other amortization 5,200 5,200 Adjusted EBITDA $ (28,000) $ (25,000) Full Year 2022 Guidance