- Subscription revenue of $43.2 million, up 40%
year-over-year.
- Total revenue of $66.3 million, up 18% year-over-year.
PROS Holdings, Inc. (NYSE: PRO), a provider of AI-powered
solutions that optimize selling in the digital economy, today
announced financial results for the first quarter ended March 31,
2020.
“I’m so proud of how our team has kept their focus on supporting
our customers and each other during these difficult times,” stated
CEO Andres Reiner. “We’ve fully embraced the shift to operating
virtually and delivered another strong revenue growth quarter as we
help our customers and the industries we serve accelerate their
move to digital selling.”
First Quarter 2020 Financial Highlights
Key financial results for the first quarter 2020 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
Q1 2020
Q1 2019
Change
Q1 2020
Q1 2019
Change
Revenue:
Total Revenue
$
66.3
$
56.1
18
%
n/a
n/a
n/a
Subscription Revenue
$
43.2
$
30.9
40
%
n/a
n/a
n/a
Subscription and Maintenance Revenue
$
55.7
$
46.2
20
%
n/a
n/a
n/a
Profitability:
Gross Profit
$
37.6
$
35.3
6%
$
39.1
$
37.1
6%
Operating Loss
$
(21.4
)
$
(13.6
)
$
(7.7
)
$
(13.1
)
$
(5.4
)
$
(7.6
)
Net Loss
$
(22.7
)
$
(16.9
)
$
(5.8
)
$
(9.8
)
$
(4.2
)
$
(5.6
)
Net Loss Per Share
$
(0.53
)
$
(0.45
)
$
(0.08
)
$
(0.23
)
$
(0.11
)
$
(0.12
)
Adjusted EBITDA
n/a
n/a
n/a
$
(11.4
)
$
(4.6
)
$
(6.9
)
Cash:
Net Cash Used In Operating Activities
$
(24.2
)
$
(8.1
)
$
(16.1
)
n/a
n/a
n/a
Free Cash Flow
n/a
n/a
n/a
$
(25.5
)
$
(9.6
)
$
(15.9
)
The attached table provides a summary of PROS results for the
period, including a reconciliation of GAAP to non-GAAP metrics.
Recent Business Highlights
- Extended our leadership position on our Guidance solution with
strategic innovations that further enable our B2B customers to
self-serve, accelerate their time to value, and drive higher
adoption with targeted insights.
- Continued innovation in our market-leading airline passenger
revenue management product with the release of willingness-to-pay
based forecasting and optimization algorithms to help airlines
achieve dynamic pricing.
- Delivered a series of strategy and training webinars to bring
the markets and our customers together to learn, share ideas, and
prepare for the post-COVID-19 world; offered free consultations
with our industry and pricing experts to help customers proactively
manage demand shifts and navigate the current macro
environment.
- Launched the PROS B2B pricing transformation value calculator
program with Microsoft so companies visiting global Microsoft
Technology Centers receive personalized business cases and
assessments of the strong value of our AI-powered selling
solutions.
- Named to the 2020 CRM Watchlist for the sixth consecutive year
in recognition of PROS impact in the CRM market, promise for the
future, and vision around product strategy and innovation; scored
highest in the ‘Customer’ category.
- Joined the IATA Airline Industry Retailing (AIR) Think Tank to
deliver thought leadership on transformational retailing ideas and
concepts to improve the traveler experience through digital
transformation.
- Proactively moved to fully virtual across our global offices in
early March to ensure the safety and well-being of our people,
customers, and communities.
- Announced a virtual experience for PROS Outperform 2020
Conference, the premier event for pricing, selling, revenue
management, and eCommerce executives, and industry strategists from
across the globe, extending our reach and engagement with our
customers and prospects occurring October 7-8.
Financial Outlook
Based on information as of May 5, 2020, PROS currently
anticipates the following based on an estimated 43.3 million basic
weighted average shares outstanding and a 22% non-GAAP estimated
tax rate for the second quarter ending June 30, 2020. Given
uncertainties related to the ongoing COVID-19 pandemic and rapidly
changing global economic environment, PROS is withdrawing its
previously issued full year 2020 guidance provided February 6,
2020:
Q2 2020 Guidance
v. Q2 2019 at
Mid-Point
Total Revenue
$60.0 to $61.0
(5)%
Subscription Revenue
$39.5 to $40.5
14%
Non-GAAP Loss Per Share
$(0.22) to $(0.20)
$(0.14)
Adjusted EBITDA
$(11.5) to $(10.5)
$(9.2)
Conference Call
In conjunction with this announcement, PROS Holdings, Inc. will
host a conference call on Tuesday, May 5, 2020, at 4:45 p.m. ET to
discuss the Company’s financial results and business outlook. To
access this call, dial 1-877-407-9039 (toll-free) or
1-201-689-8470. The live and archived webcasts of this call can be
accessed under the “Investor Relations” section of the Company’s
website at www.pros.com.
A telephone replay will be available until Tuesday, May 19,
2020, at 1-844-512-2921 (toll-free) or 1-412-317-6671 using the
pass code 13700852.
About PROS
PROS Holdings, Inc. (NYSE: PRO) provides AI solutions that power
commerce in the digital economy. PROS solutions bring intelligence
to commerce by providing companies with predictive and prescriptive
guidance that enables them to dynamically price, configure and sell
their products and services across all channels with speed,
precision and consistency. To learn more, visit www.pros.com.
Forward-looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements about the business 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; 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 and timeframe for recovery of the travel industry, (b)
cybersecurity, (c) maintaining subscription renewal rates, (d)
potential downturns in sales, (e) implementing our solutions, (f)
software innovation, (g) maintaining our corporate culture, (h)
disruptions from our third party data center, software, data, and
other unrelated service providers, (i) evolving data privacy, cyber
security and data localization laws, (j) cloud operations, (k)
managing our growth effectively, (l) operating globally, including
economic and commercial disruptions, (m) personnel risks including
loss of any key employees, (n) the timing of revenue recognition
and cash flow from operations, (o) competition, (p) market
acceptance of our software innovations, (q) development of our
target markets, (r) increasing business from existing customers,
(s) migrating customers to our latest cloud solutions; (t)
expanding and training our direct and indirect sales force, (u) our
debt repayment obligations, (v) returning to profitability, and (w)
acquiring and integrating businesses and/or technologies.
Additional information relating to the risks and uncertainties
affecting our business is contained in our filings with the SEC.
These forward-looking statements represent our expectations as of
the date hereof. Subsequent events may cause these expectations to
change, and PROS disclaims any obligations to update or alter these
forward-looking statements in the future, whether as a result of
new information, future events or otherwise.
Non-GAAP Financial Measures
PROS has provided in this release certain non-GAAP financial
measures, including non-GAAP gross profit and margin, non-GAAP
income (loss) from operations or non-GAAP operating loss, annual
recurring revenue, adjusted EBITDA, free cash flow, non-GAAP
subscription revenue, non-GAAP tax rate, non-GAAP net income (loss)
or non-GAAP net loss, and diluted earnings (loss) per share or
non-GAAP net loss per share. PROS uses these non-GAAP financial
measures internally in analyzing its financial results and believes
they are useful to investors, as a supplement to GAAP measures, in
evaluating PROS’ ongoing operational performance and cloud
transition. Non-GAAP gross margin can be compared to gross margin
which can be calculated from the condensed consolidated statement
on income (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 statement on
income (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.
PROS also presents certain information in “constant currency,”
which is also a non-GAAP financial measure. Since PROS has
operations outside of the United States reporting in currencies
other than the U.S. dollar, the comparability of our operating
results reported in U.S. Dollars is affected by foreign currency
exchange rate fluctuations because the underlying currencies in
which we transact change in value over time compared to the U.S.
Dollar. These fluctuations may have a significant effect on our
reported results. As such, this release contains references to
constant currency measures, which are calculated based on currency
rates set at the start of a year and held constant throughout the
year. Management believes this supplemental information is useful
to investors as a framework for facilitating period-to-period
comparisons of our business performance excluding the effects of
foreign currency exchange rate fluctuations.
Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
prepared in accordance with GAAP. Investors are encouraged to
review the reconciliation of these non-GAAP measures to their most
directly comparable GAAP financial measure as detailed above. A
reconciliation of GAAP to the non-GAAP financial measures has been
provided in the tables included as part of this press release, and
can be found, along with other financial information, in the
investor relations portion of our website. PROS' use of non-GAAP
financial measures may not be consistent with the presentations by
similar companies in PROS' industry. PROS has also provided in this
release certain forward-looking non-GAAP financial measures,
including non-GAAP income (loss) from operations, annual recurring
revenue, non-GAAP loss per share, adjusted EBITDA, free cash flow,
non-GAAP tax rates, and calculated billings (collectively the
"non-GAAP financial measures") as follows:
Non-GAAP income (loss) from operations: Non-GAAP income
(loss) from operations excludes the impact of share-based
compensation, amortization of acquisition-related intangibles and
new headquarters noncash rent expense. Non-GAAP income (loss) from
operations excludes the following items from non-GAAP
estimates:
- Share-Based Compensation: Although share-based
compensation is an important aspect of compensation for our
employees and executives, our share-based compensation expense can
vary because of changes in our stock price and market conditions at
the time of grant, varying valuation methodologies, and the variety
of award types. Since share-based compensation expense can vary for
reasons that are generally unrelated to our performance during any
particular period, we believe this could make it difficult for
investors to compare our current financial results to previous and
future periods. Therefore, we believe it is useful to exclude
share-based compensation in order to better understand our business
performance and allow investors to compare our operating results
with peer companies.
- Amortization of Acquisition-Related Intangibles: We view
amortization of acquisition-related intangible assets, such as the
amortization of the cost associated with an acquired company's
research and development efforts, trade names, customer lists and
customer relationships, as items arising from pre-acquisition
activities determined at the time of an acquisition. While these
intangible assets are continually evaluated for impairment,
amortization of the cost of purchased intangibles is a static
expense, one that is not typically affected by operations during
any particular period.
- New Headquarters Noncash Rent Expense: Noncash rent
expense is related to our new corporate headquarters and is
incurred prior to occupation of this facility. These amounts are
unrelated to our core performance during any particular period and
we believe this could make it difficult for investors to compare
our current financial results to previous and future periods.
Therefore, we believe it is useful to exclude the noncash rent
expense on the preoccupied new headquarters in order for investors
to better understand our business performance and allow investors
to compare our operating results with peer companies.
Non-GAAP loss per share: Non-GAAP net income (loss)
excludes the items listed above as excluded from non-GAAP income
(loss) from operations and also excludes amortization of debt
discount and issuance costs and the taxes related to these items
and the items excluded from non-GAAP income (loss) from operations.
Estimates of non-GAAP loss per share are calculated by dividing
estimates for non-GAAP loss by our estimate of shares outstanding
for the future period. In addition to the items listed above as
excluded from non-GAAP income (loss) from operations, non-GAAP net
income (loss) excludes the following items from non-GAAP
estimates:
- Amortization of Debt Discount and Issuance Costs:
Amortization of debt discount and issuance costs are related to our
convertible notes. These amounts are unrelated to our core
performance during any particular period, and therefore, we believe
it is useful to exclude these amounts in order to better understand
our business performance and allow investors to compare our results
with peer companies.
- Taxes: We exclude the tax consequences associated with
non-GAAP items to provide investors with a useful comparison of our
operating results to prior periods and to our peer companies
because such amounts can vary significantly. In the fourth quarter
of 2014, we concluded that it is more likely than not that we will
be unable to fully realize our deferred tax assets and accordingly,
established a valuation allowance against those assets. The ongoing
impact of the valuation allowance on our non-GAAP effective tax
rate has been eliminated to allow investors to better understand
our business performance and compare our operating results with
peer companies.
Annual Recurring Revenue: Annual Recurring Revenue
("ARR") is used to assess the trajectory of our cloud business. ARR
means, as of a specified date, the contracted recurring revenue,
including contracts with a future start date, together with
annualized overage fees incurred above contracted minimum
transactions, and excluding perpetual and term license agreements
recognized as license revenue in accordance with GAAP. ARR should
be viewed independently of revenue and any other GAAP measure.
Non-GAAP Tax Rate: The estimated non-GAAP effective tax
rate adjusts the tax effect to quantify the impact of the excluded
non-GAAP items.
Adjusted EBITDA: Adjusted EBITDA is defined as GAAP net
income (loss) before interest expense, provision for income taxes,
depreciation and amortization, as adjusted to eliminate the effect
of stock-based compensation cost, amortization of
acquisition-related intangibles, depreciation and amortization, new
headquarters noncash rent expense and capitalized internal-use
software development costs. Adjusted EBITDA should not be
considered as an alternative to net income (loss) as an indicator
of our operating performance.
Free Cash Flow: Free cash flow is a non-GAAP financial
measure which is defined as net cash provided by (used in)
operating activities, less capital expenditures (excluding
expenditures for PROS new headquarters), purchases of other
(non-acquisition-related) intangible assets and capitalized
internal-use software development costs.
Calculated Billings: Calculated billings is defined as
total subscription, maintenance and support revenue plus the change
in recurring deferred revenue in a given period.
These non-GAAP estimates are not measurements of financial
performance prepared in accordance with GAAP, and we are unable to
reconcile these forward-looking non-GAAP financial measures to
their directly comparable GAAP financial measures because the
information described above which is needed to complete a
reconciliation is unavailable at this time without unreasonable
effort.
PROS Holdings, Inc.
Condensed Consolidated Balance
Sheets
(In thousands, except share and
per share amounts)
(Unaudited)
March 31, 2020
December 31, 2019
Assets:
Current assets:
Cash and cash equivalents
$
251,782
$
306,077
Trade and other receivables, net of
allowance of $2,810 and $214, respectively
53,591
65,074
Deferred costs, current
5,829
5,756
Prepaid and other current assets
9,394
9,038
Total current assets
320,596
385,945
Property and equipment, net
26,703
14,794
Operating lease right-of-use assets
25,707
26,550
Deferred costs, noncurrent
14,642
15,478
Intangibles, net
12,954
14,605
Goodwill
48,912
49,104
Other assets, noncurrent
7,163
6,831
Total assets
$
456,677
$
513,307
Liabilities and Stockholders’
Equity:
Current liabilities:
Accounts payable and other liabilities
$
12,757
$
9,098
Accrued liabilities
18,734
22,748
Accrued payroll and other employee
benefits
12,604
32,656
Operating lease liabilities, current
7,383
7,173
Deferred revenue, current
126,325
124,459
Total current liabilities
177,803
196,134
Deferred revenue, noncurrent
13,915
17,801
Convertible debt, net, noncurrent
112,406
110,704
Operating lease liabilities,
noncurrent
21,683
22,391
Other liabilities, noncurrent
1,260
1,281
Total liabilities
327,067
348,311
Stockholders' equity:
Preferred stock, $0.001 par value,
5,000,000 shares authorized; none issued
—
—
Common stock, $0.001 par value, 75,000,000
shares authorized; 47,972,383 and 47,310,846 shares issued,
respectively; 43,291,660 and 42,630,123 shares outstanding,
respectively
48
47
Additional paid-in capital
548,014
560,496
Treasury stock, 4,680,723 common shares,
at cost
(29,847
)
(29,847
)
Accumulated deficit
(384,524
)
(361,789
)
Accumulated other comprehensive loss
(4,081
)
(3,911
)
Total stockholders’ equity
129,610
164,996
Total liabilities and stockholders’
equity
$
456,677
$
513,307
PROS Holdings, Inc.
Condensed Consolidated
Statements of Income (Loss)
(In thousands, except per share
data)
(Unaudited)
Three Months Ended March
31,
2020
2019
Revenue:
Subscription
$
43,170
$
30,921
Maintenance and support
12,523
15,327
Total subscription, maintenance and
support
55,693
46,248
Services
10,618
9,883
Total revenue
66,311
56,131
Cost of revenue:
Subscription
12,864
9,786
Maintenance and support
2,790
2,802
Total cost of subscription, maintenance
and support
15,654
12,588
Services
13,073
8,202
Total cost of revenue
28,727
20,790
Gross profit
37,584
35,341
Operating expenses:
Selling and marketing
24,920
21,485
General and administrative
14,880
11,667
Research and development
19,136
15,799
Loss from operations
(21,352
)
(13,610
)
Convertible debt interest and
amortization
(2,062
)
(4,356
)
Other income, net
831
1,271
Loss before income tax provision
(22,583
)
(16,695
)
Income tax provision
152
222
Net loss
$
(22,735
)
$
(16,917
)
Net loss per share:
Basic and diluted
$
(0.53
)
$
(0.45
)
Weighted average number of shares:
Basic and diluted
43,102
37,623
PROS Holdings, Inc.
Condensed Consolidated
Statements of Cash Flows
(In thousands) (Unaudited)
Three Months Ended March
31,
2020
2019
Operating activities:
Net loss
$
(22,735
)
$
(16,917
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
3,420
3,325
Amortization of debt discount and issuance
costs
1,712
3,116
Share-based compensation
6,347
6,046
Provision for doubtful accounts
2,596
—
Changes in operating assets and
liabilities:
Accounts and unbilled receivables
8,889
(3,773
)
Deferred costs
763
(893
)
Prepaid expenses and other assets
(701
)
(2,065
)
Accounts payable and other liabilities
1,447
565
Accrued liabilities
(3,840
)
2,634
Accrued payroll and other employee
benefits
(20,055
)
(11,779
)
Deferred revenue
(2,016
)
11,646
Net cash used in operating activities
(24,173
)
(8,095
)
Investing activities:
Purchases of property and equipment
(10,993
)
(611
)
Capitalized internal-use software
development costs
(412
)
(868
)
Purchase of intangible asset
—
(50
)
Net cash used in investing activities
(11,405
)
(1,529
)
Financing activities:
Proceeds from employee stock plans
1,364
943
Tax withholding related to net share
settlement of stock awards
(20,172
)
(14,239
)
Net cash used in financing activities
(18,808
)
(13,296
)
Effect of foreign currency rates on
cash
91
80
Net change in cash and cash
equivalents
(54,295
)
(22,840
)
Cash and cash equivalents:
Beginning of period
306,077
295,476
End of period
$
251,782
$
272,636
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 March
31,
Year over Year
2020
2019
% change
GAAP gross profit
$
37,584
$
35,341
6
%
Non-GAAP adjustments:
New headquarters noncash rent expense
162
153
Amortization of acquisition-related
intangibles
842
1,034
Share-based compensation
524
538
Non-GAAP gross profit
$
39,112
$
37,066
6
%
Non-GAAP gross margin
59.0
%
66.0
%
GAAP loss from operations
$
(21,352
)
$
(13,610
)
57
%
Non-GAAP adjustments:
New headquarters noncash rent expense
555
554
Amortization of acquisition-related
intangibles
1,383
1,583
Share-based compensation
6,347
6,046
Total Non-GAAP adjustments
8,285
8,183
Non-GAAP loss from operations
$
(13,067
)
$
(5,427
)
141
%
Non-GAAP loss from operations % of total
revenue
(19.7
)%
(9.7
)%
GAAP net loss
$
(22,735
)
$
(16,917
)
34
%
Non-GAAP adjustments:
Total Non-GAAP adjustments affecting loss
from operations
8,285
8,183
Amortization of debt discount and issuance
costs
1,702
3,106
Tax impact related to non-GAAP
adjustments
2,923
1,411
Non-GAAP net loss
$
(9,825
)
$
(4,217
)
133
%
Non-GAAP diluted loss per share
$
(0.23
)
$
(0.11
)
Shares used in computing non-GAAP loss per
share
43,102
37,623
PROS Holdings, Inc.
Supplemental Schedule of
Non-GAAP Financial Measures
Increase (Decrease) in GAAP
Amounts Reported
(In thousands)
(Unaudited)
Three Months Ended March
31,
2020
2019
Cost of Subscription Items
New headquarters noncash rent expense
14
16
Amortization of acquisition-related
intangibles
683
870
Share-based compensation
87
71
Total cost of subscription items
$
784
$
957
Cost of Maintenance Items
New headquarters noncash rent expense
26
28
Amortization of acquisition-related
intangibles
159
164
Share-based compensation
66
60
Total cost of maintenance items
$
251
$
252
Cost of Services Items
New headquarters noncash rent expense
122
109
Share-based compensation
371
407
Total cost of services items
$
493
$
516
Sales and Marketing Items
New headquarters noncash rent expense
104
103
Amortization of acquisition-related
intangibles
541
549
Share-based compensation
1,866
1,400
Total sales and marketing items
$
2,511
$
2,052
General and Administrative
Items
New headquarters noncash rent expense
99
93
Share-based compensation
2,450
2,812
Total general and administrative items
$
2,549
$
2,905
Research and Development Items
New headquarters noncash rent expense
190
205
Share-based compensation
1,507
1,296
Total research and development items
$
1,697
$
1,501
PROS Holdings, Inc.
Supplemental Reconciliation of
GAAP to Non-GAAP Financial Measures
(In thousands)
(Unaudited)
Three Months Ended March
31,
2020
2019
GAAP Loss from Operations
$
(21,352
)
$
(13,610
)
Amortization of acquisition-related
intangibles
1,383
1,583
New headquarters noncash rent expense
555
554
Share-based compensation
6,347
6,046
Depreciation and other amortization
2,037
1,742
Capitalized internal-use software
development costs
(412
)
(868
)
Adjusted EBITDA
$
(11,442
)
$
(4,553
)
Net cash used in operating
activities
$
(24,173
)
$
(8,095
)
Purchase of property and equipment
(excluding new headquarters)
(957
)
(611
)
Purchase of intangible asset
—
(50
)
Capitalized internal-use software
development costs
(412
)
(868
)
Free Cash Flow
$
(25,542
)
$
(9,624
)
Guidance
Q2 2020 Guidance
Low
High
Adjusted EBITDA
GAAP Loss from Operations
$
(21,900
)
$
(20,900
)
Amortization of acquisition-related
intangibles
1,400
1,400
New headquarters noncash rent expense
400
400
Share-based compensation
6,800
6,800
Depreciation and other amortization
2,200
2,200
Capitalized internal-use software
development costs
(400
)
(400
)
Adjusted EBITDA
$
(11,500
)
$
(10,500
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200505005738/en/
Investor Contact: PROS Investor Relations Shannon Tatz
713-335-5932 ir@pros.com Media Contact: Amanda Parrish
832-924-4731 aparrish@pros.com
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