EX-99.1 2 a2018q4ex991prosearningsre.htm EXHIBIT 99.1 Exhibit
EXHIBIT 99.1

proslogoa03a02a01a18.jpg

PROS HOLDINGS, INC. REPORTS FOURTH QUARTER AND
FULL YEAR 2018 FINANCIAL RESULTS

•
Subscription revenue of $95.2 million, up 57% for the full year 2018.
•
Subscription gross margins of 68% and non-GAAP subscription margin of 71% in the fourth quarter, up more than 850 basis points year-over-year.
•
Cash flow provided by operating activities of $15.2 million and free cash flow of $14.1 million in the fourth quarter, contributing to a full year 2018 free cash flow improvement of $29.0 million year-over-year.

HOUSTON – February 7, 2019 — PROS Holdings, Inc. (NYSE: PRO), a provider of AI-powered solutions that optimize selling in the digital economy, today announced financial results for the fourth quarter and full year ended December 31, 2018.

“As the market embraces our AI solutions, we are driving strong growth and rapid transformation in our business,” stated CEO Andres Reiner. “Subscription revenue accounted for more than half of total revenue for the first time in our company's history last quarter, and we surpassed our pre-transition total revenue in less than four years from when we began our journey to the cloud. We enter 2019 excited by the opportunity in front of us to accelerate our growth once again.”

CFO Stefan Schulz said, “We successfully drove both growth and scale in our business in 2018. In the fourth quarter, we improved our non-GAAP subscription gross margins by nine percentage points year-over-year and our operating margins by seven percentage points year-over-year. We also achieved our goal of reaching near breakeven free cash flow in 2018. We have strong momentum coming into 2019 and remain on track to achieve our long-term financial goals.”

Fourth Quarter and Full Year 2018 Financial Highlights

Key financial results for the fourth quarter and full year 2018 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 2018
 
Q4 2017
 
Change
 
Q4 2018
 
Q4 2017
 
 Change
Revenue:
 
 
 
 
 
 
 
 
 
 
 
  Total Revenue
$52.6
 
$46.3
 
14%
 
n/a
 
n/a
 
n/a
  Subscription Revenue
$28.3
 
$19.1
 
48%
 
n/a
 
n/a
 
n/a
  Subscription and Maintenance Revenue
$44.0
 
$36.2
 
22%
 
n/a
 
n/a
 
n/a
Profitability:
 
 
 
 
 
 
 
 
 
 
 
  Gross Profit
$33.2
 
$28.2
 
18%
 
$34.7
 
$29.9
 
16%
  Operating Loss
$(9.6)
 
$(12.8)
 
$3.2
 
$(2.6)
 
$(5.5)
 
$2.8
  Net Loss
$(12.8)
 
$(17.0)
 
$4.2
 
$(2.1)
 
$(4.3)
 
$2.2
  Net Loss Per Share
$(0.34)
 
$(0.53)
 
$0.19
 
$(0.06)
 
$(0.13)
 
$0.07
  Adjusted EBITDA
n/a
 
n/a
 
n/a
 
$(2.0)
 
$(4.9)
 
$2.9
Cash:
 
 
 
 
 
 
 
 
 
 
 
  Net Cash Provided by Operating Activities
$15.2
 
$4.5
 
$10.7
 
n/a
 
n/a
 
n/a
  Free Cash Flow
n/a
 
n/a
 
n/a
 
$14.1
 
$3.6
 
$10.4


1

 
GAAP
 
Non-GAAP
 
FY 2018
 
FY 2017
 
Change
 
FY 2018
 
FY 2017
 
 Change
Revenue:
 
 
 
 
 
 
 
 
 
 
 
  Total Revenue
$197.0
 
$168.8
 
17%
 
n/a
 
n/a
 
n/a
  Subscription Revenue
$95.2
 
$60.5
 
57%
 
n/a
 
n/a
 
n/a
  Subscription and Maintenance Revenue
$160.0
 
$129.9
 
23%
 
n/a
 
n/a
 
n/a
  Annual Recurring Revenue ("ARR")
n/a
 
n/a
 
n/a
 
$189.3
 
$160.6
 
18%
  Annual Recurring Revenue in constant currency
n/a
 
n/a
 
n/a
 
$190.5
 
$160.6
 
19%
Profitability:
 
 
 
 
 
 
 
 
 
 
 
  Gross Profit
$119.8
 
$100.3
 
20%
 
$126.2
 
$105.5
 
20%
  Operating Loss
$(49.2)
 
$(64.9)
 
$15.7
 
$(20.1)
 
$(36.3)
 
$16.2
  Net Loss
$(64.2)
 
$(77.9)
 
$13.7
 
$(17.9)
 
$(25.5)
 
$7.6
  Net Loss Per Share
$(1.86)
 
$(2.46)
 
$0.6
 
$(0.52)
 
$(0.81)
 
$0.29
  Adjusted EBITDA
n/a
 
n/a
 
n/a
 
$(19.0)
 
$(33.7)
 
$14.7
Cash:
 
 
 
 
 
 
 
 
 
 
 
  Net Cash Provided by (Used in) Operating Activities
$5.7
 
$(25.3)
 
$31.0
 
n/a
 
n/a
 
n/a
  Free Cash Flow
n/a
 
n/a
 
n/a
 
$(0.5)
 
$(29.5)
 
$29.0

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

Recent Business Highlights

•
Accelerated growth among B2B customers and increased B2B deal volume by more than 40% year-over-year.

•
Launched the next-generation of PROS flagship revenue management solution suite, born in the cloud and delivering data science and forecasting tailored to the unique needs of each airline industry segment from ultra low-cost carriers through 5-star airlines.

•
Named a Leader in the IDC Marketscape for B2B Price Optimization and a Visionary in the Gartner CPQ Magic Quadrant for CPQ Application Suites in recognition of PROS strong AI innovation and product roadmap, leading ability to integrate with external systems and intuitive user experience.

•
Awarded several prominent AI thought leadership speaking positions in the fourth quarter, including Michael Wu, Ph.D’s keynote presentation at the Professional Pricing Society Fall Conference, “How the Pricing Industry Can Realize the Benefit of AI”, Dr. Wu’s “The Science and Strategy Behind Good CX” partner session at SAP Customer Experience LIVE, and Principle Scientist Surain Adyanthaya’s “Price Availability, Offer Management and the PSS” at T2RL’s PSS Conference.

•
Appointed Jill Sawatzky, a globally recognized customer success expert, as Vice President of Customer Success to define the next era of PROS customer success and bring an even higher focus to customer value attainment.

Financial Outlook

PROS anticipates the following based on an estimated 37.6 million basic weighted average shares outstanding for the first quarter of 2019 and a 22% non-GAAP estimated tax rate for the first quarter and full year 2019:

2

 
Q1 2019 Guidance
 
v. Q1 2018 at Mid-Point
 
Full Year 2019 Guidance
 
v. Prior Year at Mid-Point
Total Revenue
$54.0 to $55.0
 
14%
 
$231.0 to $233.0
 
18%
Subscription Revenue
$29.0 to $29.5
 
40%
 
$130.0 to $131.0
 
37%
ARR
n/a
 
n/a
 
$219.0 to $221.0
 
16%
Non-GAAP Loss Per Share
$(0.15) to $(0.13)
 
$0.05
 
n/a
 
n/a
Adjusted EBITDA
$(5.1) to $(4.1)
 
$2.1
 
$(13.0) to $(11.0)
 
$7.0
Free Cash Flow
n/a
 
n/a
 
$0.0 to $2.0
 
$1.5
Conference Call
In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on Thursday, February 7, 2019, 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.

A telephone replay will be available until Thursday, February 21, 2019, at 1-844-512-2921 (toll-free) or 1-412-317-6671 using the pass code 13685957. 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) provides AI solutions that power commerce in the digital economy. PROS solutions bring intelligence to commerce by providing companies with predictive and prescriptive guidance that enables them to dynamically price, configure and sell their products and services across all channels with speed, precision and consistency. 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 do 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 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.


3

Non-GAAP Financial Measures

PROS has provided in this release certain financial information that has not been prepared in accordance with U.S. generally accepted accounting principles (“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 transition.

PROS also presents certain information in “constant currency,” which is also a non-GAAP financial measure. Since PROS has operations outside of the United States reporting in currencies other than the U.S. dollar, the comparability of our operating results reported in U.S. Dollars is affected by foreign currency exchange rate fluctuations because the underlying currencies in which we transact change in value over time compared to the U.S. Dollar. These fluctuations may have a significant effect on our reported results. As such, this release contains references to constant currency measures, which are calculated based on currency rates set at the start of a year and held constant throughout the year. Management believes this supplemental information is useful to investors as a framework for facilitating period-to-period comparisons of our business performance excluding the effects of foreign currency exchange rate fluctuations.

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, new headquarters noncash rent expense 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.
•
New Headquarters Noncash Rent Expense: Noncash rent expense is related to PROS new corporate headquarters and is incurred prior to occupation of this facility. These amounts are unrelated to our core performance during any particular period and we believe this could make it difficult for investors to compare our current financial results to previous and

4

future periods. Therefore, we believe it is useful to exclude the noncash rent expense on the preoccupied new headquarters in order for investors to better understand our business performance and allow investors to compare our operating 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 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, new headquarters noncash rent expense 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 capital expenditures (excluding expenditures for PROS new headquarters), 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.


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

Media Contact:
James Garber
617-960-9875
pros@marchcomms.com



5


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

 
 
December 31, 2018
 
December 31, 2017
Assets:
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
295,476

 
$
160,505

Trade and other receivables, net of allowance of $978 and $760, respectively
 
41,822

 
32,484

Deferred costs
 
4,089

 
3,137

Prepaid and other current assets
 
4,756

 
5,930

Total current assets
 
346,143

 
202,056

Property and equipment, net
 
14,676

 
14,007

Deferred costs, noncurrent
 
13,373

 
3,194

Intangibles, net
 
19,354

 
26,929

Goodwill
 
38,231

 
38,458

Other assets, noncurrent
 
5,190

 
4,039

Total assets
 
$
436,967

 
$
288,683

Liabilities and Stockholders’ Equity:
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable and other liabilities
 
$
6,934

 
$
2,976

Accrued liabilities
 
9,506

 
6,733

Accrued payroll and other employee benefits
 
22,519

 
16,712

Deferred revenue
 
99,262

 
75,604

Current portion of convertible debt, net
 
136,529

 
—

Total current liabilities
 
274,750

 
102,025

Deferred revenue, noncurrent
 
17,903

 
19,591

Convertible debt, net, noncurrent
 
88,661

 
213,203

Other liabilities, noncurrent
 
754

 
843

Total liabilities
 
382,068

 
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; 41,573,491
and 36,356,760 shares issued, respectively; 37,155,906 and 31,939,175 shares outstanding, respectively
 
42

 
36

Additional paid-in capital
 
364,877

 
207,924

Treasury stock, 4,417,585 common shares, at cost
 
(13,938
)
 
(13,938
)
Accumulated deficit
 
(292,708
)
 
(238,185
)
Accumulated other comprehensive loss
 
(3,374
)
 
(2,816
)
Total stockholders’ equity
 
54,899

 
(46,979
)
Total liabilities and stockholders’ equity
 
$
436,967

 
$
288,683


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,
 
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
 
Subscription
 
$
28,316

 
$
19,082

 
$
95,192

 
$
60,539

Maintenance and support
 
15,723

 
17,076

 
64,760

 
69,408

Total subscription, maintenance and support
 
44,039

 
36,158

 
159,952

 
129,947

License
 
662

 
1,679

 
3,516

 
5,562

Services
 
7,912

 
8,507

 
33,556

 
33,307

Total revenue
 
52,613

 
46,344

 
197,024

 
168,816

Cost of revenue:
 
 
 
 
 
 
 
 
Subscription
 
9,060

 
8,253

 
35,368

 
27,858

Maintenance and support
 
2,840

 
2,807

 
11,602

 
11,693

Total cost of subscription, maintenance and support
 
11,900

 
11,060

 
46,970

 
39,551

License
 
51

 
72

 
251

 
282

Services
 
7,507

 
7,015

 
29,958

 
28,733

Total cost of revenue
 
19,458

 
18,147

 
77,179

 
68,566

Gross profit
 
33,155

 
28,197

 
119,845

 
100,250

Operating expenses:
 
 
 
 
 
 
 
 
Selling and marketing
 
18,335

 
17,491

 
72,006

 
68,116

General and administrative
 
10,289

 
9,822

 
41,302

 
40,336

Research and development
 
14,140

 
13,592

 
55,657

 
56,021

Acquisition-related
 
—

 
107

 
95

 
720

Loss from operations
 
(9,609
)
 
(12,815
)
 
(49,215
)
 
(64,943
)
Convertible debt interest and amortization
 
(4,315
)
 
(4,140
)
 
(16,986
)
 
(13,218
)
Other income, net
 
1,188

 
69

 
2,155

 
384

Loss before income tax provision
 
(12,736
)
 
(16,886
)
 
(64,046
)
 
(77,777
)
Income tax provision
 
24

 
94

 
200

 
149

Net loss
 
$
(12,760
)
 
$
(16,980
)
 
$
(64,246
)
 
$
(77,926
)
 
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
 
Basic and diluted
 
$
(0.34
)
 
$
(0.53
)
 
$
(1.86
)
 
$
(2.46
)
Weighted average number of shares:
 
 
 
 
 
 
 
 
Basic and diluted
 
37,154

 
31,927

 
34,465

 
31,627


7

PROS Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2018
 
2017
 
2018
 
2017
Operating activities:
 
 
 
 
 
 
 
 
Net loss
 
$
(12,760
)
 
$
(16,980
)
 
$
(64,246
)
 
$
(77,926
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
3,270

 
3,484

 
13,055

 
10,531

Amortization of debt discount and issuance costs
 
3,069

 
2,901

 
12,027

 
9,264

Share-based compensation
 
5,098

 
5,131

 
21,453

 
22,796

Deferred income tax, net
 
(211
)
 
(67
)
 
(463
)
 
(520
)
Provision for doubtful accounts
 
(3
)
 
—

 
212

 
—

Loss on disposal of assets
 
—

 
59

 
37

 
59

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Accounts and unbilled receivables
 
4,348

 
2,163

 
(9,550
)
 
2,022

Deferred costs
 
(2,569
)
 
—

 
(4,086
)
 
—

Prepaid expenses and other assets
 
1,971

 
2,586

 
87

 
(3,715
)
Accounts payable and other liabilities
 
1,362

 
(1,034
)
 
3,931

 
700

Accrued liabilities
 
3,297

 
(582
)
 
2,764

 
(1,055
)
Accrued payroll and other employee benefits
 
6,172

 
3,378

 
5,830

 
(2,344
)
Deferred revenue
 
2,144

 
3,496

 
24,652

 
14,875

Net cash provided by (used in) operating activities
 
15,188

 
4,535

 
5,703

 
(25,313
)
Investing activities:
 
 
 
 
 
 
 
 
Purchases of property and equipment
 
(69
)
 
(51
)
 
(1,475
)
 
(1,286
)
Purchase of equity securities
 
(45
)
 
—

 
(45
)
 
—

Acquisition of Vayant, net of cash acquired
 
—

 
—

 
—

 
(34,130
)
Capitalized internal-use software development costs
 
(927
)
 
(801
)
 
(4,613
)
 
(2,797
)
Purchase of intangible asset
 
(125
)
 
(50
)
 
(125
)
 
(125
)
Proceeds from maturities of short-term investments
 
—

 
—

 
—

 
15,992

Net cash used in investing activities
 
(1,166
)
 
(902
)
 
(6,258
)
 
(22,346
)
Financing activities:
 
 
 
 
 
 
 
 
Exercise of stock options
 
—

 
(16
)
 
1,142

 
6,331

Proceeds from employee stock plans
 
—

 
—

 
1,720

 
1,535

Tax withholding related to net share settlement of stock awards
 
(257
)
 
(132
)
 
(9,410
)
 
(7,375
)
Proceeds from Secondary Offering, net
 
—

 
—

 
141,954

 
—

Payments of notes payable
 
—

 
(54
)
 
(54
)
 
(209
)
Proceeds from issuance of convertible debt, net
 
—

 
—

 
—

 
93,500

Debt issuance costs related to convertible debt
 
—

 
(305
)
 
—

 
(2,978
)
Debt issuance costs related to Revolver
 
—

 
—

 
—

 
(150
)
Net cash (used in) provided by financing activities
 
(257
)
 
(507
)
 
135,352

 
90,654

Effect of foreign currency rates on cash
 
(178
)
 
20

 
174

 
(529
)
Net change in cash and cash equivalents
 
13,587

 
3,146

 
134,971

 
42,466

Cash and cash equivalents:
 
 
 
 
 
 
 
 
Beginning of period
 
281,889

 
157,359

 
160,505

 
118,039

End of period
 
$
295,476

 
$
160,505

 
$
295,476

 
$
160,505


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
 
 
 
 
2018
 
2017
 
% change
 
2018
 
2017
 
% change
GAAP gross profit
 
$
33,155

 
$
28,197

 
18
 %
 
$
119,845

 
$
100,250

 
20
 %
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
New headquarters noncash rent expense
 
48

 
—

 
 
 
48

 
—

 
 
 
Amortization of acquisition-related intangibles
 
1,077

 
1,280

 
 
 
4,624

 
3,297

 
 
 
Share-based compensation
 
396

 
402

 
 
 
1,721

 
1,971

 
 
Non-GAAP gross profit
 
$
34,676

 
$
29,879

 
16
 %
 
$
126,238

 
$
105,518

 
20
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP gross margin
 
65.9
 %
 
64.5
 %
 
 
 
64.1
 %
 
62.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP loss from operations
 
$
(9,609
)
 
$
(12,815
)
 
(25
)%
 
$
(49,215
)
 
$
(64,943
)
 
(24
)%
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
 
—

 
107

 
 
 
95

 
720

 
 
 
New headquarters noncash rent expense
 
185

 
—

 
 
 
185

 
—

 
 
 
Amortization of acquisition-related intangibles
 
1,694

 
2,112

 
 
 
7,396

 
5,174

 
 
 
Share-based compensation
 
5,098

 
5,131

 
 
 
21,453

 
22,796

 
 
 
Total Non-GAAP adjustments
 
6,977


7,350

 
 
 
29,129


28,690

 
 
Non-GAAP loss from operations
 
$
(2,632
)
 
$
(5,465
)
 
(52
)%
 
$
(20,086
)
 
$
(36,253
)
 
(45
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP loss from operations % of total revenue
 
(5.0
)%
 
(11.8
)%
 
 
 
(10.2
)%
 
(21.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net loss
 
$
(12,760
)
 
$
(16,980
)
 
(25
)%
 
$
(64,246
)
 
$
(77,926
)
 
(18
)%
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Non-GAAP adjustments affecting loss from operations
 
6,977

 
7,350

 
 
 
29,129

 
28,690

 
 
 
Amortization of debt discount and issuance costs
 
3,065

 
2,891

 
 
 
11,986

 
9,228

 
 
 
Tax impact related to non-GAAP adjustments
 
617

 
2,486

 
 
 
5,244

 
14,498

 
 
Non-GAAP net loss
 
$
(2,101
)
 
$
(4,253
)
 
(51
)%
 
$
(17,887
)
 
$
(25,510
)
 
(30
)%
 
 
 


 


 
 
 
 
 
 
 
 
Non-GAAP diluted loss per share
 
$
(0.06
)
 
$
(0.13
)
 
 
 
$
(0.52
)
 
$
(0.81
)
 


 
 
 
 
 
 
 
 
 
 
 
 
 
Shares used in computing non-GAAP loss per share
 
37,154

 
31,927

 
 
 
34,465

 
31,627

 
 

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,
 
 
 
2018
 
2017
 
2018
 
2017
Cost of Subscription Items
 
 
 
 
 
 
 
 
 
New headquarters noncash rent expense
 
5

 
—

 
5

 
—

 
Amortization of acquisition-related intangibles
 
901

 
1,099

 
3,898

 
2,603

 
Share-based compensation
 
53

 
50

 
218

 
237

 
Total cost of subscription items
 
$
959

 
$
1,149

 
$
4,121

 
$
2,840

 
 
 
 
 
 
 
 
 
 
Cost of Maintenance Items
 
 
 
 
 
 
 
 
 
New headquarters noncash rent expense
 
9

 
—

 
9

 
—

 
Amortization of acquisition-related intangibles
 
165

 
170

 
682

 
652

 
Share-based compensation
 
57

 
80

 
242

 
298

 
Total cost of maintenance items
 
$
231

 
$
250

 
$
933

 
$
950

 
 
 
 
 
 
 
 
 
 
Cost of License Items
 


 
 
 
 
 
 
 
Amortization of acquisition-related intangibles
 
11

 
11

 
44

 
42

 
Total cost of license items
 
$
11

 
$
11

 
$
44

 
$
42

 
 
 
 
 
 


 


Cost of Services Items
 
 
 
 
 
 
 
 
 
New headquarters noncash rent expense
 
34

 
—

 
34

 
—

 
Share-based compensation
 
286

 
272

 
1,261

 
1,436

 
Total cost of services items
 
$
320

 
$
272

 
$
1,295

 
$
1,436

 
 
 
 
 
 
 
 
 
 
Sales and Marketing Items
 


 


 


 


 
New headquarters noncash rent expense
 
35

 
—

 
35

 
—

 
Amortization of acquisition-related intangibles
 
617

 
832

 
2,772

 
1,877

 
Share-based compensation
 
1,049

 
1,035

 
4,396

 
4,348

 
Total sales and marketing items
 
$
1,701

 
$
1,867

 
$
7,203

 
$
6,225

 
 
 
 
 
 
 
 
 
General and Administrative Items
 
 
 
 
 
 
 
 
 
New headquarters noncash rent expense
 
33

 
—

 
33

 
—

 
Share-based compensation
 
2,515

 
2,617

 
10,717

 
11,163

 
Total general and administrative items
 
$
2,548

 
$
2,617

 
$
10,750

 
$
11,163

 
 
 
 
 
 
 
 
 
Research and Development Items
 
 
 
 
 
 
 
 
 
New headquarters noncash rent expense
 
69

 
—

 
69

 
—

 
Share-based compensation
 
1,138

 
1,077

 
4,619

 
5,314

 
Total research and development items
 
$
1,207

 
$
1,077

 
$
4,688

 
$
5,314

 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
 
$
—

 
$
107

 
$
95

 
$
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,
 
 
 
2018
 
2017
 
2018
 
2017
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
GAAP Loss from Operations
 
$
(9,609
)
 
$
(12,815
)
 
$
(49,215
)
 
$
(64,943
)
 
Acquisition-related expenses
 
—

 
107

 
95

 
720

 
Amortization of acquisition-related intangibles
 
1,694

 
2,112

 
7,396

 
5,174

 
New headquarters noncash rent expense
 
185

 
—

 
185

 
—

 
Share-based compensation
 
5,098

 
5,131

 
21,453

 
22,796

 
Depreciation and other amortization
 
1,576

 
1,372

 
5,659

 
5,357

 
Capitalized internal-use software development costs
 
(927
)
 
(801
)
 
(4,613
)
 
(2,797
)
 
Adjusted EBITDA
 
$
(1,983
)
 
$
(4,894
)
 
$
(19,040
)
 
$
(33,693
)
 
 
 
 
 
 
 
 
 
 
Free Cash Flow
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
 
$
15,188

 
$
4,535

 
$
5,703

 
$
(25,313
)
 
Purchase of property and equipment
 
(69
)
 
(51
)
 
(1,475
)
 
(1,286
)
 
Purchase of intangible asset
 
(125
)
 
(50
)
 
(125
)
 
(125
)
 
Capitalized internal-use software development costs
 
(927
)
 
(801
)
 
(4,613
)
 
(2,797
)
 
Free Cash Flow
 
$
14,067

 
$
3,633

 
$
(510
)
 
$
(29,521
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Guidance
 
Q1 2019 Guidance
 
Full Year 2019 Guidance
 
 
Low
 
High
 
Low
 
High
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
GAAP Loss from Operations
 
$
(14,200
)
 
$
(13,300
)
 
$
(47,300
)
 
$
(45,300
)
 
Amortization of acquisition-related intangibles
 
1,600

 
1,600

 
5,700

 
5,700

 
New headquarters noncash rent expense
 
600

 
600

 
1,900

 
1,900

 
Share-based compensation
 
5,900

 
5,900

 
23,400

 
23,400

 
Depreciation and other amortization
 
1,800

 
1,800

 
6,600

 
6,600

 
Capitalized internal-use software development costs
 
(800
)
 
(700
)
 
(3,300
)
 
(3,300
)
 
Adjusted EBITDA
 
$
(5,100
)
 
$
(4,100
)
 
$
(13,000
)
 
$
(11,000
)





11