EX-99.1 2 a2023q1ex991prosearningsre.htm EX-99.1 Document

EXHIBIT 99.1

proslogo.jpg

PROS HOLDINGS, INC. REPORTS FIRST QUARTER 2023 FINANCIAL RESULTS

Subscription revenue of $56.0 million, up 15% year-over-year.
Subscription gross margin of 75% and non-GAAP subscription gross margin of 78%, up over 150 basis points year-over-year.
Driven by PROS outperformance in the first quarter, the company is improving its growth and profitability outlook for the full year of 2023.

HOUSTON – May 2, 2023 — PROS Holdings, Inc. (NYSE: PRO), a leading provider of AI-powered SaaS pricing, CPQ, revenue management, and digital offer marketing solutions, today announced financial results for the first quarter ended March 31, 2023.

“I’m proud of our team for delivering a strong start to 2023 where we drove 15% subscription revenue growth and 75% improvement to adjusted EBITDA year-over-year,” stated CEO Andres Reiner. “We continue to lead the industry in AI that drives measurable ROI for our customers. As a result of our outperformance in the first quarter, we are raising our 2023 full year guidance across all metrics.”

First Quarter 2023 Financial Highlights

Key financial results for the first quarter 2023 are shown below. Throughout this press release all dollar figures are in millions, except net (loss) earnings per share. Unless otherwise noted, all results are on a reported basis and are compared with the prior-year period.
GAAPNon-GAAP
Q1 2023Q1 2022ChangeQ1 2023Q1 2022 Change
Revenue:
  Total Revenue$73.2$66.510%n/an/an/a
  Subscription Revenue$56.0$48.815%n/an/an/a
  Subscription and Maintenance Revenue $61.7$56.69%n/an/an/a
Profitability:
  Gross Profit$43.6$39.112%$46.6$41.911%
  Operating (Loss) Income$(18.8)$(26.5)$7.7$(3.5)$(10.8)$7.3
  Net (Loss) Income$(19.0)$(28.6)$9.6$(2.5)$(9.7)$7.1
  Net (Loss) Earnings Per Share$(0.41)$(0.64)$0.23$(0.06)$(0.21)$0.15
  Adjusted EBITDAn/an/an/a$(2.3)$(9.1)$6.8
Cash:
  Net Cash Used in Operating Activities$(6.1)$(11.0)$4.9n/an/an/a
  Free Cash Flown/an/an/a$(4.5)$(11.5)$7.0
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 the PROS Platform such as Air Serbia, Atea, Europcar, Meyle, Nature’s Touch, Nok Air, and QuidelOrtho, among others.

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Named to the Constellation ShortListTM for Price Optimization and Configure, Price, Quote for the sixth consecutive year, in recognition of PROS price optimization and omnichannel selling capabilities that are helping customers drive profitable growth.

A commissioned Forrester Consulting independent Total Economic ImpactTM study showed an investment in PROS paid for itself within 9 months and generated a 400% return on investment in the first 3 years for interviewed customers.

Launched our new generation of PROS Dynamic Pricing for Ancillaries powered by AI, expanding PROS leadership position in offer optimization for airlines.

Selected recipient of the Houston Business Journal’s Diversity in Business Award for PROS exceptional commitment to promoting practices that advance diversity, equity, and inclusion in the workplace.

Published PROS 2022 ESG Report, highlighting our perspectives on and approach to environmental, social, and governance issues that matter most to PROS customers, employees, and shareholders.

Announced the PROS 2023 Analyst Day scheduled for Tuesday, May 23, 2023 from 1:30 pm MT to 3:30 pm MT during the 2023 Outperform conference in Denver, CO.

Financial Outlook

PROS currently anticipates the following based on an estimated 46.1 million basic weighted average shares outstanding for the second quarter of 2023 and a 22% non-GAAP estimated tax rate for the second quarter and full year 2023.
Q2 2023 Guidancev. Q2 2022 at Mid-PointFull Year 2023 Guidancev. Prior Year at Mid-Point
Total Revenue$72.2 to $73.26%$295.0 to $297.07%
Subscription Revenue$56.0 to $56.512%$231.7 to $233.714%
Subscription ARRn/an/a$251.0 to $254.011%
Non-GAAP Loss Per Share$(0.08) to $(0.05)$0.08n/an/a
Adjusted EBITDA$(3.2) to $(2.2)$3.3$3.5 to $6.5$19.9
Free Cash Flown/an/a$2.5 to $6.5$26.2
Conference Call
In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on Tuesday, May 2, 2023, 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 9, 2023, 11:59 PM ET at 1-844-512-2921 (toll-free) or 1-412-317-6671 using the pass code 13737916.

About PROS

PROS Holdings, Inc. (NYSE: PRO) is a leading provider of AI-powered SaaS pricing, CPQ, revenue management, and digital offer marketing solutions. Its vision is to optimize every shopping and selling experience. With over 30 years of industry expertise and a proven track record of success, PROS helps B2B and B2C companies across the globe, in a variety of industries, including airlines, manufacturing, distribution, and services, drive profitable growth. The PROS Platform leverages AI to provide real-time predictive insights that enable businesses to drive revenue and margin improvements. To learn more about PROS and our innovative SaaS solutions, please visit our website at 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 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
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expansion; revenue; subscription revenue; ARR; non-GAAP earnings (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 macroeconomic environment, (b) the effects of inflation, (c) the impact of the COVID-19 pandemic, (d) 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, (e) increasing business from customers and maintaining subscription renewal rates, (f) managing our growth and profit objectives effectively, (g) disruptions from our third party data center, software, data, and other unrelated service providers, (h) implementing our solutions, (i) cloud operations, (j) intellectual property and third-party software, (k) acquiring and integrating businesses and/or technologies, (l) catastrophic events, (m) operating globally, including economic and commercial disruptions, (n) potential downturns in sales and lengthy sales cycles, (o) software innovation, (p) competition, (q) market acceptance of our software innovations, (r) maintaining our corporate culture, (s) personnel risks including loss of any key employees and competition for talent, (t) expanding and training our direct and indirect sales force, (u) evolving data privacy, cyber security and data localization laws, (v) our debt repayment obligations, (w) the timing of revenue recognition and cash flow from operations, (x) migrating customers to our latest cloud solutions, and (y) 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 income (loss), annual recurring revenue, adjusted EBITDA, free cash flow, non-GAAP tax rate, non-GAAP net income (loss), and earnings (loss) per share or non-GAAP earnings (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 income (loss) from operations, annual recurring revenue, non-GAAP earnings (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 severance. 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.
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Amortization of Acquisition-Related Intangibles:  We view amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company's research and development efforts, trade names, customer lists and customer relationships, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
Severance: Severance costs relate to the separation of our Chief Operations Officer in Q1 2022 and costs related to other internal role consolidations as well as severance cost incurred in Q4 2022 and Q1 2023 as the Company reprioritized its investments to focus on supporting key growth areas of its business. As a result of this reprioritization, the Company incurred severance, employee benefits, outplacement and related costs. 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 earnings (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 issuance costs and the taxes related to these items and the items excluded from non-GAAP income (loss) from operations. Estimates of non-GAAP earnings (loss) per share are calculated by dividing estimates for non-GAAP net income (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 income (loss) from operations, non-GAAP net income (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. 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 income (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, and depreciation and amortization. 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, excluding severance payments, less capital expenditures, 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
713-335-5879
ir@pros.com
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PROS Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)

March 31, 2023December 31, 2022
Assets:
Current assets:
Cash and cash equivalents
$192,376 $203,627 
Trade and other receivables, net of allowance of $722 and $609, respectively45,787 48,178 
Deferred costs, current
6,433 6,032 
Prepaid and other current assets
12,149 9,441 
Total current assets
256,745 267,278 
Property and equipment, net
25,442 25,012 
Operating lease right-of-use assets
14,797 17,474 
Deferred costs, noncurrent
7,938 8,764 
Intangibles, net
16,046 17,851 
Goodwill
107,717 107,561 
Other assets, noncurrent
8,872 9,012 
Total assets
$437,557 $452,952 
Liabilities and Stockholders’ (Deficit) Equity:
Current liabilities:
Accounts payable and other liabilities
$4,197 $7,964 
Accrued liabilities
13,356 12,854 
Accrued payroll and other employee benefits
15,624 23,797 
Operating lease liabilities, current
5,461 7,662 
Deferred revenue, current
122,192 108,659 
Total current liabilities
160,830 160,936 
Deferred revenue, noncurrent
6,161 8,298 
Convertible debt, net, noncurrent
290,152 289,779 
Operating lease liabilities, noncurrent
27,135 28,184 
Other liabilities, noncurrent
1,247 1,228 
Total liabilities
485,525 488,425 
Stockholders' (deficit) equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued
— — 
Common stock, $0.001 par value, 75,000,000 shares authorized; 50,711,964
and 50,318,726 shares issued, respectively; 46,031,241 and 45,638,003 shares outstanding, respectively
51 50 
Additional paid-in capital
596,805 590,475 
Treasury stock, 4,680,723 common shares, at cost(29,847)(29,847)
Accumulated deficit
(609,900)(590,898)
Accumulated other comprehensive loss
(5,077)(5,253)
Total stockholders’ (deficit) equity
(47,968)(35,473)
Total liabilities and stockholders’ (deficit) equity
$437,557 $452,952 


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PROS Holdings, Inc.
Condensed Consolidated Statements of Loss
(In thousands, except per share data)
(Unaudited) 

Three Months Ended March 31,
20232022
Revenue:
Subscription$55,969 $48,765 
Maintenance and support5,712 7,855 
Total subscription, maintenance and support61,681 56,620 
Services11,501 9,872 
Total revenue73,182 66,492 
Cost of revenue:
Subscription14,093 13,779 
Maintenance and support2,282 2,167 
Total cost of subscription, maintenance and support16,375 15,946 
Services13,167 11,415 
Total cost of revenue29,542 27,361 
Gross profit43,640 39,131 
Operating expenses:
Selling and marketing26,010 25,287 
Research and development22,291 24,467 
General and administrative14,135 14,329 
Impairment of fixed assets— 1,551 
Loss from operations(18,796)(26,503)
Convertible debt interest and amortization(1,576)(1,576)
Other income (expense), net1,451 (418)
Loss before income tax provision(18,921)(28,497)
Income tax provision81 143 
Net loss $(19,002)$(28,640)
Net loss per share:
Basic and diluted$(0.41)$(0.64)
Weighted average number of shares:
Basic and diluted45,926 45,085 
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PROS Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended March 31,
20232022
Operating activities:
Net loss
$(19,002)$(28,640)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
3,001 4,647 
Amortization of debt issuance costs373 373 
Share-based compensation
9,904 11,225 
Provision for credit losses
108 (91)
Loss on disposal of assets
35 — 
Impairment of fixed assets
— 1,551 
Changes in operating assets and liabilities:
Accounts and unbilled receivables
2,239 (12,130)
Deferred costs
425 (48)
Prepaid expenses and other assets
(2,505)(262)
Operating lease right-of-use assets and liabilities(591)(739)
Accounts payable and other liabilities
(3,793)3,903 
Accrued liabilities
504 (109)
Accrued payroll and other employee benefits
(8,174)(13,246)
Deferred revenue
11,333 22,552 
Net cash used in operating activities(6,143)(11,014)
Investing activities:
Purchases of property and equipment
(1,546)(461)
Net cash used in investing activities(1,546)(461)
Financing activities:
Proceeds from employee stock plans1,137 1,443 
Tax withholding related to net share settlement of stock awards
(4,710)(212)
Net cash (used in) provided by financing activities(3,573)1,231 
Effect of foreign currency rates on cash11 84 
Net change in cash and cash equivalents(11,251)(10,160)
Cash and cash equivalents:
Beginning of period
203,627 227,553 
End of period
$192,376 $217,393 
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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
20232022
% change
GAAP gross profit
$43,640 $39,131 12 %
Non-GAAP adjustments:
Amortization of acquisition-related intangibles
1,337 1,983 
Severance749 — 
Share-based compensation
832 825 
Non-GAAP gross profit
$46,558 $41,939 11 %
Non-GAAP gross margin
63.6 %63.1 %
GAAP loss from operations
$(18,796)$(26,503)(29)%
Non-GAAP adjustments:
Amortization of acquisition-related intangibles
1,806 2,975 
Severance
3,586 1,508 
Share-based compensation
9,904 11,225 
Total Non-GAAP adjustments
15,296 15,708 
Non-GAAP loss from operations
$(3,500)$(10,795)(68)%
Non-GAAP loss from operations % of total revenue
(4.8)%(16.2)%
GAAP net loss
$(19,002)$(28,640)(34)%
Non-GAAP adjustments:
Total Non-GAAP adjustments affecting loss from operations
15,296 15,708 
Amortization of debt issuance costs
373 373 
Tax impact related to non-GAAP adjustments
797 2,880 
Non-GAAP net loss
$(2,536)$(9,679)(74)%
Non-GAAP loss per share
$(0.06)$(0.21)
Shares used in computing non-GAAP loss per share
45,926 45,085 
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PROS Holdings, Inc.
Supplemental Schedule of Non-GAAP Financial Measures
Increase (Decrease) in GAAP Amounts Reported
(In thousands)
(Unaudited)
Three Months Ended March 31,
20232022
Cost of Subscription Items
  Amortization of acquisition-related intangibles
1,337 1,983 
  Severance125 — 
  Share-based compensation
125 151 
Total cost of subscription items
$1,587 $2,134 
Cost of Maintenance Items
  Severance307 — 
  Share-based compensation
80 91 
Total cost of maintenance items
$387 $91 
Cost of Services Items
  Severance317 — 
  Share-based compensation
627 583 
Total cost of services items
$944 $583 
Sales and Marketing Items
  Amortization of acquisition-related intangibles
469 992 
  Severance
1,595 1,444 
  Share-based compensation
2,928 3,240 
Total sales and marketing items
$4,992 $5,676 
Research and Development Items
  Severance1,008 — 
  Share-based compensation
2,350 3,713 
Total research and development items
$3,358 $3,713 
General and Administrative Items
  Severance
234 64 
  Share-based compensation
3,794 3,447 
Total general and administrative items
$4,028 $3,511 
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PROS Holdings, Inc.
Supplemental Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands)
(Unaudited)
Three Months Ended March 31,
20232022
Adjusted EBITDA
GAAP Loss from Operations
$(18,796)$(26,503)
Amortization of acquisition-related intangibles
1,806 2,975 
Severance
3,586 1,508 
Share-based compensation
9,904 11,225 
Depreciation and other amortization
1,195 1,672 
Adjusted EBITDA
$(2,305)$(9,123)
Net cash used in operating activities$(6,143)$(11,014)
   Severance3,170 — 
   Purchase of property and equipment
(1,546)(461)
Free Cash Flow
$(4,519)$(11,475)
Guidance
Q2 2023 Guidance
LowHigh
Adjusted EBITDA
  GAAP Loss from Operations
$(16,900)$(15,900)
Amortization of acquisition-related intangibles
1,600 1,600 
Share-based compensation
10,900 10,900 
Depreciation and other amortization
1,200 1,200 
Adjusted EBITDA
$(3,200)$(2,200)
Full Year 2023 Guidance
LowHigh
Adjusted EBITDA
  GAAP Loss from Operations
$(54,300)$(51,300)
Amortization of acquisition-related intangibles
6,100 6,100 
Severance
3,600 3,600 
Share-based compensation
43,400 43,400 
Depreciation and other amortization
4,700 4,700 
Adjusted EBITDA
$3,500 $6,500 




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