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. | ||
May 2, 2017 | /s/ Stefan Schulz | |
Stefan Schulz | ||
Executive Vice President and Chief Financial Officer |
• | Subscription revenue up 49% year-over-year. |
• | 75% recurring revenue mix, compared with 66% in the same period last year. |
• | Achieved cloud transition milestone of year-over-year total revenue growth. |
GAAP | Non-GAAP | |||||||||||||||||||
Q1 2017 | Q1 2016 | % Change | Q1 2017 | Q1 2016 | % Change | |||||||||||||||
Revenue: | ||||||||||||||||||||
Total Revenue | $ | 40.1 | $ | 37.9 | 6 | % | n/a | n/a | n/a | |||||||||||
Subscription Revenue | 12.2 | 8.2 | 49 | % | n/a | n/a | n/a | |||||||||||||
Subscription and Maintenance Revenue | 30.3 | 24.9 | 22 | % | n/a | n/a | n/a | |||||||||||||
Profitability: | ||||||||||||||||||||
Operating Loss | (17.7 | ) | (18.0 | ) | nm | (10.8 | ) | (11.8 | ) | nm | ||||||||||
Net Loss | (20.2 | ) | (20.5 | ) | nm | (7.4 | ) | (8.1 | ) | nm | ||||||||||
Net Loss Per Share | (0.65 | ) | (0.68 | ) | nm | (0.24 | ) | (0.27 | ) | nm | ||||||||||
Adjusted EBITDA | n/a | n/a | n/a | (10.0 | ) | (10.1 | ) | nm | ||||||||||||
Cash: | ||||||||||||||||||||
Net Cash Used in Operating Activities | (12.2 | ) | (2.8 | ) | nm | (12.2 | ) | (2.8 | ) | nm | ||||||||||
Free Cash Flow | n/a | n/a | n/a | $ | (13.2 | ) | $ | (6.3 | ) | nm |
• | Attained ISO/IEC 27001: 2013 certification, underscoring PROS commitment to customers by achieving the industry’s most rigorous requirements for cloud security, data privacy, governance, and compliance. |
• | Launched customer-led free trial of PROS Smart CPQ on Microsoft AppSource, giving prospective customers a hands-on experience with personalized selling in Microsoft Dynamics 365 CRM. The Smart CPQ trial features PROS modern commerce machine-learning cloud solution to identify new sales opportunities, recommend cross-sell and upsell products, create accurate configurations, recommend personalized prices, and generate proposals and contracts. |
• | PROS ranked as the highest scoring vendor for customer references and machine learning intelligence in The Forrester Wave™: Configure-Price-Quote Solutions, Q1 2017 report; achieved the highest possible score for pricing and subscription management, and recognized as uniquely positioned to lead the market in analytics-driven recommendations. |
• | Saint-Gobain Glass Solutions named a winner of the IDG Digital 50 Award for the measurable impact of its digital transformation, powered by PROS modern commerce solutions. |
• | PROS named a winner of the prestigious CRM Watchlist Award for the fourth consecutive year in recognition of continued impact on customers and the market overall. |
• | Extended global cloud reach through two new Microsoft Azure Germany regions, delivering local data privacy and security for customers in Germany, the European Union (EU) and the European Free Trade Association (EFTA). |
Q2 2017 Guidance | v. Q2 2016 at Mid-Point | Full Year 2017 Guidance | v. Prior Year at Mid-Point | ||||
Total Revenue | $38.5 to $39.5 | 5% | $162.5 to $165.5 | 7% | |||
Subscription Revenue | $13 to $ 13.3 | 44% | $54 to $55 | 43% | |||
ARR | n/a | n/a | $147 to $149 | 21% | |||
Non-GAAP Loss Per Share | $(0.27) to $(0.26) | n/a | n/a | n/a | |||
Adjusted EBITDA | $(11.5) to $(10.5) | n/a | $(35) to $(34) | n/a | |||
Free Cash Flow | n/a | n/a | $(21) to $(19) | 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, |
• | 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. |
March 31, 2017 | December 31, 2016 | |||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 111,868 | $ | 118,039 | ||||
Short-term investments | 6,000 | 15,996 | ||||||
Accounts and unbilled receivables, net of allowance of $760 | 32,744 | 33,285 | ||||||
Prepaid and other current assets | 6,805 | 6,337 | ||||||
Total current assets | 157,417 | 173,657 | ||||||
Property and equipment, net | 14,789 | 15,238 | ||||||
Intangibles, net | 12,074 | 12,650 | ||||||
Goodwill | 20,245 | 20,096 | ||||||
Other long-term assets | 6,202 | 6,013 | ||||||
Total assets | $ | 210,727 | $ | 227,654 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Current liabilities: | ||||||||
Accounts payable and other liabilities | $ | 6,253 | $ | 2,744 | ||||
Accrued liabilities | 7,483 | 7,279 | ||||||
Accrued payroll and other employee benefits | 7,391 | 18,349 | ||||||
Deferred revenue | 73,307 | 68,349 | ||||||
Total current liabilities | 94,434 | 96,721 | ||||||
Long-term deferred revenue | 11,561 | 11,389 | ||||||
Convertible debt, net | 123,974 | 122,299 | ||||||
Other long-term liabilities | 628 | 639 | ||||||
Total liabilities | 230,597 | 231,048 | ||||||
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; 35,821,241 and 35,001,236 shares issued, respectively; 31,403,656 and 30,583,651 shares outstanding, respectively | 36 | 35 | ||||||
Additional paid-in capital | 179,161 | 175,678 | ||||||
Treasury stock, 4,417,585 common shares, at cost | (13,938 | ) | (13,938 | ) | ||||
Accumulated deficit | (180,466 | ) | (160,259 | ) | ||||
Accumulated other comprehensive loss | (4,663 | ) | (4,910 | ) | ||||
Total stockholders’ equity | (19,870 | ) | (3,394 | ) | ||||
Total liabilities and stockholders’ equity | $ | 210,727 | $ | 227,654 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Revenue: | ||||||||
Subscription | $ | 12,214 | $ | 8,201 | ||||
Maintenance and support | 18,076 | 16,662 | ||||||
Total subscription, maintenance and support | 30,290 | 24,863 | ||||||
License | 2,190 | 3,302 | ||||||
Services | 7,649 | 9,763 | ||||||
Total revenue | 40,129 | 37,928 | ||||||
Cost of revenue: | ||||||||
Subscription | 5,937 | 3,446 | ||||||
Maintenance and support | 3,146 | 3,272 | ||||||
Total cost of subscription, maintenance and support | 9,083 | 6,718 | ||||||
License | 65 | 62 | ||||||
Services | 7,461 | 8,931 | ||||||
Total cost of revenue | 16,609 | 15,711 | ||||||
Gross profit | 23,520 | 22,217 | ||||||
Operating expenses: | ||||||||
Selling and marketing | 16,473 | 18,018 | ||||||
General and administrative | 10,408 | 9,041 | ||||||
Research and development | 14,307 | 13,132 | ||||||
Loss from operations | (17,668 | ) | (17,974 | ) | ||||
Convertible debt interest and amortization | (2,394 | ) | (2,287 | ) | ||||
Other income (expense), net | 32 | (58 | ) | |||||
Loss before income tax provision | (20,030 | ) | (20,319 | ) | ||||
Income tax provision | 177 | 158 | ||||||
Net loss | $ | (20,207 | ) | $ | (20,477 | ) | ||
Net loss per share: | ||||||||
Basic and diluted | $ | (0.65 | ) | $ | (0.68 | ) | ||
Weighted average number of shares: | ||||||||
Basic and diluted | 31,099 | 30,226 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Operating activities: | ||||||||
Net loss | $ | (20,207 | ) | $ | (20,477 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 2,033 | 2,465 | ||||||
Amortization of debt discount and issuance costs | 1,675 | 1,568 | ||||||
Share-based compensation | 6,162 | 5,384 | ||||||
Deferred income tax, net | 33 | 27 | ||||||
Provision for doubtful accounts | — | (96 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts and unbilled receivables | 543 | 1,257 | ||||||
Prepaid expenses and other assets | (666 | ) | 458 | |||||
Accounts payable and other liabilities | 3,631 | 801 | ||||||
Accrued liabilities | 434 | 1,034 | ||||||
Accrued payroll and other employee benefits | (10,957 | ) | (3,203 | ) | ||||
Deferred revenue | 5,126 | 8,018 | ||||||
Net cash used in operating activities | (12,193 | ) | (2,764 | ) | ||||
Investing activities: | ||||||||
Purchases of property and equipment | (484 | ) | (3,522 | ) | ||||
Capitalized internal-use software development costs | (572 | ) | — | |||||
Purchases of short-term investments | — | (34,946 | ) | |||||
Proceeds from maturities of short-term investments | 9,983 | 2,500 | ||||||
Net cash provided by (used in) investing activities | 8,927 | (35,968 | ) | |||||
Financing activities: | ||||||||
Exercise of stock options | 2,198 | — | ||||||
Proceeds from employee stock plans | 776 | 470 | ||||||
Tax withholding related to net share settlement of stock awards | (5,665 | ) | (4,797 | ) | ||||
Payments of notes payable | (50 | ) | (38 | ) | ||||
Debt issuance costs related to Revolver | (125 | ) | — | |||||
Net cash used in financing activities | (2,866 | ) | (4,365 | ) | ||||
Effect of foreign currency rates on cash | (39 | ) | 27 | |||||
Net change in cash and cash equivalents | (6,171 | ) | (43,070 | ) | ||||
Cash and cash equivalents: | ||||||||
Beginning of period | 118,039 | 161,770 | ||||||
End of period | $ | 111,868 | $ | 118,700 |
Three Months Ended March 31, | Quarter over Quarter | ||||||||||||
2017 | 2016 | % change | |||||||||||
GAAP gross profit | $ | 23,520 | $ | 22,217 | 6 | % | |||||||
Non-GAAP adjustments: | |||||||||||||
Amortization of intangible assets | 477 | 491 | |||||||||||
Share-based compensation | 575 | 599 | |||||||||||
Non-GAAP gross profit | $ | 24,572 | $ | 23,307 | 5 | % | |||||||
Non-GAAP gross margin | 61.2 | % | 61.5 | % | |||||||||
GAAP loss from operations | $ | (17,668 | ) | $ | (17,974 | ) | (2 | )% | |||||
Non-GAAP adjustments: | |||||||||||||
Amortization of intangible assets | 669 | 785 | |||||||||||
Share-based compensation | 6,162 | 5,384 | |||||||||||
Total Non-GAAP adjustments | 6,831 | 6,169 | |||||||||||
Non-GAAP loss from operations | $ | (10,837 | ) | $ | (11,805 | ) | (8 | )% | |||||
Non-GAAP loss from operations % of total revenue | (27.0 | )% | (31.1 | )% | |||||||||
GAAP net loss | $ | (20,207 | ) | $ | (20,477 | ) | (1 | )% | |||||
Non-GAAP adjustments: | |||||||||||||
Total Non-GAAP adjustments affecting loss from operations | 6,831 | 6,169 | |||||||||||
Amortization of debt discount and issuance costs | 1,675 | 1,568 | |||||||||||
Tax impact related to non-GAAP adjustments | 4,326 | 4,688 | |||||||||||
Non-GAAP net loss | $ | (7,375 | ) | $ | (8,052 | ) | (8 | )% | |||||
Non-GAAP diluted loss per share | $ | (0.24 | ) | $ | (0.27 | ) | |||||||
Shares used in computing non-GAAP loss per share | 31,099 | 30,226 |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | |||||||||||
Cost of Subscription Items | ||||||||||||
Amortization of intangible assets | 313 | 322 | ||||||||||
Share-based compensation | 78 | 51 | ||||||||||
Total cost of subscription items | $ | 391 | $ | 373 | ||||||||
Cost of Maintenance Items | ||||||||||||
Amortization of intangible assets | 154 | 159 | ||||||||||
Share-based compensation | 89 | 77 | ||||||||||
Total cost of maintenance items | $ | 243 | $ | 236 | ||||||||
Cost of License Items | ||||||||||||
Amortization of intangible assets | 10 | 10 | ||||||||||
Total cost of license items | $ | 10 | $ | 10 | ||||||||
Cost of Services Items | ||||||||||||
Share-based compensation | 408 | 471 | ||||||||||
Total cost of services items | $ | 408 | $ | 471 | ||||||||
Sales and Marketing Items | ||||||||||||
Amortization of intangible assets | 192 | 288 | ||||||||||
Share-based compensation | 1,273 | 1,780 | ||||||||||
Total sales and marketing items | $ | 1,465 | $ | 2,068 | ||||||||
General and Administrative Items | ||||||||||||
Amortization of intangible assets | — | 6 | ||||||||||
Share-based compensation | 2,802 | 1,730 | ||||||||||
Total general and administrative items | $ | 2,802 | $ | 1,736 | ||||||||
Research and Development Items | ||||||||||||
Share-based compensation | 1,512 | 1,275 | ||||||||||
Total research and development items | $ | 1,512 | $ | 1,275 |
Three Months Ended March 31, | ||||||||||||
2017 | 2016 | |||||||||||
Adjusted EBITDA | ||||||||||||
GAAP Loss from Operations | $ | (17,668 | ) | $ | (17,974 | ) | ||||||
Amortization of intangible assets | 669 | 785 | ||||||||||
Share-based compensation | 6,162 | 5,384 | ||||||||||
Depreciation | 1,364 | 1,680 | ||||||||||
Capitalized internal-use software development costs | (572 | ) | — | |||||||||
Adjusted EBITDA | $ | (10,045 | ) | $ | (10,125 | ) | ||||||
Free Cash Flow | ||||||||||||
Net cash used in operating activities | $ | (12,193 | ) | $ | (2,764 | ) | ||||||
Purchase of property and equipment | (484 | ) | (3,522 | ) | ||||||||
Capitalized internal-use software development costs | (572 | ) | — | |||||||||
Free Cash Flow | $ | (13,249 | ) | $ | (6,286 | ) | ||||||
Guidance | Q2 2017 Guidance | |||||||||||
Low | High | |||||||||||
Adjusted EBITDA | ||||||||||||
GAAP Loss from Operations | $ | (19,200 | ) | $ | (18,200 | ) | ||||||
Amortization of intangible assets | 700 | 700 | ||||||||||
Share-based compensation | 6,300 | 6,300 | ||||||||||
Depreciation | 1,400 | 1,400 | ||||||||||
Capitalized internal-use software development costs | (700 | ) | (700 | ) | ||||||||
Adjusted EBITDA | $ | (11,500 | ) | $ | (10,500 | ) | ||||||
Full Year 2017 Guidance | ||||||||||||
Low | High | |||||||||||
Adjusted EBITDA | ||||||||||||
GAAP Loss from Operations | $ | (65,350 | ) | $ | (64,350 | ) | ||||||
Amortization of intangible assets | 2,700 | 2,700 | ||||||||||
Share-based compensation | 24,850 | 24,850 | ||||||||||
Depreciation | 5,500 | 5,500 | ||||||||||
Capitalized internal-use software development costs | (2,700 | ) | (2,700 | ) | ||||||||
Adjusted EBITDA | $ | (35,000 | ) | $ | (34,000 | ) |