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,
2021.
“I’m incredibly proud of how our team executed in the first
quarter,” stated CEO Andres Reiner. “We exceeded the high end of
our guidance range across all metrics and welcomed some amazing new
customers to the PROS family. We’re confident in our business and
the momentum we’re seeing, and as a result, we’re happy to be able
to provide annual guidance once again.”
First Quarter 2021 Financial Highlights
Key financial results for the first quarter 2021 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 2021
Q1 2020
Change
Q1 2021
Q1 2020
Change
Revenue:
Total Revenue
$61.4
$66.3
(7)%
n/a
n/a
n/a
Subscription Revenue
$42.6
$43.2
(1)%
n/a
n/a
n/a
Subscription and Maintenance Revenue
$52.3
$55.7
(6)%
n/a
n/a
n/a
Profitability:
Gross Profit
$34.9
$37.6
(7)%
$36.1
$39.1
(8)%
Operating Loss
$(20.6)
$(21.4)
$0.8
$(11.6)
$(13.1)
$1.5
Net Loss
$(22.0)
$(22.7)
$0.7
$(9.7)
$(9.8)
$0.1
Net Loss Per Share
$(0.50)
$(0.53)
$0.03
$(0.22)
$(0.23)
$0.01
Adjusted EBITDA
n/a
n/a
n/a
$(9.4)
$(11.4)
$2.1
Cash:
Net Cash Used in Operating Activities
$(4.4)
$(24.2)
$19.7
n/a
n/a
n/a
Free Cash Flow
n/a
n/a
n/a
$(4.6)
$(25.5)
$20.9
The attached table provides a summary of PROS results for the
period, including a reconciliation of GAAP to non-GAAP metrics.
Recent Business Highlights
- Welcomed new customers that are adopting our digital selling
technology such as Dedalus, Deluxe, Florida Water Products, and
United Airlines, among others.
- Designated as one of the 2021 Best Workplaces in Texas by Great
Place to Work, in recognition of PROS people first culture and
commitment to creating an inclusive environment where employees can
bring their authentic selves to work.
- Named inaugural winner of the 2021 Artificial Intelligence
Excellence Award for Machine Learning, in recognition of our
market-leading AI-powered digital selling innovations.
- Named a Microsoft Top 350 U.S. Partner by Redmond Channel
Partner, placing PROS in the top 1% of Microsoft partners,
continued proof of our successful partnership.
- Appointed Katrina Klier as Chief Marketing Officer to lead PROS
global marketing strategy, responsible for fueling revenue growth
by optimizing demand generation, increasing engagement, and
amplifying brand visibility.
Financial Outlook
PROS currently anticipates the following based on an estimated
44.3 million basic weighted average shares outstanding for the
second quarter of 2021 and a 22% non-GAAP estimated tax rate for
the second quarter and a full year 2021.
Q2 2021 Guidance
v. Q2 2020 at
Mid-Point
Full Year 2021
Guidance
v. Prior Year at
Mid-Point
Total Revenue
$61.0 to $62.0
(4)%
$250.5 to $253.5
—%
Subscription Revenue
$43.0 to $43.5
2%
$176.5 to $179.5
4%
ARR
n/a
n/a
$211.0 to $216.0
2%
Non-GAAP Loss Per Share
$(0.23) to $(0.21)
$(0.08)
n/a
n/a
Adjusted EBITDA
$(10.0) to $(9.0)
$(3.8)
$(36.0) to $(33.0)
$(6.9)
Free Cash Flow
n/a
n/a
$(39.0) to $(35.0)
$16.3
Conference Call
In conjunction with this announcement, PROS Holdings, Inc. will
host a conference call on Thursday, May 4, 2021, 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 18,
2021, at 1-844-512-2921 (toll-free) or 1-412-317-6671 using the
pass code 13718107.
About PROS
PROS Holdings, Inc. (NYSE: PRO) provides AI-powered solutions
that optimize selling in the digital economy. PROS solutions make
it possible for companies to price, configure and sell their
products and services in an omnichannel environment with speed,
precision and consistency. Our customers, who are leaders in their
markets, benefit from decades of data science expertise infused
into our industry solutions. 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 and duration
of the coronavirus (COVID-19) pandemic; our financial outlook;
expectations; ability to achieve future growth and profitability;
management's confidence and optimism; positioning; customer
successes; demand for our software solutions; pipeline; business
expansion; revenue; subscription revenue; ARR; non-GAAP loss per
share; adjusted EBITDA; free cash flow; shares outstanding and
effective tax rate. The forward-looking statements contained in
this press release are based upon our historical performance and
our current plans, estimates and expectations and are not a
representation that such plans, estimates or expectations will be
achieved. Factors that could cause actual results to differ
materially from those described herein include, among others, risks
related to: (a) the impact of the COVID-19 pandemic, such as the
scope and duration of the outbreak and timeframe for recovery of
the travel industry, (b) cybersecurity, (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, (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, (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
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 statements
of 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 statements of
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.
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, debt extinguishment fees and
capitalized internal-use software development costs. Adjusted
EBITDA should not be considered as an alternative to net income
(loss) as an indicator of our operating performance.
Free Cash Flow: Free cash flow is a non-GAAP financial
measure which is defined as net cash provided by (used in)
operating activities, less capital expenditures (excluding
expenditures for PROS new headquarters), purchases of other
(non-acquisition-related) intangible assets and capitalized
internal-use software development costs.
Calculated Billings: Calculated billings is defined as
total subscription, maintenance and support revenue plus the change
in recurring deferred revenue in a given period.
These non-GAAP estimates are not measurements of financial
performance prepared in accordance with GAAP, and we are unable to
reconcile these forward-looking non-GAAP financial measures to
their directly comparable GAAP financial measures because the
information described above which is needed to complete a
reconciliation is unavailable at this time without unreasonable
effort.
PROS Holdings, Inc.
Condensed Consolidated Balance
Sheets
(In thousands, except share and
per share amounts)
(Unaudited)
March 31, 2021
December 31, 2020
Assets:
Current assets:
Cash and cash equivalents
$
323,929
$
329,134
Trade and other receivables, net of
allowance of $3,563 and $4,122, respectively
53,665
49,578
Deferred costs, current
5,883
5,941
Prepaid and other current assets
10,668
9,647
Total current assets
394,145
394,300
Property and equipment, net
35,629
36,504
Operating lease right-of-use assets
29,044
30,689
Deferred costs, noncurrent
11,735
12,544
Intangibles, net
7,467
8,341
Goodwill
49,563
50,044
Other assets, noncurrent
7,505
7,549
Total assets
$
535,088
$
539,971
Liabilities and Stockholders’
Equity:
Current liabilities:
Accounts payable and other liabilities
$
6,317
$
4,246
Accrued liabilities
16,734
13,065
Accrued payroll and other employee
benefits
17,958
25,514
Operating lease liabilities, current
5,897
5,937
Deferred revenue, current
113,478
99,156
Total current liabilities
160,384
147,918
Deferred revenue, noncurrent
8,528
11,372
Convertible debt, net, noncurrent
287,169
218,028
Operating lease liabilities,
noncurrent
42,529
44,099
Other liabilities, noncurrent
1,449
1,517
Total liabilities
500,059
422,934
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; 48,933,488 and 48,142,267 shares issued,
respectively; 44,252,765 and 43,461,544 shares outstanding,
respectively
49
48
Additional paid-in capital
518,338
589,040
Treasury stock, 4,680,723 common shares,
at cost
(29,847
)
(29,847
)
Accumulated deficit
(449,472
)
(438,773
)
Accumulated other comprehensive loss
(4,039
)
(3,431
)
Total stockholders’ equity
35,029
117,037
Total liabilities and stockholders’
equity
$
535,088
$
539,971
PROS Holdings, Inc.
Condensed Consolidated
Statements of Income (Loss)
(In thousands, except per share
data)
(Unaudited)
Three Months Ended March
31,
2021
2020
Revenue:
Subscription
$
42,648
$
43,170
Maintenance and support
9,674
12,523
Total subscription, maintenance and
support
52,322
55,693
Services
9,056
10,618
Total revenue
61,378
66,311
Cost of revenue:
Subscription
13,801
12,864
Maintenance and support
2,258
2,790
Total cost of subscription, maintenance
and support
16,059
15,654
Services
10,433
13,073
Total cost of revenue
26,492
28,727
Gross profit
34,886
37,584
Operating expenses:
Selling and marketing
21,564
24,920
Research and development
20,458
19,136
General and administrative
13,454
14,880
Loss from operations
(20,590
)
(21,352
)
Convertible debt interest and
amortization
(1,576
)
(2,062
)
Other income, net
286
831
Loss before income tax provision
(21,880
)
(22,583
)
Income tax provision
149
152
Net loss
$
(22,029
)
$
(22,735
)
Net loss per share:
Basic and diluted
$
(0.50
)
$
(0.53
)
Weighted average number of shares:
Basic and diluted
44,245
43,102
PROS Holdings, Inc.
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended March
31,
2021
2020
Operating activities:
Net loss
$
(22,029
)
$
(22,735
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
3,068
3,420
Amortization of debt discount and issuance
costs
373
1,712
Share-based compensation
8,170
6,347
Provision for doubtful accounts
(559
)
2,596
Changes in operating assets and
liabilities:
Accounts and unbilled receivables
(3,610
)
8,889
Deferred costs
867
763
Prepaid expenses and other assets
(395
)
(701
)
Operating lease right-of-use assets and
liabilities
(173
)
868
Accounts payable and other liabilities
2,012
579
Accrued liabilities
3,918
(3,840
)
Accrued payroll and other employee
benefits
(7,573
)
(20,055
)
Deferred revenue
11,502
(2,016
)
Net cash used in operating activities
(4,429
)
(24,173
)
Investing activities:
Purchases of property and equipment
(1,300
)
(10,993
)
Capitalized internal-use software
development costs
—
(412
)
Purchase of equity securities
(501
)
—
Net cash used in investing activities
(1,801
)
(11,405
)
Financing activities:
Proceeds from employee stock plans
1,596
1,364
Tax withholding related to net share
settlement of stock awards
(352
)
(20,172
)
Net cash provided by (used in) financing
activities
1,244
(18,808
)
Effect of foreign currency rates on
cash
(219
)
91
Net change in cash and cash
equivalents
(5,205
)
(54,295
)
Cash and cash equivalents:
Beginning of period
329,134
306,077
End of period
$
323,929
$
251,782
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
2021
2020
% change
GAAP gross profit
$
34,886
$
37,584
(7
)%
Non-GAAP adjustments:
New headquarters noncash rent expense
—
162
Amortization of acquisition-related
intangibles
421
842
Share-based compensation
826
524
Non-GAAP gross profit
$
36,133
$
39,112
(8
)%
Non-GAAP gross margin
58.9
%
59.0
%
GAAP loss from operations
$
(20,590
)
$
(21,352
)
(4
)%
Non-GAAP adjustments:
New headquarters noncash rent expense
—
555
Amortization of acquisition-related
intangibles
867
1,383
Share-based compensation
8,170
6,347
Total Non-GAAP adjustments
9,037
8,285
Non-GAAP loss from operations
$
(11,553
)
$
(13,067
)
(12
)%
Non-GAAP loss from operations % of total
revenue
(18.8
)%
(19.7
)%
GAAP net loss
$
(22,029
)
$
(22,735
)
(3
)%
Non-GAAP adjustments:
Total Non-GAAP adjustments affecting loss
from operations
9,037
8,285
Amortization of debt discount and issuance
costs
373
1,702
Tax impact related to non-GAAP
adjustments
2,895
2,923
Non-GAAP net loss
$
(9,724
)
$
(9,825
)
(1
)%
Non-GAAP diluted loss per share
$
(0.22
)
$
(0.23
)
Shares used in computing non-GAAP loss per
share
44,245
43,102
PROS Holdings, Inc.
Supplemental Schedule of
Non-GAAP Financial Measures
Increase (Decrease) in GAAP
Amounts Reported
(In thousands)
(Unaudited)
Three Months Ended March
31,
2021
2020
Cost of Subscription Items
New headquarters noncash rent expense
—
14
Amortization of acquisition-related
intangibles
408
683
Share-based compensation
148
87
Total cost of subscription items
$
556
$
784
Cost of Maintenance Items
New headquarters noncash rent expense
—
26
Amortization of acquisition-related
intangibles
13
159
Share-based compensation
104
66
Total cost of maintenance items
$
117
$
251
Cost of Services Items
New headquarters noncash rent expense
—
122
Share-based compensation
574
371
Total cost of services items
$
574
$
493
Sales and Marketing Items
New headquarters noncash rent expense
—
104
Amortization of acquisition-related
intangibles
446
541
Share-based compensation
2,224
1,866
Total sales and marketing items
$
2,670
$
2,511
Research and Development Items
New headquarters noncash rent expense
—
190
Share-based compensation
1,826
1,507
Total research and development items
$
1,826
$
1,697
General and Administrative
Items
New headquarters noncash rent expense
—
99
Share-based compensation
3,294
2,450
Total general and administrative items
$
3,294
$
2,549
PROS Holdings, Inc.
Supplemental Reconciliation of
GAAP to Non-GAAP Financial Measures
(In thousands)
(Unaudited)
Three Months Ended March
31,
2021
2020
Adjusted EBITDA
GAAP Loss from Operations
$
(20,590
)
$
(21,352
)
Amortization of acquisition-related
intangibles
867
1,383
New headquarters noncash rent expense
—
555
Share-based compensation
8,170
6,347
Depreciation and other amortization
2,201
2,037
Capitalized internal-use software
development costs
—
(412
)
Adjusted EBITDA
$
(9,352
)
$
(11,442
)
Net cash used in operating
activities
$
(4,429
)
$
(24,173
)
Purchase of property and equipment
(excluding new headquarters)
(203
)
(957
)
Capitalized internal-use software
development costs
—
(412
)
Free Cash Flow
$
(4,632
)
$
(25,542
)
Guidance
Q2 2021 Guidance
Low
High
Adjusted EBITDA
GAAP Loss from Operations
$
(22,200
)
$
(21,200
)
Amortization of acquisition-related
intangibles
900
900
Share-based compensation
9,100
9,100
Depreciation and other amortization
2,200
2,200
Adjusted EBITDA
$
(10,000
)
$
(9,000
)
Full Year 2021
Guidance
Low
High
Adjusted EBITDA
GAAP Loss from Operations
$
(84,400
)
$
(81,400
)
Amortization of acquisition-related
intangibles
3,400
3,400
Share-based compensation
36,700
36,700
Depreciation and other amortization
8,300
8,300
Adjusted EBITDA
$
(36,000
)
$
(33,000
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210504006136/en/
Investor Contact: PROS Investor Relations Belinda
Overdeput 713-335-5895 ir@pros.com
Media Contact: Amanda Parrish 832-924-4731
aparrish@pros.com
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