Delaware | ||||
(State or Other Jurisdiction of Incorporation) | ||||
001-33554 | 76-0168604 | |||
(Commission File Number) | (IRS Employer Identification No.) |
3100 Main Street, Suite 900 Houston TX | 77002 | |||||||
(Address of Principal Executive Offices) | (Zip Code) | |||||||
Registrant’s telephone number, including area code | (713) 335-5151 | |||||||
(Former Name or Former Address, if Changed Since Last Report) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
PROS HOLDINGS, INC. | ||
November 1, 2016 | /s/ Stefan Schulz | |
Stefan Schulz | ||
Executive Vice President and Chief Financial Officer |
• | Subscription revenue of $9.9 million, up 43% year-over-year. |
• | ARR of $114.8 million as of September 30, 2016, up 22% year-over-year. |
• | ACV bookings up 25% year-over-year for the third quarter, and up 35% year-to-date. |
GAAP | Non-GAAP | ||||||||||||||||||||
Q3 2016 | Q3 2015 | % Change | Q3 2016 | Q3 2015 | % Change | ||||||||||||||||
Revenue and Bookings: | |||||||||||||||||||||
Revenue | $ | 38.4 | $ | 40.9 | (6 | )% | $ | 38.4 | $ | 41.7 | (8 | )% | |||||||||
Subscription Revenue | 9.9 | 6.9 | 43 | % | 9.9 | 6.9 | 43 | % | |||||||||||||
Annual Recurring Revenue ("ARR") | n/a | n/a | n/a | 114.8 | 93.8 | 22 | % | ||||||||||||||
Annual Contract Value ("ACV") bookings | n/a | n/a | n/a | 5.6 | 4.5 | 25 | % | ||||||||||||||
Profitability: | |||||||||||||||||||||
Operating Loss | (13.1 | ) | (15.9 | ) | nm | (8.1 | ) | (6.4 | ) | nm | |||||||||||
Net Loss | (15.7 | ) | (18.2 | ) | nm | (5.7 | ) | (4.7 | ) | nm | |||||||||||
Net Loss Per Share | (0.52 | ) | (0.61 | ) | nm | (0.19 | ) | (0.16 | ) | nm | |||||||||||
Adjusted EBITDA | n/a | n/a | n/a | (6.9 | ) | (5.0 | ) | nm | |||||||||||||
Cash: | |||||||||||||||||||||
Net cash provided by operating activities | 2.2 | 4.8 | (54 | )% | 2.2 | 4.8 | (54 | )% | |||||||||||||
Free Cash Flow | n/a | n/a | n/a | $ | 0.5 | $ | 1.8 | (72 | )% |
• | Released new innovations that enable modern commerce such as data-science driven cross-sell recommendations in PROS Smart CPQ, opportunity detection and guidance for B2B sales reps, and cloud analytics for airline group bookings. |
• | Showcased as data science innovator at Microsoft Ignite during keynote presentation, and strengthened position within Microsoft Dynamics CRM ecosystem with the addition of PROS Smart CPQ in the Microsoft AppSource, the marketplace for Azure-based applications. |
• | Recognized by Computerworld for powering BRF (formerly Brasil Foods) use of data insights and guidance to drive profitability, helping BRF win a Computerworld Data+ Editor’s Choice award. |
• | Won four silver Stevie Awards for PROS Smart CPQ for Microsoft Dynamics and Salesforce.com in the category of best B2B software and cloud applications in the Americas and International markets. |
• | Launched the Future of Revenue Management thought leadership website to help airlines around the world with management best practices and modern commerce case studies. |
Q4 2016 Guidance | v. Q4 2015 at Mid-Point | Full Year 2016 Guidance | v. Prior Year at Mid-Point | ||||
Total Revenue | $37 to $38.5 | (12)% | $150.3 to $151.8 | (12)% | |||
Subscription Revenue | $10.3 to $10.5 | 30% | $37.5 to $37.7 | 29% | |||
ARR | n/a | n/a | $119 to $121 | 22% | |||
ACV Bookings | $6.1 to $8.1 | 11% | $26.5 to $28.5 | 28% | |||
Non-GAAP Loss Per Share | $(0.27) to $(0.24) | n/a | n/a | n/a | |||
Adjusted EBITDA | $(11) to $(9.5) | n/a | $(37.8) to $(36.3) | n/a | |||
Free Cash Flow | n/a | n/a | $(32.5) to $(30.5) | n/a |
• | 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. |
• | Amortization of Debt Discount and Issuance Costs: Amortization of debt discount and issuance costs are related to our Senior Notes due 2019. 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. |
September 30, 2016 | December 31, 2015 | |||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 95,208 | $ | 161,770 | ||||
Short-term investments | 50,952 | 2,500 | ||||||
Accounts and unbilled receivables, net of allowance of $360 and $586, respectively | 26,443 | 39,115 | ||||||
Prepaid and other current assets | 6,710 | 7,540 | ||||||
Total current assets | 179,313 | 210,925 | ||||||
Property and equipment, net | 15,456 | 15,777 | ||||||
Intangibles, net | 12,114 | 14,191 | ||||||
Goodwill | 20,718 | 20,445 | ||||||
Other long-term assets | 3,359 | 1,873 | ||||||
Total assets | $ | 230,960 | $ | 263,211 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Current liabilities: | ||||||||
Accounts payable and other liabilities | $ | 3,406 | $ | 8,273 | ||||
Accrued liabilities | 5,235 | 4,333 | ||||||
Accrued payroll and other employee benefits | 13,791 | 13,084 | ||||||
Deferred revenue | 67,275 | 60,664 | ||||||
Total current liabilities | 89,707 | 86,354 | ||||||
Long-term deferred revenue | 9,939 | 4,665 | ||||||
Convertible debt, net | 120,647 | 115,860 | ||||||
Other long-term liabilities | 687 | 918 | ||||||
Total liabilities | 220,980 | 207,797 | ||||||
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; 34,938,021 and 34,156,561 shares issued, respectively; 30,520,436 and 29,738,976 shares outstanding, respectively | 35 | 34 | ||||||
Additional paid-in capital | 169,395 | 158,674 | ||||||
Treasury stock, 4,417,585 common shares, at cost | (13,938 | ) | (13,938 | ) | ||||
Accumulated deficit | (141,746 | ) | (85,034 | ) | ||||
Accumulated other comprehensive loss | (3,766 | ) | (4,322 | ) | ||||
Total stockholders’ equity | 9,980 | 55,414 | ||||||
Total liabilities and stockholders’ equity | $ | 230,960 | $ | 263,211 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenue: | ||||||||||||||||
License | $ | 2,419 | $ | 5,980 | $ | 8,178 | $ | 26,564 | ||||||||
Services | 8,447 | 12,273 | 26,873 | 32,100 | ||||||||||||
Subscription | 9,852 | 6,886 | 27,196 | 20,966 | ||||||||||||
Total license, services and subscription | 20,718 | 25,139 | 62,247 | 79,630 | ||||||||||||
Maintenance and support | 17,666 | 15,727 | 51,103 | 46,604 | ||||||||||||
Total revenue | 38,384 | 40,866 | 113,350 | 126,234 | ||||||||||||
Cost of revenue: | ||||||||||||||||
License | 38 | 51 | 199 | 242 | ||||||||||||
Services | 7,380 | 9,138 | 24,594 | 27,064 | ||||||||||||
Subscription | 4,808 | 3,105 | 12,342 | 9,330 | ||||||||||||
Total license, services and subscription | 12,226 | 12,294 | 37,135 | 36,636 | ||||||||||||
Maintenance and support | 3,416 | 2,972 | 10,266 | 9,361 | ||||||||||||
Total cost of revenue | 15,642 | 15,266 | 47,401 | 45,997 | ||||||||||||
Gross profit | 22,742 | 25,600 | 65,949 | 80,237 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and marketing | 13,641 | 19,639 | 47,725 | 55,810 | ||||||||||||
General and administrative | 9,253 | 9,626 | 27,910 | 29,786 | ||||||||||||
Research and development | 12,964 | 12,201 | 39,454 | 35,098 | ||||||||||||
Loss from operations | (13,116 | ) | (15,866 | ) | (49,140 | ) | (40,457 | ) | ||||||||
Convertible debt interest and amortization | (2,339 | ) | (2,234 | ) | (6,943 | ) | (6,642 | ) | ||||||||
Other expense, net | (26 | ) | (152 | ) | (139 | ) | (571 | ) | ||||||||
Loss before income tax provision (benefit) | (15,481 | ) | (18,252 | ) | (56,222 | ) | (47,670 | ) | ||||||||
Income tax provision (benefit) | 227 | (70 | ) | 490 | 410 | |||||||||||
Net loss | $ | (15,708 | ) | $ | (18,182 | ) | $ | (56,712 | ) | $ | (48,080 | ) | ||||
Net loss per share: | ||||||||||||||||
Basic and diluted | $ | (0.52 | ) | $ | (0.61 | ) | $ | (1.87 | ) | $ | (1.63 | ) | ||||
Weighted average number of shares: | ||||||||||||||||
Basic and diluted | 30,469 | 29,649 | 30,341 | 29,530 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Operating activities: | ||||||||||||||||
Net loss | $ | (15,708 | ) | $ | (18,182 | ) | $ | (56,712 | ) | $ | (48,080 | ) | ||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 2,423 | 3,152 | 7,396 | 7,923 | ||||||||||||
Amortization of debt discount and issuance costs | 1,620 | 1,514 | 4,786 | 4,485 | ||||||||||||
Share-based compensation | 3,192 | 6,631 | 14,445 | 21,381 | ||||||||||||
Deferred income tax, net | 22 | 22 | 64 | 138 | ||||||||||||
Provision for doubtful accounts | (87 | ) | 66 | (226 | ) | 132 | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts and unbilled receivables | 10,419 | 9,657 | 12,899 | 20,474 | ||||||||||||
Prepaid expenses and other assets | 58 | (1,891 | ) | (746 | ) | (383 | ) | |||||||||
Accounts payable and other liabilities | (1,092 | ) | (1,615 | ) | (2,546 | ) | (3,330 | ) | ||||||||
Accrued liabilities | 247 | 235 | 887 | 364 | ||||||||||||
Accrued payroll and other employee benefits | 2,955 | 1,415 | 709 | (4,909 | ) | |||||||||||
Deferred revenue | (1,836 | ) | 3,823 | 11,885 | 8,609 | |||||||||||
Net cash provided by (used in) operating activities | 2,213 | 4,827 | (7,159 | ) | 6,804 | |||||||||||
Investing activities: | ||||||||||||||||
Purchases of property and equipment | (1,185 | ) | (3,006 | ) | (6,524 | ) | (4,856 | ) | ||||||||
Capitalized internal-use software development costs | (497 | ) | — | (569 | ) | (233 | ) | |||||||||
Purchases of short-term investments | (56,006 | ) | (23,976 | ) | (144,934 | ) | (55,176 | ) | ||||||||
Proceeds from maturities of short-term investments | 47,000 | 12,700 | 96,500 | 32,700 | ||||||||||||
Net cash used in investing activities | (10,688 | ) | (14,282 | ) | (55,527 | ) | (27,565 | ) | ||||||||
Financing activities: | ||||||||||||||||
Exercise of stock options | 406 | (334 | ) | 420 | 433 | |||||||||||
Proceeds from employee stock plans | 620 | 457 | 1,090 | 839 | ||||||||||||
Tax withholding related to net share settlement of stock awards | (405 | ) | (238 | ) | (5,244 | ) | (4,966 | ) | ||||||||
Payment of contingent consideration for PROS France | — | (1,304 | ) | — | (1,304 | ) | ||||||||||
Payments of notes payable | (105 | ) | (53 | ) | (196 | ) | (212 | ) | ||||||||
Debt issuance costs related to convertible debt | — | — | — | (408 | ) | |||||||||||
Net cash provided by (used in) financing activities | 516 | (1,472 | ) | (3,930 | ) | (5,618 | ) | |||||||||
Effect of foreign currency rates on cash | 16 | 44 | 54 | 308 | ||||||||||||
Net change in cash and cash equivalents | (7,943 | ) | (10,883 | ) | (66,562 | ) | (26,071 | ) | ||||||||
Cash and cash equivalents: | ||||||||||||||||
Beginning of period | 103,151 | 145,831 | 161,770 | 161,019 | ||||||||||||
End of period | $ | 95,208 | $ | 134,948 | $ | 95,208 | $ | 134,948 |
Three Months Ended September 30, | Quarter over Quarter | Nine Months Ended September 30, | Year over Year | |||||||||||||
2016 | 2015 | % change | 2016 | 2015 | % change | |||||||||||
GAAP revenue | $38,384 | $40,866 | (6)% | $113,350 | $126,234 | (10)% | ||||||||||
Non-GAAP adjustment: | ||||||||||||||||
Acquisition-related deferred revenue write-down | — | 868 | — | 3,065 | ||||||||||||
Non-GAAP revenue | $38,384 | $41,734 | (8)% | $113,350 | $129,299 | (12)% | ||||||||||
GAAP gross profit | $22,742 | $25,600 | (11)% | $65,949 | $80,237 | (18)% | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||
Acquisition-related deferred revenue write-down, net of cost of revenue | — | 328 | — | 1,167 | ||||||||||||
Amortization of intangible assets | 490 | 553 | 1,476 | 1,659 | ||||||||||||
Share-based compensation | 544 | 852 | 1,720 | 2,896 | ||||||||||||
Non-GAAP gross profit | $23,776 | $27,333 | (13)% | $69,145 | $85,959 | (20)% | ||||||||||
Non-GAAP gross margin | 61.9% | 65.5% | 61.0% | 66.5% | ||||||||||||
GAAP loss from operations | $(13,116) | $(15,866) | (17)% | $(49,140) | $(40,457) | 21% | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||
Acquisition-related deferred revenue write-down, net of cost of revenue | — | 328 | — | 1,167 | ||||||||||||
Amortization of intangible assets | 737 | 1,703 | 2,288 | 3,866 | ||||||||||||
Accretion expense for acquisition-related contingent consideration | — | — | — | 22 | ||||||||||||
Recovery of bankruptcy claim | — | — | — | (626) | ||||||||||||
Severance | 1,070 | 756 | 1,070 | 756 | ||||||||||||
Share-based compensation | 3,192 | 6,631 | 14,445 | 21,381 | ||||||||||||
Total Non-GAAP adjustments | $4,999 | $9,418 | $17,803 | $26,566 | ||||||||||||
Non-GAAP loss from operations | $(8,117) | $(6,448) | 26% | $(31,337) | $(13,891) | 126% | ||||||||||
Non-GAAP loss from operations % of total revenue | (21.1)% | (15.5)% | (27.6)% | (10.7)% | ||||||||||||
GAAP net loss | $(15,708) | $(18,182) | (14)% | $(56,712) | $(48,080) | 18% | ||||||||||
Non-GAAP adjustments: | ||||||||||||||||
Total Non-GAAP adjustments affecting loss from operations | 4,999 | 9,418 | 17,803 | 26,566 | ||||||||||||
Amortization of debt discount and issuance costs | 1,620 | 1,514 | 4,786 | 4,485 | ||||||||||||
Tax impact related to non-GAAP adjustments | 3,418 | 2,566 | 12,598 | 6,376 | ||||||||||||
Non-GAAP net loss | $(5,671) | $(4,684) | 21% | $(21,525) | $(10,653) | 102% | ||||||||||
Non-GAAP diluted loss per share | $(0.19) | $(0.16) | $(0.71) | $(0.36) | ||||||||||||
Shares used in computing non-GAAP loss per share | 30,469 | 29,649 | 30,341 | 29,530 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Revenue Items | ||||||||||||||||||||
Acquisition-related deferred revenue write-down - service revenue | — | 823 | — | 2,766 | ||||||||||||||||
Acquisition-related deferred revenue write-down - subscription revenue | — | 20 | — | 224 | ||||||||||||||||
Acquisition-related deferred revenue write-down - maintenance revenue | — | 25 | — | 75 | ||||||||||||||||
Total revenue items | $ | — | $ | 868 | $ | — | $ | 3,065 | ||||||||||||
Cost of License Items | ||||||||||||||||||||
Amortization of intangible assets | 10 | 10 | 31 | 31 | ||||||||||||||||
Total cost of license items | $ | 10 | $ | 10 | $ | 31 | $ | 31 | ||||||||||||
Cost of Services Items | ||||||||||||||||||||
Acquisition-related deferred cost write-down | — | (540 | ) | — | (1,898 | ) | ||||||||||||||
Share-based compensation | 424 | 754 | 1,289 | 2,505 | ||||||||||||||||
Total cost of services items | $ | 424 | $ | 214 | $ | 1,289 | $ | 607 | ||||||||||||
Cost of Subscription Items | ||||||||||||||||||||
Amortization of intangible assets | 319 | 382 | 962 | 1,145 | ||||||||||||||||
Share-based compensation | 31 | 35 | 185 | 200 | ||||||||||||||||
Total cost of subscription items | $ | 350 | $ | 417 | $ | 1,147 | $ | 1,345 | ||||||||||||
Cost of Maintenance Items | ||||||||||||||||||||
Amortization of intangible assets | 161 | 161 | 483 | 483 | ||||||||||||||||
Share-based compensation | 89 | 63 | 246 | 191 | ||||||||||||||||
Total cost of maintenance items | $ | 250 | $ | 224 | $ | 729 | $ | 674 | ||||||||||||
Sales and Marketing Items | ||||||||||||||||||||
Amortization of intangible assets | 247 | 1,067 | 806 | 1,956 | ||||||||||||||||
Severance | 1,070 | 342 | 1,070 | 342 | ||||||||||||||||
Share-based compensation | (918 | ) | 2,229 | 2,559 | 6,541 | |||||||||||||||
Total sales and marketing items | $ | 399 | $ | 3,638 | $ | 4,435 | $ | 8,839 | ||||||||||||
General and Administrative Items | ||||||||||||||||||||
Accretion expense for acquisition-related contingent consideration | — | — | — | 22 | ||||||||||||||||
Amortization of intangible assets | — | 83 | 6 | 251 | ||||||||||||||||
Recovery of bankruptcy claim | — | — | — | (626 | ) | |||||||||||||||
Share-based compensation | 2,235 | 2,280 | 6,267 | 8,000 | ||||||||||||||||
Total general and administrative items | $ | 2,235 | $ | 2,363 | $ | 6,273 | $ | 7,647 | ||||||||||||
Research and Development Items | ||||||||||||||||||||
Severance | — | 414 | — | 414 | ||||||||||||||||
Share-based compensation | 1,331 | 1,270 | 3,899 | 3,944 | ||||||||||||||||
Total research and development items | $ | 1,331 | $ | 1,684 | $ | 3,899 | $ | 4,358 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Adjusted EBITDA | ||||||||||||||||||||
GAAP Loss from Operations | $ | (13,116 | ) | $ | (15,866 | ) | $ | (49,140 | ) | $ | (40,457 | ) | ||||||||
Acquisition-related deferred revenue write-down, net of cost of revenue | — | 328 | — | 1,167 | ||||||||||||||||
Amortization of intangible assets | 737 | 1,703 | 2,288 | 3,866 | ||||||||||||||||
Accretion expense for acquisition-related contingent consideration | — | — | — | 22 | ||||||||||||||||
Recovery of bankruptcy claim | — | — | — | (626 | ) | |||||||||||||||
Severance | 1,070 | 756 | 1,070 | 756 | ||||||||||||||||
Share-based compensation | 3,192 | 6,631 | 14,445 | 21,381 | ||||||||||||||||
Depreciation | 1,686 | 1,449 | 5,108 | 4,057 | ||||||||||||||||
Capitalized internal-use software development costs | (497 | ) | — | (569 | ) | (233 | ) | |||||||||||||
Adjusted EBITDA | $ | (6,928 | ) | $ | (4,999 | ) | $ | (26,798 | ) | $ | (10,067 | ) | ||||||||
Free Cash Flow | ||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 2,213 | $ | 4,827 | $ | (7,159 | ) | $ | 6,804 | |||||||||||
Purchase of property and equipment | (1,185 | ) | (3,006 | ) | (6,524 | ) | (4,856 | ) | ||||||||||||
Capitalized internal-use software development costs | (497 | ) | — | (569 | ) | (233 | ) | |||||||||||||
Free Cash Flow | $ | 531 | $ | 1,821 | $ | (14,252 | ) | $ | 1,715 | |||||||||||
Guidance | Q4 2016 Guidance | Full Year 2016 Guidance | ||||||||||||||||||
Low | High | Low | High | |||||||||||||||||
Adjusted EBITDA | ||||||||||||||||||||
GAAP Loss from Operations | $ | (18,850 | ) | $ | (17,350 | ) | $ | (67,915 | ) | $ | (66,415 | ) | ||||||||
Amortization of intangible assets | 700 | 700 | 2,950 | 2,950 | ||||||||||||||||
Severance | — | — | 1,070 | 1,070 | ||||||||||||||||
Share-based compensation | 6,250 | 6,250 | 20,695 | 20,695 | ||||||||||||||||
Depreciation | 1,400 | 1,400 | 6,500 | 6,500 | ||||||||||||||||
Capitalized internal-use software development costs | (500 | ) | (500 | ) | (1,100 | ) | (1,100 | ) | ||||||||||||
Adjusted EBITDA | $ | (11,000 | ) | $ | (9,500 | ) | $ | (37,800 | ) | $ | (36,300 | ) |