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. | ||
July 26, 2018 | /s/ Stefan Schulz | |
Stefan Schulz | ||
Executive Vice President and Chief Financial Officer |
Exhibit No. | Description | |
99.1 |
• | Subscription revenue up 64% year-over-year. |
• | Total revenue up 17% year-over-year. |
• | Free cash flow improvement of $4.9 million year-over-year. |
GAAP | Non-GAAP | ||||||||||||||||
Q2 2018 | Q2 2017 | % Change | Q2 2018 | Q2 2017 | % Change | ||||||||||||
Revenue: | |||||||||||||||||
Total Revenue | 47.4 | 40.4 | 17 | % | n/a | n/a | n/a | ||||||||||
Subscription Revenue | 22.0 | 13.4 | 64 | % | n/a | n/a | n/a | ||||||||||
Subscription and Maintenance Revenue | 38.3 | 30.6 | 25 | % | n/a | n/a | n/a | ||||||||||
Profitability: | |||||||||||||||||
Gross Profit | 28.7 | 24.3 | 18 | % | 30.3 | 25.3 | 20 | % | |||||||||
Operating Loss | (13.0 | ) | (16.7 | ) | nm | (5.6 | ) | (10.1 | ) | nm | |||||||
Net Loss | (16.8 | ) | (19.5 | ) | nm | (5.2 | ) | (7.0 | ) | nm | |||||||
Net Loss Per Share | (0.52 | ) | (0.62 | ) | nm | (0.16 | ) | (0.22 | ) | nm | |||||||
Adjusted EBITDA | n/a | n/a | n/a | (5.4 | ) | (9.5 | ) | nm | |||||||||
Cash: | |||||||||||||||||
Net Cash Used in Operating Activities | (3.6 | ) | (9.1 | ) | nm | n/a | n/a | n/a | |||||||||
Free Cash Flow | n/a | n/a | n/a | (5.2 | ) | (10.1 | ) | nm |
• | Hosted PROS Outperform 2018 global customer conference, the premiere conference for companies powering their digital transformation, where PROS unveiled plans to extend solution capabilities to fully integrate with leading eCommerce platforms, including Salesforce CloudCraze and SAP Hybris. |
• | Announced a partnership with SAP Hybris to integrate PROS shopping and merchandising solutions with SAP’s omnichannel commerce solution to deliver a best-of-breed digital selling solution to the airline industry. |
• | Showcased PROS manufacturing solutions in the Microsoft booth at Hannover Messe 2018, the world’s leading exhibition for industrial technology with more than 200,000 professionals in attendance, representing virtually every aspect of manufacturing. |
• | Joined forces with YRC Freight at the SMC3 Connections Conference to share best practices related to leveraging predictive analytics in the logistics industry in a panel titled “Strategic Analytics: Maximizing Data and Information Value.” |
• | Awarded twelve prominent speaking positions to share PROS science and research thought leadership at prestigious conferences, including the 29th Annual Production and Operations Management Society (POMS) Conference, the 2018 INFORMS Revenue Management and Pricing Conference, and the Professional Pricing Society 29th Annual Spring Pricing Workshops and Conference. |
• | Appointed Michael Wu, Ph.D., one of the world’s premier authorities, thought leaders and authors on artificial intelligence, data science and the digital experience, as Chief Artificial Intelligence Strategist. |
Q3 2018 Guidance | v. Q3 2017 at Mid-Point | Full Year 2018 Guidance | v. Prior Year at Mid-Point | ||||
Total Revenue | $47.5 to $48.5 | 14% | $192.0 to $194.0 | 14% | |||
Subscription Revenue | $23.0 to $23.5 | 47% | $91.5 to $92.5 | 52% | |||
ARR | n/a | n/a | $187.0 to $190.0 | 17% | |||
Non-GAAP Loss Per Share | $(0.20) to $(0.18) | nm | n/a | n/a | |||
Adjusted EBITDA | $(7.0) to $(6.0) | $2.7 | $(26.0) to $(24.0) | $8.7 | |||
Free Cash Flow | n/a | n/a | $(5.0) to $(2.0) | $26.0 |
• | 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 |
• | 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. |
June 30, 2018 | December 31, 2017 | |||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 141,867 | $ | 160,505 | ||||
Trade and other receivables, net of allowance of $983 and $760, respectively | 39,349 | 32,484 | ||||||
Deferred costs | 3,053 | 3,137 | ||||||
Prepaid and other current assets | 5,518 | 5,930 | ||||||
Total current assets | 189,787 | 202,056 | ||||||
Property and equipment, net | 14,856 | 14,007 | ||||||
Long-term deferred costs | 10,966 | 3,194 | ||||||
Intangibles, net | 22,921 | 26,929 | ||||||
Goodwill | 38,443 | 38,458 | ||||||
Other long-term assets | 4,467 | 4,039 | ||||||
Total assets | $ | 281,440 | $ | 288,683 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Current liabilities: | ||||||||
Accounts payable and other liabilities | $ | 4,725 | $ | 2,976 | ||||
Accrued liabilities | 8,828 | 6,733 | ||||||
Accrued payroll and other employee benefits | 12,392 | 16,712 | ||||||
Deferred revenue | 89,270 | 75,604 | ||||||
Total current liabilities | 115,215 | 102,025 | ||||||
Long-term deferred revenue | 14,957 | 19,591 | ||||||
Convertible debt, net | 219,108 | 213,203 | ||||||
Other long-term liabilities | 819 | 843 | ||||||
Total liabilities | 350,099 | 335,662 | ||||||
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; 37,128,924 and 36,356,760 shares issued, respectively; 32,711,339 and 31,939,175 shares outstanding, respectively | 37 | 36 | ||||||
Additional paid-in capital | 212,481 | 207,924 | ||||||
Treasury stock, 4,417,585 common shares, at cost | (13,938 | ) | (13,938 | ) | ||||
Accumulated deficit | (264,161 | ) | (238,185 | ) | ||||
Accumulated other comprehensive loss | (3,078 | ) | (2,816 | ) | ||||
Total stockholders’ equity | (68,659 | ) | (46,979 | ) | ||||
Total liabilities and stockholders’ equity | $ | 281,440 | $ | 288,683 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenue: | ||||||||||||||||
Subscription | $ | 22,038 | $ | 13,434 | $ | 42,988 | $ | 25,648 | ||||||||
Maintenance and support | 16,225 | 17,132 | 32,799 | 35,208 | ||||||||||||
Total subscription, maintenance and support | 38,263 | 30,566 | 75,787 | 60,856 | ||||||||||||
License | 695 | 1,090 | 1,761 | 3,280 | ||||||||||||
Services | 8,468 | 8,750 | 17,788 | 16,399 | ||||||||||||
Total revenue | 47,426 | 40,406 | 95,336 | 80,535 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Subscription | 8,491 | 5,800 | 17,255 | 11,737 | ||||||||||||
Maintenance and support | 2,953 | 2,881 | 5,910 | 6,027 | ||||||||||||
Total cost of subscription, maintenance and support | 11,444 | 8,681 | 23,165 | 17,764 | ||||||||||||
License | 64 | 72 | 137 | 137 | ||||||||||||
Services | 7,216 | 7,333 | 14,943 | 14,794 | ||||||||||||
Total cost of revenue | 18,724 | 16,086 | 38,245 | 32,695 | ||||||||||||
Gross profit | 28,702 | 24,320 | 57,091 | 47,840 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and marketing | 18,590 | 17,172 | 36,158 | 33,645 | ||||||||||||
General and administrative | 10,145 | 9,782 | 20,834 | 20,190 | ||||||||||||
Research and development | 12,960 | 14,076 | 27,744 | 28,383 | ||||||||||||
Acquisition-related | — | — | 95 | — | ||||||||||||
Loss from operations | (12,993 | ) | (16,710 | ) | (27,740 | ) | (34,378 | ) | ||||||||
Convertible debt interest and amortization | (4,226 | ) | (2,590 | ) | (8,405 | ) | (4,984 | ) | ||||||||
Other income (expense), net | 244 | (64 | ) | 446 | (32 | ) | ||||||||||
Loss before income tax (benefit) provision | (16,975 | ) | (19,364 | ) | (35,699 | ) | (39,394 | ) | ||||||||
Income tax (benefit) provision | (131 | ) | 149 | 1 | 326 | |||||||||||
Net loss | $ | (16,844 | ) | $ | (19,513 | ) | $ | (35,700 | ) | $ | (39,720 | ) | ||||
Net loss per share: | ||||||||||||||||
Basic and diluted | $ | (0.52 | ) | $ | (0.62 | ) | $ | (1.10 | ) | $ | (1.27 | ) | ||||
Weighted average number of shares: | ||||||||||||||||
Basic and diluted | 32,651 | 31,615 | 32,514 | 31,357 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Operating activities: | ||||||||||||||||
Net loss | $ | (16,844 | ) | $ | (19,513 | ) | $ | (35,700 | ) | $ | (39,720 | ) | ||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 3,256 | 1,972 | 6,620 | 4,005 | ||||||||||||
Amortization of debt discount and issuance costs | 2,988 | 1,835 | 5,929 | 3,510 | ||||||||||||
Share-based compensation | 5,462 | 5,932 | 11,398 | 12,094 | ||||||||||||
Deferred income tax, net | (252 | ) | — | (252 | ) | 33 | ||||||||||
Provision for doubtful accounts | 215 | — | 215 | — | ||||||||||||
Loss on disposal of assets | 2 | — | 37 | — | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts and unbilled receivables | (10,556 | ) | (406 | ) | (7,102 | ) | 137 | |||||||||
Deferred costs | (880 | ) | — | (642 | ) | — | ||||||||||
Prepaid expenses and other assets | 1,513 | (315 | ) | (62 | ) | (981 | ) | |||||||||
Accounts payable and other liabilities | 1,039 | (793 | ) | 1,729 | 2,838 | |||||||||||
Accrued liabilities | 3,529 | (147 | ) | 2,114 | 287 | |||||||||||
Accrued payroll and other employee benefits | 3,854 | 2,356 | (4,327 | ) | (8,601 | ) | ||||||||||
Deferred revenue | 3,096 | (37 | ) | 11,733 | 5,089 | |||||||||||
Net cash used in operating activities | (3,578 | ) | (9,116 | ) | (8,310 | ) | (21,309 | ) | ||||||||
Investing activities: | ||||||||||||||||
Purchases of property and equipment | (409 | ) | (211 | ) | (1,187 | ) | (695 | ) | ||||||||
Capitalized internal-use software development costs | (1,168 | ) | (736 | ) | (2,484 | ) | (1,308 | ) | ||||||||
Proceeds from maturities of short-term investments | — | — | — | 9,983 | ||||||||||||
Net cash (used in) provided by investing activities | (1,577 | ) | (947 | ) | (3,671 | ) | 7,980 | |||||||||
Financing activities: | ||||||||||||||||
Exercise of stock options | 326 | 3,078 | 1,201 | 5,276 | ||||||||||||
Proceeds from employee stock plans | — | — | 834 | 776 | ||||||||||||
Tax withholding related to net share settlement of stock awards | (1,713 | ) | (89 | ) | (8,968 | ) | (5,754 | ) | ||||||||
Payments of notes payable | 3 | (105 | ) | (55 | ) | (155 | ) | |||||||||
Debt issuance costs related to Revolver | — | — | — | (125 | ) | |||||||||||
Proceeds from issuance of convertible debt, net | — | 93,500 | — | 93,500 | ||||||||||||
Net cash (used in) provided by financing activities | (1,384 | ) | 96,384 | (6,988 | ) | 93,518 | ||||||||||
Effect of foreign currency rates on cash | 260 | (220 | ) | 331 | (259 | ) | ||||||||||
Net change in cash and cash equivalents | (6,279 | ) | 86,101 | (18,638 | ) | 79,930 | ||||||||||
Cash and cash equivalents: | ||||||||||||||||
Beginning of period | 148,146 | 111,868 | 160,505 | 118,039 | ||||||||||||
End of period | $ | 141,867 | $ | 197,969 | $ | 141,867 | $ | 197,969 |
Three Months Ended June 30, | Quarter over Quarter | Six Months Ended June 30, | Year over Year | |||||||||||||||||||||
2018 | 2017 | % change | 2018 | 2017 | % change | |||||||||||||||||||
GAAP gross profit | $ | 28,702 | $ | 24,320 | 18 | % | $ | 57,091 | $ | 47,840 | 19 | % | ||||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||||||
Amortization of acquisition-related intangibles | 1,181 | 485 | 2,422 | 962 | ||||||||||||||||||||
Share-based compensation | 398 | 515 | 880 | 1,090 | ||||||||||||||||||||
Non-GAAP gross profit | $ | 30,281 | $ | 25,320 | 20 | % | $ | 60,393 | $ | 49,892 | 21 | % | ||||||||||||
Non-GAAP gross margin | 63.8 | % | 62.7 | % | 63.3 | % | 62.0 | % | ||||||||||||||||
GAAP loss from operations | $ | (12,993 | ) | $ | (16,710 | ) | (22 | )% | $ | (27,740 | ) | $ | (34,378 | ) | (19 | )% | ||||||||
Non-GAAP adjustments: | ||||||||||||||||||||||||
Acquisition-related expenses | — | — | 95 | — | ||||||||||||||||||||
Amortization of acquisition-related intangibles | 1,897 | 680 | 3,912 | 1,349 | ||||||||||||||||||||
Share-based compensation | 5,462 | 5,932 | 11,398 | 12,094 | ||||||||||||||||||||
Total Non-GAAP adjustments | 7,359 | 6,612 | 15,405 | 13,443 | ||||||||||||||||||||
Non-GAAP loss from operations | $ | (5,634 | ) | $ | (10,098 | ) | (44 | )% | $ | (12,335 | ) | $ | (20,935 | ) | (41 | )% | ||||||||
Non-GAAP loss from operations % of total revenue | (11.9 | )% | (25.0 | )% | (12.9 | )% | (26.0 | )% | ||||||||||||||||
GAAP net loss | $ | (16,844 | ) | $ | (19,513 | ) | (14 | )% | $ | (35,700 | ) | $ | (39,720 | ) | (10 | )% | ||||||||
Non-GAAP adjustments: | ||||||||||||||||||||||||
Total Non-GAAP adjustments affecting loss from operations | 7,359 | 6,612 | 15,405 | 13,443 | ||||||||||||||||||||
Amortization of debt discount and issuance costs | 2,976 | 1,818 | 5,905 | 3,493 | ||||||||||||||||||||
Tax impact related to non-GAAP adjustments | 1,330 | 4,084 | 3,167 | 8,410 | ||||||||||||||||||||
Non-GAAP net loss | $ | (5,179 | ) | $ | (6,999 | ) | (26 | )% | $ | (11,223 | ) | $ | (14,374 | ) | (22 | )% | ||||||||
Non-GAAP diluted loss per share | $ | (0.16 | ) | $ | (0.22 | ) | $ | (0.35 | ) | $ | (0.46 | ) | ||||||||||||
Shares used in computing non-GAAP loss per share | 32,651 | 31,615 | 32,514 | 31,357 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||
Cost of Subscription Items | ||||||||||||||||||||
Amortization of acquisition-related intangibles | 997 | 317 | 2,050 | 630 | ||||||||||||||||
Share-based compensation | 35 | 51 | 88 | 129 | ||||||||||||||||
Total cost of subscription items | $ | 1,032 | $ | 368 | $ | 2,138 | $ | 759 | ||||||||||||
Cost of Maintenance Items | ||||||||||||||||||||
Amortization of acquisition-related intangibles | 172 | 158 | 349 | 312 | ||||||||||||||||
Share-based compensation | 54 | 84 | 132 | 173 | ||||||||||||||||
Total cost of maintenance items | $ | 226 | $ | 242 | $ | 481 | $ | 485 | ||||||||||||
Cost of License Items | ||||||||||||||||||||
Amortization of acquisition-related intangibles | 12 | 10 | 23 | 20 | ||||||||||||||||
Total cost of license items | $ | 12 | $ | 10 | $ | 23 | $ | 20 | ||||||||||||
Cost of Services Items | ||||||||||||||||||||
Share-based compensation | 309 | 380 | 660 | 788 | ||||||||||||||||
Total cost of services items | $ | 309 | $ | 380 | $ | 660 | $ | 788 | ||||||||||||
Sales and Marketing Items | ||||||||||||||||||||
Amortization of acquisition-related intangibles | 716 | 195 | 1,490 | 387 | ||||||||||||||||
Share-based compensation | 1,284 | 1,131 | 2,568 | 2,404 | ||||||||||||||||
Total sales and marketing items | $ | 2,000 | $ | 1,326 | $ | 4,058 | $ | 2,791 | ||||||||||||
General and Administrative Items | ||||||||||||||||||||
Share-based compensation | 2,688 | 2,880 | 5,567 | 5,682 | ||||||||||||||||
Total general and administrative items | $ | 2,688 | $ | 2,880 | $ | 5,567 | $ | 5,682 | ||||||||||||
Research and Development Items | ||||||||||||||||||||
Share-based compensation | 1,092 | 1,406 | 2,383 | 2,918 | ||||||||||||||||
Total research and development items | $ | 1,092 | $ | 1,406 | $ | 2,383 | $ | 2,918 | ||||||||||||
Acquisition-related expenses | $ | — | $ | — | $ | 95 | $ | — |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||
Adjusted EBITDA | ||||||||||||||||||||
GAAP Loss from Operations | $ | (12,993 | ) | $ | (16,710 | ) | $ | (27,740 | ) | $ | (34,378 | ) | ||||||||
Acquisition-related expenses | — | — | 95 | — | ||||||||||||||||
Amortization of acquisition-related intangibles | 1,897 | 680 | 3,912 | 1,349 | ||||||||||||||||
Share-based compensation | 5,462 | 5,932 | 11,398 | 12,094 | ||||||||||||||||
Depreciation | 1,359 | 1,292 | 2,708 | 2,656 | ||||||||||||||||
Capitalized internal-use software development costs | (1,168 | ) | (736 | ) | (2,484 | ) | (1,308 | ) | ||||||||||||
Adjusted EBITDA | $ | (5,443 | ) | $ | (9,542 | ) | $ | (12,111 | ) | $ | (19,587 | ) | ||||||||
Free Cash Flow | ||||||||||||||||||||
Net cash used in operating activities | $ | (3,578 | ) | $ | (9,116 | ) | $ | (8,310 | ) | $ | (21,309 | ) | ||||||||
Purchase of property and equipment | (409 | ) | (211 | ) | (1,187 | ) | (695 | ) | ||||||||||||
Capitalized internal-use software development costs | (1,168 | ) | (736 | ) | (2,484 | ) | (1,308 | ) | ||||||||||||
Free Cash Flow | $ | (5,155 | ) | $ | (10,063 | ) | $ | (11,981 | ) | $ | (23,312 | ) | ||||||||
Guidance | Q3 2018 Guidance | Full Year 2018 Guidance | ||||||||||||||||||
Low | High | Low | High | |||||||||||||||||
Adjusted EBITDA | ||||||||||||||||||||
GAAP Loss from Operations | $ | (14,600 | ) | $ | (13,600 | ) | $ | (56,300 | ) | $ | (54,300 | ) | ||||||||
Amortization of acquisition-related intangibles | 1,900 | 1,900 | 7,500 | 7,500 | ||||||||||||||||
Share-based compensation | 5,500 | 5,500 | 22,100 | 22,100 | ||||||||||||||||
Depreciation | 1,300 | 1,300 | 5,300 | 5,300 | ||||||||||||||||
Capitalized internal-use software development costs | (1,100 | ) | (1,100 | ) | (4,600 | ) | (4,600 | ) | ||||||||||||
Adjusted EBITDA | $ | (7,000 | ) | $ | (6,000 | ) | $ | (26,000 | ) | $ | (24,000 | ) |