EX-99.1 2 a2017q4ex991prosq42017earn.htm EXHIBIT 99.1 Exhibit
EXHIBIT 99.1

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PROS HOLDINGS, INC. REPORTS FOURTH QUARTER AND
FULL YEAR 2017 FINANCIAL RESULTS

•
Subscription revenue of $60.5 million, up 59% for the full year 2017.
•
Annual recurring revenue of $160.6 million as of December 31, 2017, up 31% year-over-year.
•
Free cash flow of $3.6 million in the fourth quarter, representing a key milestone and inflection point in PROS cloud transition.

HOUSTON – February 6, 2018 — PROS Holdings, Inc. (NYSE: PRO), a cloud software company powering the shift to modern commerce, today announced financial results for the fourth quarter and full year ended December 31, 2017.

“2017 was a major inflection point in our cloud transition as we returned to year-over-year revenue growth,” stated CEO Andres Reiner. “We are pleased with our strong fourth quarter and full year performance, exceeding the high end of guidance across all metrics. We enter 2018 excited by the large market opportunity in front of us as we leverage our AI platform to lead companies in making the shift to modern commerce.”

CFO Stefan Schulz said, “We continue to drive growth and scale in our business, and we achieved two key milestones in our cloud transition in the fourth quarter. We saw subscription revenue overtake maintenance revenue for the first time, and we generated positive free cash flow. We have strong momentum coming into 2018 and remain on track to accomplish our long-term financial goals.”

Fourth Quarter and Full Year 2017 Financial Highlights

Key financial results for the fourth quarter and full year 2017 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
 
Q4 2017
 
Q4 2016
 
% Change
 
Q4 2017
 
Q4 2016
 
% Change
Revenue:
 
 
 
 
 
 
 
 
 
 
 
  Total Revenue
$
46.3

 
$
39.9

 
16
%
 
n/a

 
n/a

 
n/a

  Subscription Revenue
19.1

 
11.0

 
74
%
 
n/a

 
n/a

 
n/a

  Subscription and Maintenance Revenue
36.2

 
28.4

 
27
%
 
n/a

 
n/a

 
n/a

Profitability:
 
 
 
 
 
 
 
 
 
 
 
  Gross Profit
28.2

 
24.0

 
18
%
 
29.9

 
25.0

 
20
%
  Operating Loss
(12.8
)
 
(16.3
)
 
nm

 
(5.5
)
 
(9.6
)
 
nm

  Net Loss
(17.0
)
 
(18.5
)
 
nm

 
(4.3
)
 
(6.5
)
 
nm

  Net Loss Per Share
(0.53
)
 
(0.61
)
 
nm

 
(0.13
)
 
(0.21
)
 
nm

  Adjusted EBITDA
n/a

 
n/a

 
n/a

 
(4.9
)
 
(8.6
)
 
nm

Cash:
 
 
 
 
 
 
 
 
 
 
 
  Net Cash Provided by (Used in) Operating Activities
4.5

 
(7.2
)
 
nm

 
n/a

 
n/a

 
n/a

  Free Cash Flow
n/a

 
n/a

 
n/a

 
$
3.6

 
$
(10.0
)
 
nm


1


 
GAAP
 
Non-GAAP
 
FY 2017
 
FY 2016
 
% Change
 
FY 2017
 
FY 2016
 
% Change
Revenue:
 
 
 
 
 
 
 
 
 
 
 
  Total Revenue
$
168.8

 
$
153.3

 
10
%
 
n/a

 
n/a

 
n/a

  Subscription Revenue
60.5

 
38.2

 
59
%
 
n/a

 
n/a

 
n/a

  Subscription and Maintenance Revenue
129.9

 
106.7

 
22
%
 
n/a

 
n/a

 
n/a

  Annual Recurring Revenue ("ARR")
n/a

 
n/a

 
n/a

 
160.6

 
122.2

 
31
%
Profitability:
 
 
 
 
 
 
 
 
 
 
 
  Gross Profit
100.3

 
89.9

 
11
%
 
105.5

 
94.1

 
12
%
  Operating Loss
(64.9
)
 
(65.4
)
 
nm

 
(36.3
)
 
(40.9
)
 
nm

  Net Loss
(77.9
)
 
(75.2
)
 
nm

 
(25.5
)
 
(28.0
)
 
nm

  Net Loss Per Share
(2.46
)
 
(2.47
)
 
nm

 
(0.81
)
 
(0.92
)
 
nm

  Adjusted EBITDA
n/a

 
n/a

 
n/a

 
(33.7
)
 
(35.4
)
 
nm

Cash:
 
 
 
 
 
 
 
 
 
 
 
  Net Cash Used in Operating Activities
(25.3
)
 
(14.3
)
 
nm

 
n/a

 
n/a

 
n/a

  Free Cash Flow
n/a

 
n/a

 
n/a

 
$
(29.5
)
 
$
(24.3
)
 
nm


The attached tables provide a summary of PROS results for the period, including a reconciliation of GAAP to non-GAAP metrics.

2017 and Recent Business Highlights

•
Released numerous new innovations enabling modern commerce, including the Q4 introduction of Monet™, PROS artificial intelligence analyst that delivers data science-driven insights in PROS solutions, and the Q4 launch of PROS next-generation Guidance solution, providing customers with an unprecedented level of transparency and self-service capabilities in PROS cloud.

•
Extended PROS modern commerce leadership position in the travel industry by introducing shopping, pricing and merchandising solutions through the acquisition of Vayant Travel Technologies based in Sofia, Bulgaria. Announced plans to expand the Sofia office to accommodate future growth plans.

•
Named the inaugural partner to showcase PROS modern commerce solutions for the manufacturing industry across the more than 50 Microsoft Technology Centers (MTC) globally. MTCs educate companies on how to accelerate their digital transformation and will feature how PROS Smart CPQ solutions powered by Microsoft Azure modernize the sales experience by delivering personalized offers and a fluid channel experience integrated with Microsoft Dynamics 365.

•
Won prestigious awards around innovation, partnership and customer success, including: Microsoft Partner of the Year awards in both the Alliance Global Commercial ISV and U.S. EPG, ISV - Business Applications categories in recognition of the value that PROS delivers to customers while leveraging Microsoft technologies; and the CRM Watchlist Award in recognition of PROS continued impact on customers and the market overall.

•
Strengthened leadership position in the market by being named to the Constellation ShortList™ for Pricing Optimization, and the Constellation ShortList™ for Configure, Price, Quote Solutions, as well as achieving the highest possible scores for reference customer assessment and intelligence and analytics criteria in The Forrester Wave™: Configure-Price-Quote Solutions report.

•
Successfully completed a private offering of $106.3 million aggregate principal amount at maturity of convertible senior notes due 2047; net proceeds were $90.5 million.

•
Appointed Tom Dziersk as Executive Vice President of Global Sales and Celia Fleischaker as Chief Marketing Officer to drive continued market adoption of PROS modern commerce solutions.



2

Financial Outlook

PROS anticipates the following based on an estimated 32.3 million basic weighted average shares outstanding, for the first quarter 2018, and a 22% non-GAAP estimated tax rate for the first quarter and full year 2018:
 
Q1 2018 Guidance
 
v. Q1 2017 at Mid-Point
 
Full Year 2018 Guidance
 
v. Prior Year at Mid-Point
Total Revenue
$45.6 to $46.6
 
15%
 
$187.0 to $190.0
 
12%
Subscription Revenue
$19.1 to $19.6
 
58%
 
$90.0 to $91.0
 
49%
ARR
n/a
 
n/a
 
$186.0 to $189.0
 
17%
Non-GAAP Loss Per Share
$(0.21) to $(0.19)
 
nm
 
n/a
 
n/a
Adjusted EBITDA
$(6.8) to $(5.8)
 
nm
 
$(27.0) to $(25.0)
 
nm
Free Cash Flow
n/a
 
n/a
 
$(5.0) to $(2.0)
 
$26.0
Conference Call
In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on Tuesday, February 6, 2018, 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 webcast of the conference call can be accessed under the “Investor Relations” section of the Company’s website at www.pros.com.

Following the call, an archived webcast will be available in the “Investor Relations” section of the Company’s website at www.pros.com. A telephone replay will be available until Tuesday, February 20, 2018, at 1-844-512-2921 (toll-free) or 1-412-317-6671 using the pass code 13675221. An archived webcast of this conference call will also be available in the “Investor Relations” section of the Company’s website at www.pros.com.

About PROS

PROS Holdings, Inc. (NYSE: PRO) is a cloud software company powering the shift to modern commerce by helping companies create personalized and frictionless buying experiences for their customers. Fueled by dynamic pricing science and machine learning, 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, including statements about our future financial performance; positioning; management's confidence and optimism; customer successes; demand for enterprise revenue, profit realization and modern commerce software solutions; business expansion; business predictability; ARR; revenue; 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 risks related to: (a) our ability to execute on our cloud strategy, (b) reduced revenue and cash flow resulting from our transition to a cloud strategy, (c) threats to the security of our or our customer’s data, (d) potential business or service disruptions from our third party data centers, cloud platform providers or other unrelated service providers, (e) market acceptance of our new products and product enhancements, (f) the risk that the markets for our software does not grow as anticipated, (g) the length of our sales cycles, (h) the risk that we will not be able to maintain historical maintenance, support and subscription renewal rates, (i) competition from vendors of sales, pricing, revenue management and configure-price-quote solutions as well as from companies internally developing their own solutions, (j) potential unauthorized or improper actions of our personnel, (k) the risk that acquisitions we have and may enter into in the future may be difficult to integrate, fail to achieve our objectives, disrupt our business, dilute stockholder value or divert management attention, (l) any downturn in sales to our target markets, (m) potential delays or other challenges related to the implementation of our solutions, (n) the difficulties of making accurate estimates necessary to complete a project and recognize revenue, (o) personnel risks associated with growing a business generally, (p) the impact that a slowdown in the world or any particular economy has on our business sales cycles, prospects’ and customers’ spending decisions, timing of implementation decisions, payment and renewal decision, (q) our debt repayment obligations, (r) the impact of currency fluctuations on our results of operations, and (s) civil and

3

political unrest in geographic regions in which we operate. Additional information relating to the uncertainty affecting PROS’ business is contained in our filings with the Securities and Exchange Commission. These forward-looking statements represent PROS’ expectations as of the date of this press release. 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 financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP income (loss) from operations, annual recurring revenue, adjusted EBITDA, free cash flow, tax rate, net income (loss) and diluted 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-first transition.

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, adjusted EBITDA, free cash flow and non-GAAP tax rates (collectively the "non-GAAP financial measures") as follows:

Non-GAAP income (loss) from operations: Non-GAAP income (loss) from operations excludes the impact of stock-based compensation, amortization of acquisition-related intangibles, acquisition-related expenses, amortization of debt discount and issuance costs, and related taxes. 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.
•
Acquisition-Related Expenses: Acquisition-related expenses include integration costs and other one-time direct costs associated with our acquisitions. These amounts are unrelated to our core performance during any particular period and are impacted by the timing and size of the acquisitions. We exclude acquisition-related expenses to provide investors a method to compare our operating results to prior periods and to peer companies because such amounts can vary significantly based on the frequency of acquisitions and magnitude of acquisition expenses.
•
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.

4

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, integration costs and other one-time direct costs associated with our acquisitions, 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 additions to property, plant and equipment, purchases of other (non-acquisition-related) intangible assets and capitalized internal-use software development costs.
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.

Investor Contact:
PROS Investor Relations
Shannon Tatz
713-335-5932
ir@pros.com

Media Contact:
PROS Public Relations
Yvonne Donaldson
713-335-5310
ydonaldson@pros.com



5


PROS Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)

 
 
December 31, 2017
 
December 31, 2016
Assets:
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
160,505

 
$
118,039

Short-term investments
 
—

 
15,996

Accounts and unbilled receivables, net of allowance of $760
 
32,484

 
33,285

Prepaid and other current assets
 
9,067

 
6,337

Total current assets
 
202,056

 
173,657

Property and equipment, net
 
14,007

 
15,238

Intangibles, net
 
26,929

 
12,650

Goodwill
 
38,458

 
20,096

Other long-term assets
 
7,233

 
6,013

Total assets
 
$
288,683

 
$
227,654

Liabilities and Stockholders’ Equity:
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable and other liabilities
 
$
2,976

 
$
2,744

Accrued liabilities
 
6,733

 
7,279

Accrued payroll and other employee benefits
 
16,712

 
18,349

Deferred revenue
 
75,604

 
68,349

Total current liabilities
 
102,025

 
96,721

Long-term deferred revenue
 
19,591

 
11,389

Convertible debt, net
 
213,203

 
122,299

Other long-term liabilities
 
843

 
639

Total liabilities
 
335,662

 
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; 36,356,760 and 35,001,236 shares issued, respectively; 31,939,175 and 30,583,651 shares outstanding, respectively
 
36

 
35

Additional paid-in capital
 
207,924

 
175,678

Treasury stock, 4,417,585 common shares, at cost
 
(13,938
)
 
(13,938
)
Accumulated deficit
 
(238,185
)
 
(160,259
)
Accumulated other comprehensive loss
 
(2,816
)
 
(4,910
)
Total stockholders’ equity
 
(46,979
)
 
(3,394
)
Total liabilities and stockholders’ equity
 
$
288,683

 
$
227,654


6

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

 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 
 
 
 
Subscription
 
$
19,082

 
$
10,962

 
$
60,539

 
$
38,158

Maintenance and support
 
17,076

 
17,462

 
69,408

 
68,565

Total subscription, maintenance and support
 
36,158

 
28,424

 
129,947

 
106,723

License
 
1,679

 
3,636

 
5,562

 
11,814

Services
 
8,507

 
7,866

 
33,307

 
34,739

Total revenue
 
46,344

 
39,926

 
168,816

 
153,276

Cost of revenue:
 
 
 
 
 
 
 
 
Subscription
 
8,253

 
5,037

 
27,858

 
17,379

Maintenance and support
 
2,807

 
3,415

 
11,693

 
13,681

Total cost of subscription, maintenance and support
 
11,060

 
8,452

 
39,551

 
31,060

License
 
72

 
47

 
282

 
246

Services
 
7,015

 
7,453

 
28,733

 
32,047

Total cost of revenue
 
18,147

 
15,952

 
68,566

 
63,353

Gross profit
 
28,197

 
23,974

 
100,250

 
89,923

Operating expenses:
 
 
 
 
 
 
 
 
Selling and marketing
 
17,491

 
16,255

 
68,116

 
63,980

General and administrative
 
9,822

 
10,627

 
40,336

 
38,537

Research and development
 
13,592

 
13,350

 
56,021

 
52,804

Acquisition-related
 
107

 
—

 
720

 
—

Loss from operations
 
(12,815
)
 
(16,258
)
 
(64,943
)
 
(65,398
)
Convertible debt interest and amortization
 
(4,140
)
 
(2,376
)
 
(13,218
)
 
(9,319
)
Other income (expense), net
 
69

 
101

 
384

 
(38
)
Loss before income tax provision (benefit)
 
(16,886
)
 
(18,533
)
 
(77,777
)
 
(74,755
)
Income tax provision (benefit)
 
94

 
(20
)
 
149

 
470

Net loss
 
$
(16,980
)
 
$
(18,513
)
 
$
(77,926
)
 
$
(75,225
)
 
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
 
Basic and diluted
 
$
(0.53
)
 
$
(0.61
)
 
$
(2.46
)
 
$
(2.47
)
Weighted average number of shares:
 
 
 
 
 
 
 
 
Basic and diluted
 
31,927

 
30,557

 
31,627

 
30,395


7

PROS Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2017
 
2016
 
2017
 
2016
Operating activities:
 
 
 
 
 
 
 
 
Net loss
 
$
(16,980
)
 
$
(18,513
)
 
$
(77,926
)
 
$
(75,225
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
3,484

 
2,111

 
10,531

 
9,507

Amortization of debt discount and issuance costs
 
2,901

 
1,653

 
9,264

 
6,439

Share-based compensation
 
5,131

 
6,021

 
22,796

 
20,466

Deferred income tax, net
 
(67
)
 
(24
)
 
(520
)
 
40

Provision for doubtful accounts
 
—

 
400

 
—

 
174

Loss on disposal of assets
 
59

 
19

 
59

 
19

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Accounts and unbilled receivables
 
2,163

 
(7,228
)
 
2,022

 
5,671

Prepaid expenses and other assets
 
2,586

 
(169
)
 
(3,715
)
 
(915
)
Accounts payable and other liabilities
 
(1,034
)
 
(359
)
 
700

 
(2,905
)
Accrued liabilities
 
(582
)
 
1,914

 
(1,055
)
 
2,801

Accrued payroll and other employee benefits
 
3,378

 
4,486

 
(2,344
)
 
5,195

Deferred revenue
 
3,496

 
2,503

 
14,875

 
14,388

Net cash provided by (used in) operating activities
 
4,535

 
(7,186
)
 
(25,313
)
 
(14,345
)
Investing activities:
 
 
 
 
 
 
 
 
Purchases of property and equipment
 
(51
)
 
(717
)
 
(1,286
)
 
(7,241
)
Purchase of equity securities
 
—

 
(2,000
)
 
—

 
(2,000
)
Acquisition of Vayant, net of cash acquired
 
—

 
—

 
(34,130
)
 
—

Capitalized internal-use software development costs
 
(801
)
 
(479
)
 
(2,797
)
 
(1,048
)
Purchase of intangible asset
 
(50
)
 
(1,625
)
 
(125
)
 
(1,625
)
Purchases of short-term investments
 
—

 
(10,056
)
 
—

 
(154,990
)
Proceeds from maturities of short-term investments
 
—

 
45,000

 
15,992

 
141,500

Net cash (used in) provided by investing activities
 
(902
)
 
30,123

 
(22,346
)
 
(25,404
)
Financing activities:
 
 
 
 
 
 
 
 
Exercise of stock options
 
(16
)
 
469

 
6,331

 
889

Proceeds from employee stock plans
 
—

 
—

 
1,535

 
1,090

Tax withholding related to net share settlement of stock awards
 
(132
)
 
(223
)
 
(7,375
)
 
(5,467
)
Payments of notes payable
 
(54
)
 
—

 
(209
)
 
(196
)
Debt issuance costs related to Revolver
 
—

 
—

 
(150
)
 
—

Debt issuance costs related to convertible debt
 
(305
)
 
—

 
(2,978
)
 
—

Proceeds from issuance of convertible debt, net
 
—

 
—

 
93,500

 
—

Net cash (used in) provided by financing activities
 
(507
)
 
246

 
90,654

 
(3,684
)
Effect of foreign currency rates on cash
 
20

 
(352
)
 
(529
)
 
(298
)
Net change in cash and cash equivalents
 
3,146

 
22,831

 
42,466

 
(43,731
)
Cash and cash equivalents:
 
 
 
 
 
 
 
 
Beginning of period
 
157,359

 
95,208

 
118,039

 
161,770

End of period
 
$
160,505

 
$
118,039

 
$
160,505

 
$
118,039


8

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 December 31,
 
Quarter over Quarter
 
Year Ended December 31,
 
Year over Year
 
 
 
 
2017
 
2016
 
% change
 
2017
 
2016
 
% change
GAAP gross profit
 
$
28,197

 
$
23,974

 
18
 %
 
$
100,250

 
$
89,923

 
11
 %
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of acquisition-related intangibles
 
1,280

 
481

 
 
 
3,297

 
1,957

 
 
 
Share-based compensation
 
402

 
547

 
 
 
1,971

 
2,267

 
 
Non-GAAP gross profit
 
$
29,879

 
$
25,002

 
20
 %
 
$
105,518

 
$
94,147

 
12
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP gross margin
 
64.5
 %
 
62.6
 %
 
 
 
62.5
 %
 
61.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP loss from operations
 
$
(12,815
)
 
$
(16,258
)
 
(21
)%
 
$
(64,943
)
 
$
(65,398
)
 
(1
)%
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
 
107

 
—

 
 
 
720

 
—

 
 
 
Amortization of acquisition-related intangibles
 
2,112

 
683

 
 
 
5,174

 
2,971

 
 
 
Severance
 
—

 
—

 
 
 
—

 
1,070

 
 
 
Share-based compensation
 
5,131

 
6,021

 
 
 
22,796

 
20,466

 
 
 
Total Non-GAAP adjustments
 
7,350


6,704

 
 
 
28,690


24,507

 
 
Non-GAAP loss from operations
 
$
(5,465
)
 
$
(9,554
)
 
(43
)%
 
$
(36,253
)
 
$
(40,891
)
 
(11
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP loss from operations % of total revenue
 
(11.8
)%
 
(23.9
)%
 
 
 
(21.5
)%
 
(26.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net loss
 
$
(16,980
)
 
$
(18,513
)
 
(8
)%
 
$
(77,926
)
 
$
(75,225
)
 
4
 %
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Non-GAAP adjustments affecting loss from operations
 
7,350

 
6,704

 
 
 
28,690

 
24,507

 
 
 
Amortization of debt discount and issuance costs
 
2,891

 
1,653

 
 
 
9,228

 
6,439

 
 
 
Tax impact related to non-GAAP adjustments
 
2,486

 
3,643

 
 
 
14,498

 
16,241

 
 
Non-GAAP net loss
 
$
(4,253
)
 
$
(6,513
)
 
(35
)%
 
$
(25,510
)
 
$
(28,038
)
 
(9
)%
 
 
 


 


 
 
 
 
 
 
 
 
Non-GAAP diluted loss per share
 
$
(0.13
)
 
$
(0.21
)
 
 
 
$
(0.81
)
 
$
(0.92
)
 


 
 
 
 
 
 
 
 
 
 
 
 
 
Shares used in computing non-GAAP loss per share
 
31,927

 
30,557

 
 
 
31,627

 
30,395

 
 

9

PROS Holdings, Inc.
Supplemental Schedule of Non-GAAP Financial Measures
Increase (Decrease) in GAAP Amounts Reported
(In thousands)
(Unaudited)

 
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
 
2017
 
2016
 
2017
 
2016
Cost of Subscription Items
 
 
 
 
 
 
 
 
 
Amortization of acquisition-related intangibles
 
1,099

 
315

 
2,603

 
1,277

 
Share-based compensation
 
50

 
64

 
237

 
249

 
Total cost of subscription items
 
$
1,149

 
$
379

 
$
2,840

 
$
1,526

 
 
 
 
 
 
 
 
 
 
Cost of Maintenance Items
 
 
 
 
 
 
 
 
 
Amortization of acquisition-related intangibles
 
170

 
156

 
652

 
639

 
Share-based compensation
 
80

 
82

 
298

 
328

 
Total cost of maintenance items
 
$
250

 
$
238

 
$
950

 
$
967

 
 
 
 
 
 
 
 
 
 
Cost of License Items
 


 
 
 
 
 
 
 
Amortization of acquisition-related intangibles
 
11

 
10

 
42

 
41

 
Total cost of license items
 
$
11

 
$
10

 
$
42

 
$
41

 
 
 
 
 
 


 


Cost of Services Items
 
 
 
 
 
 
 
 
 
Share-based compensation
 
272

 
401

 
1,436

 
1,690

 
Total cost of services items
 
$
272

 
$
401

 
$
1,436

 
$
1,690

 
 
 
 
 
 
 
 
 
 
Sales and Marketing Items
 


 


 


 


 
Amortization of acquisition-related intangibles
 
832

 
202

 
1,877

 
1,008

 
Severance
 
—

 
—

 
—

 
1,070

 
Share-based compensation
 
1,035

 
1,265

 
4,348

 
3,824

 
Total sales and marketing items
 
$
1,867

 
$
1,467

 
$
6,225

 
$
5,902

 
 
 
 
 
 
 
 
 
General and Administrative Items
 
 
 
 
 
 
 
 
 
Amortization of acquisition-related intangibles
 
—

 
—

 
—

 
6

 
Share-based compensation
 
2,617

 
2,773

 
11,163

 
9,040

 
Total general and administrative items
 
$
2,617

 
$
2,773

 
$
11,163

 
$
9,046

 
 
 
 
 
 
 
 
 
Research and Development Items
 
 
 
 
 
 
 
 
 
Share-based compensation
 
1,077

 
1,436

 
5,314

 
5,335

 
Total research and development items
 
$
1,077

 
$
1,436

 
$
5,314

 
$
5,335

 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
 
$
107

 
$
—

 
$
720

 
$
—


10

PROS Holdings, Inc.
Supplemental Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands)
(Unaudited)

 
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
 
2017
 
2016
 
2017
 
2016
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
GAAP Loss from Operations
 
$
(12,815
)
 
$
(16,258
)
 
$
(64,943
)
 
$
(65,398
)
 
Acquisition-related expenses
 
107

 
—

 
720

 
—

 
Amortization of acquisition-related intangibles
 
2,112

 
683

 
5,174

 
2,971

 
Severance
 
—

 
—

 
—

 
1,070

 
Share-based compensation
 
5,131

 
6,021

 
22,796

 
20,466

 
Depreciation
 
1,372

 
1,428

 
5,357

 
6,536

 
Capitalized internal-use software development costs
 
(801
)
 
(479
)
 
(2,797
)
 
(1,048
)
 
Adjusted EBITDA
 
$
(4,894
)
 
$
(8,605
)
 
$
(33,693
)
 
$
(35,403
)
 
 
 
 
 
 
 
 
 
 
Free Cash Flow
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
 
$
4,535

 
$
(7,186
)
 
$
(25,313
)
 
$
(14,345
)
 
Purchase of property and equipment
 
(51
)
 
(717
)
 
(1,286
)
 
(7,241
)
 
Purchase of intangible asset
 
(50
)
 
(1,625
)
 
(125
)
 
(1,625
)
 
Capitalized internal-use software development costs
 
(801
)
 
(479
)
 
(2,797
)
 
(1,048
)
 
Free Cash Flow
 
$
3,633

 
$
(10,007
)
 
$
(29,521
)
 
$
(24,259
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Guidance
 
Q1 2018 Guidance
 
Full Year 2018 Guidance
 
 
Low
 
High
 
Low
 
High
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
GAAP Loss from Operations
 
$
(16,000
)
 
$
(15,000
)
 
$
(61,000
)
 
$
(59,000
)
 
Amortization of acquisition-related intangibles
 
2,100

 
2,100

 
7,900

 
7,900

 
Share-based compensation
 
6,100

 
6,100

 
22,900

 
22,900

 
Depreciation
 
1,300

 
1,300

 
4,400

 
4,400

 
Capitalized internal-use software development costs
 
(300
)
 
(300
)
 
(1,200
)
 
(1,200
)
 
Adjusted EBITDA
 
$
(6,800
)
 
$
(5,800
)
 
$
(27,000
)
 
$
(25,000
)


11