10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

___________________________________________________________________________ 

FORM 10-Q

_________________________________________________________________________ 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the transition period from      to .

Commission File Number: 001-33554

___________________________________________________________________________ 

PROS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

__________________________________________________________________________ 

Delaware	76-0168604
(State of Incorporation)	(I.R.S. Employer Identification No.)

3200 Kirby Drive, Suite 600				77098
Houston	TX
(Address of Principal Executive Offices)				(Zip Code)
		(713)	335-5151
(Registrant's telephone number, including area code)
(Former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock $0.001 par value per share	PRO	New York Stock Exchange

    Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒   No  ☐

    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐  No  ☒

    The number of shares outstanding of the registrant's Common Stock, $0.001 par value, was 47,004,361 as of May 1, 2024.

PROS Holdings, Inc.

Form 10-Q

For the Quarterly Period Ended March 31, 2024

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Interim Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Stockholders' (Deficit) Equity	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 4.	Controls and Procedures	22
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosure	23
Item 5.	Other Information	23
Item 6.	Exhibits	23
Signatures		25

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements in this report other than historical facts are forward-looking and are based on current estimates, assumptions, trends, and projections. Statements which include the words "believes," "seeks," "expects," "may," "should," "intends," "likely," "targets," "plans," "anticipates," "estimates," or the negative version of those words and similar expressions are intended to identify forward-looking statements. Numerous important factors, risks and uncertainties affect our operating results, including, without limitation, those described in our Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q, and could cause our actual results to differ materially, from the results implied by these or any other forward-looking statements made by us or on our behalf. You should pay particular attention to the important risk factors and cautionary statements described in the section of our Annual Report on Form 10-K entitled "Risk Factors" and the section of this Quarterly Report on Form 10-Q entitled "Risk Factors." You should also carefully review the cautionary statements described in the other documents we file with the Securities and Exchange Commission, specifically the Annual Report on Form 10-K, all Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

You should not rely on forward-looking statements as predictions of future events, as we cannot guarantee that future results, levels of activity, performance or achievements will meet expectations. The forward-looking statements made herein are only made as of the date hereof, and we undertake no obligation to publicly update such forward-looking statements for any reason.

                        3

PART I. FINANCIAL INFORMATION

ITEM 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

PROS Holdings, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited) 

	March 31, 2024		December 31, 2023
Assets:
Current assets:
Cash and cash equivalents	$	156,423	$	168,747
Trade and other receivables, net of allowance of $724 and $574, respectively	51,035		49,058
Deferred costs, current	4,642		4,856
Prepaid and other current assets	10,809		12,013
Total current assets	222,909		234,674
Restricted cash	10,000		10,000
Property and equipment, net	21,572		23,051
Operating lease right-of-use assets	15,824		14,801
Deferred costs, noncurrent	9,899		10,292
Intangibles, net	10,378		11,678
Goodwill	107,641		107,860
Other assets, noncurrent	9,666		9,477
Total assets	$	407,889	$	421,833
Liabilities and Stockholders' (Deficit) Equity:
Current liabilities:
Accounts payable and other liabilities	$	2,535	$	3,034
Accrued liabilities	14,985		13,257
Accrued payroll and other employee benefits	16,157		32,762
Operating lease liabilities, current	5,135		5,655
Deferred revenue, current	128,359		120,955
Current portion of convertible debt, net	21,702		21,668
Total current liabilities	188,873		197,331
Deferred revenue, noncurrent	4,289		3,669
Convertible debt, net	271,937		272,324
Operating lease liabilities, noncurrent	25,616		25,118
Other liabilities, noncurrent	1,191		1,264
Total liabilities	491,906		499,706
Commitments and contingencies (see Note 9)
Stockholders' (deficit) 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; 51,649,163 and 51,184,584 shares issued, respectively; 46,968,440 and 46,503,861 shares outstanding, respectively	52		51
Additional paid-in capital	609,469		604,084
Treasury stock, 4,680,723 common shares, at cost	(29,847)		(29,847)
Accumulated deficit	(658,609)		(647,252)
Accumulated other comprehensive loss	(5,082)		(4,909)
Total stockholders' (deficit) equity	(84,017)		(77,873)
Total liabilities and stockholders' (deficit) equity	$	407,889	$	421,833

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

PROS Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands, except per share data)

(Unaudited) 

	Three Months Ended March 31,
	2024		2023
Revenue:
Subscription	$	64,349	$	55,969
Maintenance and support	3,595		5,712
Total subscription, maintenance and support	67,944		61,681
Services	12,744		11,501
Total revenue	80,688		73,182
Cost of revenue:
Subscription	14,613		14,093
Maintenance and support	1,862		2,282
Total cost of subscription, maintenance and support	16,475		16,375
Services	12,358		13,167
Total cost of revenue	28,833		29,542
Gross profit	51,855		43,640
Operating expenses:
Selling and marketing	22,682		26,010
Research and development	24,413		22,291
General and administrative	15,062		14,135
Loss from operations	(10,302)		(18,796)
Convertible debt interest and amortization	(1,202)		(1,576)
Other income, net	458		1,451
Loss before income tax provision	(11,046)		(18,921)
Income tax provision	311		81
Net loss	$	(11,357)	$	(19,002)
Net loss per share:
Basic and diluted	$	(0.24)	$	(0.41)
Weighted average number of shares:
Basic and diluted	46,817		45,926
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment	$	(173)	$	176
Other comprehensive (loss) income, net of tax	(173)		176
Comprehensive loss	$	(11,530)	$	(18,826)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

PROS Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2024		2023
Operating activities:
Net loss	$	(11,357)	$	(19,002)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,204		3,001
Amortization of debt premium and issuance costs	(284)		373
Share-based compensation	12,700		9,904
Provision for credit losses	149		108
Gain on lease modification	(697)		—
Loss on disposal of assets	774		35
Changes in operating assets and liabilities:
Accounts and unbilled receivables	(2,098)		2,239
Deferred costs	606		425
Prepaid expenses and other assets	1,070		(2,505)
Operating lease right-of-use assets and liabilities	(848)		(591)
Accounts payable and other liabilities	(637)		(3,793)
Accrued liabilities	2,327		504
Accrued payroll and other employee benefits	(16,611)		(8,174)
Deferred revenue	8,058		11,333
Net cash used in operating activities	(4,644)		(6,143)
Investing activities:
Purchases of property and equipment	(223)		(1,546)
Capitalized internal-use software development costs	(17)		—
Investment in equity securities	(113)		—
Net cash used in investing activities	(353)		(1,546)
Financing activities:
Proceeds from employee stock plans	1,024		1,137
Tax withholding related to net share settlement of stock awards	(8,338)		(4,710)
Net cash used in financing activities	(7,314)		(3,573)
Effect of foreign currency rates on cash	(13)		11
Net change in cash, cash equivalents and restricted cash	(12,324)		(11,251)
Cash, cash equivalents and restricted cash:
Beginning of period	178,747		203,627
End of period	$	166,423	$	192,376
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents	$	156,423	$	192,376
Restricted cash	10,000		—
Total cash, cash equivalents and restricted cash	$	166,423	$	192,376
Supplemental disclosure of cash flow information:
Noncash investing activities:
Purchase of property and equipment accrued but not paid	$	119	$	136

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

PROS Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

(In thousands, except share data)

(Unaudited) 

	Three Months Ended March 31, 2024
	Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Deficit		Accumulated other comprehensive loss		Total Stockholders’ (Deficit) Equity
	Shares	Amount				Shares	Amount
Balance at December 31, 2023	46,503,861	$	51	$	604,084	4,680,723	$	(29,847)	$	(647,252)	$	(4,909)	$	(77,873)
Stock awards net settlement	424,171	1		(8,339)		—	—		—		—		(8,338)
Proceeds from employee stock plans	40,408	—		1,024		—	—		—		—		1,024
Noncash share-based compensation	—	—		12,700		—	—		—		—		12,700
Other comprehensive (loss) income	—	—		—		—	—		—		(173)		(173)
Net loss	—	—		—		—	—		(11,357)		—		(11,357)
Balance at March 31, 2024	46,968,440	$	52	$	609,469	4,680,723	$	(29,847)	$	(658,609)	$	(5,082)	$	(84,017)

	Three Months Ended March 31, 2023
	Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Deficit		Accumulated other comprehensive loss		Total Stockholders’ (Deficit) Equity
	Shares	Amount				Shares	Amount
Balance at December 31, 2022	45,638,003	$	50	$	590,475	4,680,723	$	(29,847)	$	(590,898)	$	(5,253)	$	(35,473)
Stock awards net settlement	338,089	1		(4,711)		—	—		—		—		(4,710)
Proceeds from employee stock plans	55,149	—		1,137		—	—		—		—		1,137
Noncash share-based compensation	—	—		9,904		—	—		—		—		9,904
Other comprehensive (loss) income	—	—		—		—	—		—		176		176
Net loss	—	—		—		—	—		(19,002)		—		(19,002)
Balance at March 31, 2023	46,031,241	$	51	$	596,805	4,680,723	$	(29,847)	$	(609,900)	$	(5,077)	$	(47,968)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

PROS Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Nature of Operations

PROS Holdings, Inc., a Delaware corporation, through its operating subsidiaries (collectively, the "Company"), provides solutions that optimize shopping and selling experiences. PROS solutions leverage artificial intelligence ("AI"), self-learning and automation to ensure that every transactional experience is fast, frictionless and personalized for every shopper, supporting both business-to-business ("B2B") and business-to-consumer ("B2C") companies across industry verticals. Companies can use these selling, pricing, revenue optimization, distribution and retail, and digital offer marketing solutions to assess their market environments in real time to deliver customized prices and offers. The Company's solutions enable their customers to provide the buyers of their products the ability to move fluidly from one sales channel to another, whether direct, partner, online, mobile or other emerging channels, each with a personalized experience regardless of which channel is used. The Company's decades of data science and AI expertise are infused into its solutions and are designed to reduce time and complexity through actionable intelligence.

2. Summary of Significant Accounting Policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission ("SEC"). In management's opinion, the accompanying interim unaudited condensed consolidated financial statements include all adjustments necessary for a fair statement of the financial position of the Company as of March 31, 2024, the results of operations for the three months ended March 31, 2024 and 2023, cash flows for the three months ended March 31, 2024 and 2023, and stockholders' (deficit) equity for the three months ended March 31, 2024 and 2023.

Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 ("Annual Report") filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, 2023 was derived from the Company's audited consolidated financial statements but does not include all disclosures required under GAAP.

Changes in accounting policies

There have been no material changes in the Company’s significant accounting policies and their application as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Fair value measurement

The Company's financial assets that are included in cash and cash equivalents and that are measured at fair value on a recurring basis consisted of $150.6 million and $153.2 million at March 31, 2024 and December 31, 2023, respectively, and were invested in treasury, money market funds and interest-bearing deposits in banks. The fair value of those investments is determined based on quoted market prices, which represents level 1 in the fair value hierarchy as defined by ASC 820. See Note 8 for the fair value measurement of the convertible notes.

8

Deferred costs

Sales commissions earned by the Company's sales representatives are considered incremental and recoverable costs of obtaining a customer contract. Sales commissions are deferred and amortized on a straight-line basis over the period of benefit, which the Company has determined to be five to eight years. The Company determined the period of benefit by taking into consideration its customer contracts, expected renewals of those customer contracts (as the Company currently does not pay an incremental sales commission for renewals), the Company's technology and other factors. The Company also defers amounts earned by employees other than sales representatives who earn incentive payments under compensation plans also tied to the value of customer contracts acquired. Deferred costs were $14.5 million and $15.1 million as of March 31, 2024 and December 31, 2023, respectively. Amortization expense for the deferred costs was $1.3 million and $1.5 million for the three months ended March 31, 2024 and 2023, respectively. Amortization of deferred costs is included in selling and marketing expense in the accompanying unaudited condensed consolidated statements of comprehensive loss.    

Recently issued accounting pronouncements not yet adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and other segment items on an annual and interim basis. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The ASU is to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding income taxes paid by jurisdiction. The new standard is effective for annual periods beginning after December 15, 2024, and early adoption is permitted. The new standard is to be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2024, as compared to the recent accounting pronouncements described in the Company's Annual Report, that are of significance or potential significance to the Company.

3. Deferred Revenue and Performance Obligations

    Deferred revenue

For the three months ended March 31, 2024 and 2023, the Company recognized approximately $54.5 million and $49.4 million, respectively, of revenue that was included in the deferred revenue balances at the beginning of the respective periods and primarily related to subscription, maintenance and support, and services.

    Performance obligations

As of March 31, 2024, the Company expects to recognize approximately $447.6 million of revenue from remaining performance obligations. The Company expects, based on the terms of the related underlying contractual arrangements, to recognize revenue on approximately $227.4 million of these performance obligations over the next 12 months, with the balance recognized thereafter. Remaining performance obligations represent contractually committed revenue that has not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue in future periods.

9

4. Disaggregation of Revenue

    Revenue by geography

    The geographic information in the table below is presented for the three months ended March 31, 2024 and 2023. The Company categorizes geographic revenues based on the location of the customer's headquarters.

	Three Months Ended March 31,
	2024				2023
(in thousands)	Revenue		Percent		Revenue		Percent
United States of America	$	26,933	33	%	$	26,232	36	%
Europe	25,671		32	%	22,949		31	%
The rest of the world	28,084		35	%	24,001		33	%
Total revenue	$	80,688	100	%	$	73,182	100	%

5. Leases

    The Company has operating leases for data centers, computer infrastructure, corporate offices and certain equipment. These leases have remaining lease terms ranging from 1 year to 9 years. Some of these leases include options to extend for up to 15 years, and some include options to terminate within 1 year.

    As of March 31, 2024, the Company did not have any finance leases.

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended March 31,
	2024		2023
Cash paid for operating lease liabilities	$	2,233	$	2,251
Right-of-use asset obtained in exchange for operating lease liability	$	2,126	$	—

In February 2024, an existing operating lease was modified due to a reduction of square footage at one of the Company's offices. The result of this modification was an increase in the related right-of-use asset of $2.1 million, an increase in the corresponding lease liability of $1.4 million, and a noncash gain of $0.7 million recorded as a reduction of the lease cost within cost of revenue and operating expenses. In connection with the lease modification, the Company also recorded a loss on disposal of assets of $0.8 million which is included in other income, net in the accompanying unaudited condensed consolidated statements of comprehensive loss.

In January 2023, an existing operating lease was modified due to a change in future payments. The result of the 2023 modification was a decrease in the related right-of-use asset and corresponding lease liability of $1.0 million.

As of March 31, 2024, maturities of lease liabilities were as follows (in thousands):

Year Ending December 31,	Amount
Remaining 2024	$	5,738
2025	3,923
2026	3,895
2027	3,796
2028	3,856
2029	3,912
Thereafter	14,486
Total operating lease payments	39,606
Less: Imputed interest	(8,855)
Total operating lease liabilities	$	30,751

10

6. Earnings per Share

    The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
(in thousands, except per share data)	2024		2023
Numerator:
Net loss	$	(11,357)	$	(19,002)
Denominator:
Weighted average shares (basic)	46,817		45,926
Dilutive effect of potential common shares	—		—
Weighted average shares (diluted)	46,817		45,926
Basic loss per share	$	(0.24)	$	(0.41)
Diluted loss per share	$	(0.24)	$	(0.41)

    Dilutive potential common shares consist of shares issuable upon the vesting of restricted stock units ("RSUs") and market stock units ("MSUs"). Potential common shares determined to be antidilutive and excluded from diluted weighted average shares outstanding were approximately 1.5 million and 2.4 million for the three months ended March 31, 2024 and 2023, respectively. In addition, potential common shares related to the convertible notes determined to be antidilutive and excluded from diluted weighted average shares outstanding were 6.7 million and 5.8 million for the three months ended March 31, 2024 and 2023, respectively.

7. Noncash Share-based Compensation

The Company's 2017 Equity Incentive Plan (as amended and restated, the "2017 Stock Plan") had an aggregate authorized limit of 7,650,000 shares for issuance. In May 2023, the Company's stockholders approved an amendment to the 2017 Stock Plan increasing the aggregate amount of shares available for issuance to 10,550,000. As of March 31, 2024, 3,281,287 shares remain available for issuance under the 2017 Stock Plan.

    The following table presents the number of shares or units outstanding for each award type as of March 31, 2024 and December 31, 2023 (in thousands): 

Award type	March 31, 2024	December 31, 2023
Restricted stock units (time-based)	3,212	2,767
Market stock units	391	358

During the three months ended March 31, 2024, the Company granted 1,196,087 RSUs (time-based) with a weighted average grant-date fair value of $35.69 per share. The Company also granted 131,892 MSUs with a weighted average grant-date fair value of $41.07 to certain executive employees during the three months ended March 31, 2024. These MSUs vest on January 31, 2027 and the actual number of MSUs that will be eligible to vest is based on the total stockholder return of the Company relative to the total stockholder return of the Index over the performance period, as defined by each award's plan documents or individual award agreements. The maximum number of shares issuable upon vesting is 200% of the MSUs initially granted.

The assumptions used to value the MSUs granted during the three months ended March 31, 2024 were as follows:

	Three Months Ended March 31, 2024
Volatility	50.94	%
Risk-free interest rate	3.89	%
Expected award life in years	2.97
Dividend yield	—	%

Share-based compensation expense is allocated to expense categories in the unaudited condensed consolidated statements of comprehensive loss. The following table summarizes share-based compensation expense included in the

11

Company's unaudited condensed consolidated statements of comprehensive loss for the three months ended March 31, 2024 and 2023 (in thousands):

	Three Months Ended March 31,
	2024		2023
Share-based compensation:
Cost of revenue	$	1,068	$	832
Operating expenses:
Selling and marketing	3,628		2,928
Research and development	3,531		2,350
General and administrative	4,473		3,794
Total included in operating expenses	11,632		9,072
Total share-based compensation expense	$	12,700	$	9,904

    At March 31, 2024, the Company had an estimated $100.0 million of total unrecognized compensation costs related to share-based compensation arrangements. These costs will be recognized over a weighted average period of 2.8 years.

    The Company's Employee Stock Purchase Plan (as amended, the "ESPP") permits eligible employees to purchase Company shares on an after-tax basis in an amount between 1% and 10% of their annual pay: (i) on June 30 of each year at a 15% discount of the fair market value of the Company's common stock on January 1 or June 30, whichever is lower, and (ii) on December 31 of each year at a 15% discount of the fair market value of the Company's common stock on July 1 or December 31, whichever is lower. An employee may not purchase more than $5,000 in either of the six-month measurement periods described above or more than $10,000 annually. In May 2021, the Company's stockholders approved an amendment to the ESPP increasing the aggregate amount of shares available for issuance under the ESPP to 1,000,000. During the three months ended March 31, 2024, the Company issued 40,408 shares under the ESPP. As of March 31, 2024, 242,709 shares remain authorized and available for issuance under the ESPP. As of March 31, 2024, the Company held approximately $0.7 million on behalf of employees for future purchases under the ESPP, and this amount was recorded in accrued payroll and other employee benefits in the Company's unaudited condensed consolidated balance sheet.

8. Convertible Senior Notes

The following is a summary of the Company's convertible senior notes as of March 31, 2024 (in thousands):

	Date of Issuance	Unpaid Principal Balance		Contractual Interest Rates
1% Convertible Notes due in 2024 ("2024 Notes")	May 2019	$	21,713	1%
2.25% Convertible Notes due in 2027 ("2027 Notes")	September 2020 and October 2023	$	266,816	2.25%
Total Notes		$	288,529

The 2027 and 2024 Notes (collectively, the "Notes") are general unsecured obligations and rank senior in right of payment to all of the Company's indebtedness that is expressly subordinated in right of payment to the Notes, rank equally in right of payment with all of the Company's existing and future liabilities that are not so subordinated, are effectively junior to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness and are structurally subordinated to all indebtedness and other liabilities of the Company's subsidiaries (including trade payables but excluding intercompany obligations owed to the Company or its subsidiaries).

Interest related to the 2027 Notes is payable semi-annually in arrears in cash on March 15 and September 15 of each year, beginning on March 15, 2021. Interest related to the 2024 Notes is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2019.

The 2027 Notes mature on September 15, 2027 and the 2024 Notes mature on May 15, 2024, unless redeemed or converted in accordance with their terms prior to such date.

Each $1,000 of principal of the 2027 Notes will initially be convertible into 23.9137 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $41.82 per share. Each $1,000 of principal of the 2024

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Notes will initially be convertible into 15.1394 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $66.05 per share. The initial conversion price for the 2027 and the 2024 Notes is subject to adjustment upon the occurrence of certain specified events.

On August 23, 2023, the Company entered into legally binding exchange agreements with a limited number of existing holders of the 2024 Notes to exchange approximately $122.0 million aggregate principal amount of the existing 2024 Notes for a principal amount of the 2027 Notes at an exchange ratio to be determined based on the daily volume-weighted average trading price of the Company’s common stock over a thirty-day trading period beginning August 24, 2023 (such exchange transactions, the “Exchange”). On October 10, 2023, the Company settled the exchange agreements for the exchange of $122.0 million aggregate principal amount of its outstanding 2024 Notes for newly issued $116.8 million aggregate principal amount of its outstanding 2027 Notes. Following the settlement of the Exchange, $21.7 million in aggregate principal amount of the 2024 Notes and $266.8 million in aggregate principal amount of the 2027 Notes remain outstanding with terms unchanged. The 2027 Notes issued in the Exchange constitute a further issuance of, and form a single series and will be fungible with, the existing 2027 Notes.

As of March 31, 2024, the 2027 and 2024 Notes are not yet convertible and their remaining term is approximately 42 months and 2 months, respectively.

As of March 31, 2024 and December 31, 2023, the fair value of the principal amount of the Notes in the aggregate was $310.7 million and $320.5 million, respectively. The estimated fair value was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including the Company's stock price and interest rates, which represents level 2 in the fair value hierarchy.

The Notes consist of the following (in thousands):

	March 31, 2024		December 31, 2023
Principal	$	288,529	$	288,529
Debt premium, net of amortization	9,100		9,776
Debt issuance costs, net of amortization	(3,990)		(4,313)
Net carrying amount	$	293,639	$	293,992

The following table sets forth total interest expense recognized related to the Notes (in thousands):

	Three Months Ended March 31,
	2024		2023
Coupon interest	$	1,555	$	1,203
Amortization of debt issuance costs	323		373
Amortization of debt premium	(676)		—
Total	$	1,202	$	1,576

    Capped call transactions

In September 2020 and in May 2019, in connection with the offering of the 2027 and 2024 Notes, respectively, the Company entered into privately negotiated capped call transactions (collectively, the "Capped Call") with certain option counterparties. The Capped Call transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock initially underlying the Notes, at a strike price that corresponds to the initial conversion price of the Notes, also subject to adjustment, and are exercisable upon conversion of the Notes. The Capped Call transactions are intended to reduce potential dilution to the Company’s common stock and/or offset any cash payments the Company will be required to make in excess of the principal amounts upon any conversion of the Notes, and to effectively increase the overall conversion price of the 2027 Notes from $41.82 to $78.90 per share, and for the 2024 Notes from $66.05 to $101.62 per share. As the Capped Call transactions meet certain accounting criteria, they are recorded in stockholders’ (deficit) equity and are not accounted for as derivatives. The cost of the Capped Call was $25.3 million and $16.4 million for the 2027 and 2024 Notes, respectively, and was recorded as part of additional paid-in capital.

In August 2023, in connection with the Exchange, the Company entered into additional capped call transactions (the “Additional Capped Call”) with certain option counterparties. The Company agreed to pay a premium to the option

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counterparties for the Additional Capped Call for an amount to be determined based on the volume-weighted average trading price of the Company’s common stock over a thirty-day reference period beginning August 24, 2023. The conversion price of the Additional Capped Call is the same as the 2027 Notes Capped Call above. Initial funding of the Additional Capped Call occurred in the third quarter of 2023. The Additional Capped Call had a deferred premium component indexed to the Company's stock price and required to be settled in cash, and therefore the Additional Capped Call was a derivative instrument that, at inception, did not meet the qualifications for equity classification. On October 10, 2023, the Company settled the deferred premium on the Additional Capped Call resulting in a final value of $22.2 million. Once the deferred premium was settled, the instrument met the requirements for equity classification and the Company reclassified the Additional Capped Call to additional paid-in capital.

9. Commitments and Contingencies

    Litigation

    In the ordinary course of business, the Company regularly becomes involved in contract and other negotiations and, in more limited circumstances, becomes involved in legal proceedings, claims and litigation. The outcomes of these matters are inherently unpredictable. The Company is not currently involved in any outstanding litigation that it believes, individually or in the aggregate, will have a material adverse effect on its business, financial condition, results of operations or cash flows.

Purchase commitments

In the ordinary course of business, the Company enters into various purchase commitments for goods and services, mainly related to infrastructure platforms, business technology software and support, and other services. In January 2023, the Company entered into a noncancelable agreement for software support services with a four-year term. The remaining purchase commitment as of March 31, 2024 was $2.4 million and the agreement expires in March 2027. There were no other material changes outside the ordinary course of business to the noncancellable purchase commitments disclosed in the Annual Report.

10. Severance and Other Related Costs

In the quarter ended March 31, 2023, the Company made certain organizational changes and incurred approximately $3.6 million of severance, employee benefits, outplacement and related costs during the period. These costs were recorded primarily as operating expenses in the unaudited condensed consolidated statements of comprehensive loss, mainly research and development, and sales and marketing. During the quarter ended March 31, 2023, cash payments of $3.2 million were recorded for the incurred costs. The Company settled the remaining accrued expense within 2023.

11. Other Income, Net

Other income, net consisted of the following (in thousands):

	Three Months Ended March 31,
	2024		2023
Interest income, net	$	1,762	$	1,730
Foreign currency (loss) gain, net	(536)		(203)
Other (1)	(768)		(76)
Total other income, net	$	458	$	1,451

(1) Includes loss on disposal of assets of $0.8 million related to a lease modification in the first quarter of 2024, see Note 5.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    The terms “we,” “us,” “PROS” and “our” refer to PROS Holdings, Inc. and all of its subsidiaries that are consolidated in conformity with generally accepted accounting principles in the United States.

    This management's discussion and analysis of financial condition and results of operations should be read along with the unaudited condensed consolidated financial statements and unaudited notes to unaudited condensed consolidated financial statements included in Part I, Item 1 ("Interim Condensed Consolidated Financial Statements (Unaudited)"), as well as the audited consolidated financial statements and notes to consolidated financial statements and management's discussion and analysis of financial condition and results of operations set forth in our Annual Report.

Q1 2024 Financial Overview

In the first quarter of 2024, we continued to grow our subscription revenue, increasing subscription revenue by 15% for the three months ended March 31, 2024, as compared to the same period in 2023. Total revenue increased 10% for the three months ended March 31, 2024, as compared to the same period in 2023.

For the three months ended March 31, 2024, recurring revenue (which consists of subscription revenue and maintenance and support revenue) accounted for 84% of total revenue. Our gross revenue retention rates remained above 93% during the twelve months ended March 31, 2024.

Cash used in operating activities was $4.6 million for the three months ended March 31, 2024 as compared to $6.1 million for the three months ended March 31, 2023. The improvement was primarily due to an increase in cash collections, partially offset by a higher annual incentive payment in 2024 as compared to prior year. In addition, there was a severance payment of $3.2 million in the first quarter of 2023.

Free cash flow is a key metric to assess the strength of our business. We define free cash flow, a non-GAAP financial measure, as net cash provided by (used in) operating activities, excluding severance payments, less capital expenditures and capitalized internal-use software development costs. We believe free cash flow may be useful to investors and other users of our financial information in evaluating the amount of cash generated by our business operations. Free cash flow used during the three months ended March 31, 2024 was $4.9 million, compared to $4.5 million for the three months ended March 31, 2023.

The following is a reconciliation of free cash flow to the most comparable GAAP measure, net cash used in operating activities (in thousands):

	Three Months Ended March 31,
	2024		2023
Net cash used in operating activities	$	(4,644)	$	(6,143)
Severance	—		3,170
Purchase of property and equipment	(223)		(1,546)
Capitalized internal-use software development costs	(17)		—
Free cash flow	$	(4,884)	$	(4,519)

Factors Affecting Our Performance

    Key factors and trends that have affected, and we believe will continue to affect, our operating results include:

•Macroeconomic and Geopolitical Environment. The companies we serve continue to navigate a complex macroeconomic environment impacted by inflation, higher interest rates, volatile capital and financial markets, supply chain disruptions, tight labor markets, pricing volatility, geopolitical conflicts, including the Russia-Ukraine and Middle East conflicts, shifting regulations and other local and regional macroeconomic conditions. Uncertain macroeconomic and industry conditions in the geographies where we operate create a continued challenging selling environment for enterprise technology deployments, including in some cases more complex customer review and approval cycles. Despite this environment, we remain confident in our ability to help our customers drive profitable growth by optimizing their shopping and selling experiences. For example, pricing volatility and inflation are catalysts for demand for our AI-driven price optimization and management solutions. We believe in the near term that new

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customers will continue to emphasize smaller scope initial purchases and fast return on their investments. We believe this emphasis will require solid execution by our teams to capitalize on these demand drivers.

•Profitable Growth as a Priority. We continue to focus on profitability by investing in a disciplined manner to drive revenue growth and support our long-term initiatives. This includes investments designed to accelerate our customer time-to-value, improve efficiency and operations, further leveraging AI in our business operations, provide out-of-the-box integration with third-party commerce solutions and develop new applications and technologies. We expect our product development, sales and marketing, and general and administrative expenses as a percentage of total revenues will decrease long-term as we increase our revenues and focus on profitability.

•Artificial Intelligence. The rapidly evolving market interest in generative AI and associated interest in all aspects of AI continues to drive businesses around the world and across industries to consider, invest in and use applications leveraging AI. For example, companies use AI to extract insights from their data, improve and customize their offerings, and drive process and operating efficiencies. Our AI-powered solutions enable buyers to move fluidly and with personalized experiences across our customers’ sales channels, and our digital offer marketing solutions help our customers drive their buyers directly into their direct selling channels. The pace of change across industries helps fuel demand for our solutions as businesses look to replace manual processes with AI. We have utilized AI in our solutions for years and our deep experience in AI continues to influence our category-leading solutions. For example, our current AI uses a deep neural network to leverage all available data and attributes to improve prediction accuracy. We are also utilizing and considering new ways to expand AI use in our own business operations to drive efficiencies, improve knowledge management, gain insights and increase productivity.

•Travel Industry Stabilizing. The travel industry continues to recover from the unprecedented disruption caused by the pandemic with global air passenger traffic recovering to pre-pandemic levels during the first quarter of 2024. Despite significant geographic and individual airline variances in the timetable for full recovery and persistent operational, cost and supply chain headwinds, including continued challenges in bringing new plane capacity online, airline analysts continue to forecast strong travel demand and overall airline industry profitability in 2024. However, these trends could be impacted negatively if inflation further impacts consumer disposable income or if business travel does not recover to pre-pandemic levels. As airlines stabilize and plan for future growth, we believe our solutions are well-positioned, particularly as airlines look to manage their capacity and enhance their digital marketing, booking capabilities, and ancillary offerings.

•Digital Purchasing Driving Technology Adoption. We believe the long-term trends toward digital purchasing by both consumers and corporate buyers drives demand for technology that provides fast, frictionless and personalized buying experiences across direct sales, partner, online, mobile and emerging channels. Buyers often prefer not to interact with sales representatives as their primary source of research, and to buy online when they have already decided what to buy. For example, in the airline industry, the pandemic accelerated a long-term trend towards direct booking channels, and we anticipate airlines continuing to invest in technology to enhance their ability to capture a greater percentage of bookings and provide increasingly personalized offers through their own channels such as their websites. We believe companies increasingly compete based on customer experience and must adopt technologies which power consistent offers and experiences across sales channels.

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Results of Operations

The following table sets forth certain items in our unaudited condensed consolidated statements of comprehensive loss as a percentage of total revenues for the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
	2024		2023
Revenue:
Subscription	80	%	76	%
Maintenance and support	4		8
Total subscription, maintenance and support	84		84
Services	16		16
Total revenue	100		100
Cost of revenue:
Subscription	18		19
Maintenance and support	2		3
Total cost of subscription, maintenance and support	20		22
Services	15		18
Total cost of revenue	36		40
Gross profit	64		60
Operating Expenses:
Selling and marketing	28		36
Research and development	30		30
General and administrative	19		19
Total operating expenses	77		85
Convertible debt interest and amortization	(1)		(2)
Other income, net	1		2
Loss before income tax provision	(14)		(26)
Income tax provision	—		—
Net loss	(14)	%	(26)	%

Revenue:

	Three Months Ended March 31,				Variance
(Dollars in thousands)	2024		2023		$		%
Subscription	$	64,349	$	55,969	$	8,380	15	%
Maintenance and support	3,595		5,712		(2,117)		(37)	%
Total subscription, maintenance and support	67,944		61,681		6,263		10	%
Services	12,744		11,501		1,243		11	%
Total revenue	$	80,688	$	73,182	$	7,506	10	%

Subscription revenue. Subscription revenue increased primarily due to an increase in new and existing customer subscription contracts.

Maintenance and support revenue. Maintenance and support revenue decreased primarily as a result of existing maintenance customers migrating to our cloud solutions and, to a lesser extent, customer maintenance churn. We expect maintenance revenue to continue to decline as we continue to migrate maintenance customers to our cloud solutions.

Services revenue. Services revenue increased primarily as a result of higher sales of professional services to our existing customers. Services revenue varies from period to period depending on different factors, including the level of professional services required to implement our solutions, the timing of services revenue recognition on certain subscription contracts and efficiencies in our solutions implementations requiring less professional services during a particular period.

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Cost of revenue and gross profit:

	Three Months Ended March 31,				Variance
(Dollars in thousands)	2024		2023		$		%
Cost of subscription	$	14,613	$	14,093	$	520	4	%
Cost of maintenance and support	1,862		2,282		(420)		(18)	%
Total cost of subscription, maintenance and support	16,475		16,375		100		1	%
Cost of services	12,358		13,167		(809)		(6)	%
Total cost of revenue	28,833		29,542		(709)		(2)	%
Gross profit	$	51,855	$	43,640	$	8,215	19	%

Cost of subscription. Cost of subscription increased primarily due to higher infrastructure cost to support the growth in our current subscription customer base and higher employee-related costs mainly due to an increase in headcount. These increases were partially offset by a decrease in amortization expense for intangible assets and internal-use software expense for the three months ended March 31, 2024. Our subscription gross profit percentages were 77% and 75% for the three months ended March 31, 2024 and 2023, respectively.

Cost of maintenance and support. Cost of maintenance and support decreased due to lower personnel costs as our maintenance customer base declined primarily with migrations to our subscription solutions. Maintenance and support gross profit percentages were 48% and 60% for the three months ended March 31, 2024 and 2023, respectively. Gross profit percentages decreased in 2024 as compared to prior year primarily due to lower maintenance and support revenue and the cost of maintenance and support being partially fixed.

Cost of services. Cost of services decreased primarily due to prior organizational headcount changes and other allocated overhead. Services gross profit percentages were 3% and (14)% for the three months ended March 31, 2024 and 2023, respectively. Services gross profit percentages improved in 2024 compared to 2023 primarily due to an increase in services revenue as well as a decrease in cost of services. Services gross profit percentages vary period to period depending on different factors, including the level of professional services required to implement our solutions, the utilization of our employees and our effective man-day rates.

Operating expenses:

	Three Months Ended March 31,				Variance
(Dollars in thousands)	2024		2023		$		%
Selling and marketing	$	22,682	$	26,010	$	(3,328)	(13)	%
Research and development	24,413		22,291		2,122		10	%
General and administrative	15,062		14,135		927		7	%
Total operating expenses	$	62,157	$	62,436	$	(279)	—	%

Selling and marketing expenses. Selling and marketing expenses decreased primarily due to a decrease in employee-related costs, including severance cost in prior year, sales and marketing events and initiatives, travel and other overhead costs. The decrease was partially offset by an increase in noncash share-based compensation expense due to the acceleration of share-based compensation expense for equity awards related to the change of employment of a senior employee in the first quarter of 2024.

Research and development expenses. Research and development expenses increased primarily due to higher employee-related expenses. The increase in research and development expenses also included higher noncash share-based compensation expense due to the acceleration of share-based compensation expense for equity awards related to the change of employment of a senior employee in the first quarter of 2024.

General and administrative expenses. General and administrative expenses increased primarily due to higher employee-related expenses, including share-based compensation.

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Non-operating expenses:

	Three Months Ended March 31,				Variance
(Dollars in thousands)	2024		2023		$		%
Convertible debt interest and amortization	$	(1,202)	$	(1,576)	$	374	(24)	%
Other income, net	$	458	$	1,451	$	(993)	(68)	%

Convertible debt interest and amortization. Our convertible debt expense consisted of coupon interest, amortization of debt premium and debt issuance costs attributable to our Notes. The decrease in expense was related to the exchange of about 85% of PROS outstanding convertible notes due in May 2024 for newly issued convertible notes due in September 2027. See Note 8 for more information.

Other income, net. The change in other income, net was primarily related to loss on disposal of assets associated with a lease modification. See Note 5 for more information.

Income tax provision:

	Three Months Ended March 31,						Variance
(Dollars in thousands)	2024			2023			$		%
Effective tax rate	(2.8)		%	(0.4)		%	n/a		n/a
Income tax provision	$	311		$	81		$	230	284	%

Income tax provision. The tax provision for the three months ended March 31, 2024 included both foreign income and withholding taxes. No tax benefit was recognized on jurisdictions with a projected loss for the year due to the valuation allowances on our deferred tax assets.

Our effective tax rate was (2.8)% and (0.4)% for the three months ended March 31, 2024 and 2023, respectively. The income tax rate varies from the 21% federal statutory rate primarily due to the valuation allowances on our deferred tax assets. While our expected tax rate would be 0% due to the full valuation allowance on our deferred tax assets, the income tax provision and related effective tax rates was due to foreign income and withholding taxes.

Jurisdictions with a projected loss for the year where no tax benefit can be recognized due to the valuation allowances on our deferred tax assets are excluded from the estimated annual federal effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter depending on the mix and timing of actual earnings versus annual projections.

Liquidity and Capital Resources

At March 31, 2024, we had $156.4 million of cash and cash equivalents and $34.0 million of working capital as compared to $168.7 million of cash and cash equivalents and $37.3 million of working capital at December 31, 2023.

Our principal sources of liquidity are our cash and cash equivalents, cash flows generated from operations and potential borrowings under our $50 million credit agreement (the "Credit Agreement"). In addition, we could access capital markets to supplement our liquidity position. Our material drivers or variants of operating cash flow are net income (loss) and the timing of invoicing and cash collections from our customers. Our operating cash flows are also impacted by the timing of payments to our vendors and the payments of other liabilities.

    We believe we will have adequate liquidity and capital resources to meet our operational requirements, anticipated capital expenditures, and coupon interest of our Notes for the next twelve months, as well as for principal payments for our remaining 2024 Notes due May 2024. Our future working capital requirements depend on many factors, including the operations of our existing business, growth of our customer subscription services, future acquisitions we might undertake, expansion into complementary businesses, timing of adoption and implementation of our solutions and customer churn. Capital markets have tightened in response to the macroeconomic environment making new financing more difficult and/or expensive and we may not be able to obtain such financing on terms acceptable to us or at all.

    The following table presents key components of our unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023: 

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	Three Months Ended March 31,
(Dollars in thousands)	2024		2023
Net cash used in operating activities	$	(4,644)	$	(6,143)
Net cash used in investing activities	(353)		(1,546)
Net cash used in financing activities	(7,314)		(3,573)
Effect of foreign currency rates on cash	(13)		11
Net change in cash, cash equivalents and restricted cash	$	(12,324)	$	(11,251)

Operating activities

Net cash used in operating activities for the three months ended March 31, 2024 was $4.6 million. The improvement year over year was primarily due to an increase in cash collections, partially offset by a higher annual incentive payment in 2024 as compared to prior year. In addition, there was a severance payment of $3.2 million in the first quarter of 2023.

Investing activities

Net cash used in investing activities for the three months ended March 31, 2024 was $0.4 million. The decrease was mainly due to higher capital expenditures in 2023, primarily related to a third-party software license renewal.

Financing activities

Net cash used in financing activities for the three months ended March 31, 2024 was $7.3 million. The increase year over year was primarily due to higher tax withholding payments of $3.6 million related to the vesting of employee share-based awards.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material. We do not have any relationships with unconsolidated entities or financial partnerships, such as variable interest entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Contractual Obligations and Commitments

Other than changes described in Note 9 above and noted below, there have been no material changes to our contractual obligations and commitments disclosed in our Annual Report.

Credit facility

As of March 31, 2024, there were no outstanding borrowings under our Credit Agreement. As of March 31, 2024, $0.6 million of unamortized debt issuance costs related to the Credit Agreement is included in prepaid and other current assets and other assets, noncurrent in the unaudited condensed consolidated balance sheets. For the three months ended March 31, 2024, we recorded an immaterial amount of amortization of debt issuance costs which is included in other income, net in the unaudited condensed consolidated statements of comprehensive loss.

The Credit Agreement also has a depository condition which requires us to maintain a cash balance of at least $10.0 million with the administrative agent throughout the term of the Credit Agreement. This amount has been included in restricted cash in the unaudited condensed consolidated balance sheets.

Recent Accounting Pronouncements

    See "Recently issued accounting pronouncements not yet adopted" in Note 2 above for discussion of recent accounting pronouncements including the respective expected dates of adoption, if any.

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Critical accounting policies and estimates

    Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. Actual results could differ from those estimates. The complexity and judgment required in our estimation process, as well as issues related to the assumptions, risks and uncertainties inherent in determining the nature and timing of satisfaction of performance obligations and determining the standalone selling price of performance obligations, affect the amounts of revenue, expenses, unbilled receivables and deferred revenue. Estimates are also used for, but not limited to, receivables, allowance for credit losses, operating lease right-of-use assets and operating lease liabilities, useful lives of assets, depreciation, income taxes and deferred tax asset valuation, valuation of stock awards, other current liabilities and accrued liabilities. Numerous internal and external factors can affect estimates. Our critical accounting policies related to the estimates and judgments are discussed in our Annual Report under management's discussion and analysis of financial condition and results of operations.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    There have been no material changes in our exposure to market risks from those disclosed in Part II, Item 7A, of our Annual Report.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

    Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of March 31, 2024. Based on our evaluation of our disclosure controls and procedures as of March 31, 2024, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

    There have been no changes in our internal control over financial reporting during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are a party to legal proceedings and claims arising in the ordinary course of business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition, results of operations or cash flows.

ITEM 1A. RISK FACTORS

    There have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A, of our Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

None.

ITEM 5. OTHER INFORMATION

Securities Trading Plans of Directors and Executive Officers

None of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K during the three months ended March 31, 2024.

ITEM 6. EXHIBITS

Index to Exhibits
		Provided	Incorporated by Reference
Exhibit No.	Description	Herewith	Form	Filing Date
31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a).	X
31.2	Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/ 15d-14(a).	X
32.1*	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.	X
Exhibit No.	Description
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

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* This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, or otherwise subject to the liability of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		PROS HOLDINGS, INC.
May 7, 2024	By:	/s/ Andres Reiner
		Andres Reiner
		President and Chief Executive Officer (Principal Executive Officer)
May 7, 2024	By:	/s/ Stefan Schulz
		Stefan Schulz
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Andres Reiner, certify that:

1.I have reviewed this quarterly report on Form 10-Q of PROS Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 7, 2024	/s/ Andres Reiner
	Andres Reiner
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stefan Schulz, certify that:

1.I have reviewed this quarterly report on Form 10-Q of PROS Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 7, 2024	/s/ Stefan Schulz
	Stefan Schulz
	Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Andres Reiner, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report of PROS Holdings, Inc., on Form 10-Q for the period ended March 31, 2024 fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of PROS Holdings, Inc.

May 7, 2024	/s/ Andres Reiner
	Andres Reiner
	President and Chief Executive Officer

I, Stefan Schulz, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report of PROS Holdings, Inc., on Form 10-Q for the period ended March 31, 2024 fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of PROS Holdings, Inc. 

May 7, 2024	/s/ Stefan Schulz
	Stefan Schulz
	Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to PROS Holdings, Inc. and will be retained by PROS Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This certification "accompanies" the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2024	May 01, 2024
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2024
Document Transition Report	false
Entity File Number	001-33554
Entity Registrant Name	PROS HOLDINGS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	76-0168604
Entity Address, Address Line One	3200 Kirby Drive, Suite 600
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77098
City Area Code	(713)
Local Phone Number	335-5151
Title of 12(b) Security	Common stock $0.001 par value per share
Trading Symbol	PRO
Security Exchange Name	NYSE
Entity Central Index Key	0001392972
Amendment Flag	false
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		47,004,361
Former Address [Member]
Entity Information [Line Items]
Entity Address, Address Line One
Entity Address, City or Town
Entity Address, State or Province
Entity Address, Postal Zip Code

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 156,423	$ 168,747
Trade and Other Receivables, Net, Current	51,035	49,058
Deferred Costs, Current	4,642	4,856
Prepaid and other current assets	10,809	12,013
Total current assets	222,909	234,674
Restricted Cash, Noncurrent	10,000	10,000
Property and equipment, net	21,572	23,051
Operating Lease, Right-of-Use Asset	15,824	14,801
Deferred Costs, Noncurrent	9,899	10,292
Intangible Assets, Net (Excluding Goodwill)	10,378	11,678
Goodwill	107,641	107,860
Other long term assets, net	9,666	9,477
Total assets	407,889	421,833
Current liabilities:
Accounts payable	2,535	3,034
Accrued liabilities	14,985	13,257
Accrued payroll and other employee benefits	16,157	32,762
Operating Lease, Liability, Current	5,135	5,655
Deferred Revenue, Current	128,359	120,955
Convertible Debt, Current	21,702	21,668
Total current liabilities	188,873	197,331
Long-term deferred revenue	4,289	3,669
Convertible Debt, Noncurrent	271,937	272,324
Operating Lease, Liability, Noncurrent	25,616	25,118
Other Liabilities, Noncurrent	1,191	1,264
Total liabilities	491,906	499,706
Commitments and contingencies (see Note 9)
Stockholders' equity:
Preferred Stock, Value, Issued	0	0
Common Stock, Value, Issued	52	51
Additional paid-in capital	609,469	604,084
Treasury Stock, Value	(29,847)	(29,847)
Retained Earnings (Accumulated Deficit)	(658,609)	(647,252)
Accumulated Other Comprehensive Income (Loss), Net of Tax	(5,082)	(4,909)
Total stockholders' equity	(84,017)	(77,873)
Total liabilities and stockholders' equity	$ 407,889	$ 421,833
Preferred stock - shares authorized	5,000,000	5,000,000
Preferred stock - par value	$ 0.001	$ 0.001
Preferred stock - shares issued	0	0
Common stock - shares authorized	75,000,000	75,000,000
Common stock - par value	$ 0.001	$ 0.001
Treasury Stock, Common, Shares	4,680,723	4,680,723

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Mar. 31, 2024	Dec. 31, 2023
Allowance for bad debts	$ 724,000	$ 574,000
Preferred stock - par value	$ 0.001	$ 0.001
Preferred stock - shares authorized	5,000,000	5,000,000
Preferred stock - shares issued	0	0
Common stock - par value	$ 0.001	$ 0.001
Common stock - shares authorized	75,000,000	75,000,000
Common stock - shares issued	51,649,163	51,184,584
Common stock - shares outstanding	46,968,440	46,503,861
Treasury Stock, Common, Shares	4,680,723	4,680,723

XML

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Revenue from Contract with Customer, Including Assessed Tax	$ 80,688	$ 73,182
Cost of Goods and Services Sold	28,833	29,542
Gross Profit	51,855	43,640
Operating Expenses
Selling and Marketing Expense	22,682	26,010
Research and development	24,413	22,291
General and Administrative Expense	15,062	14,135
Income from operations	(10,302)	(18,796)
Other income (expense):
Convertible debt interest and amortization	(1,202)	(1,576)
Nonoperating Income (Expense)	458	1,451
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest, Total	(11,046)	(18,921)
Income tax provision (benefit)	311	81
Net income (loss)	$ (11,357)	$ (19,002)
Income (Loss) from Continuing Operations, Basic and Diluted	$ (0.24)	$ (0.41)
Weighted average number of shares:
Weighted Average Number of Shares Outstanding, Basic	46,817	45,926
Weighted Average Number of Shares Outstanding, Basic and Diluted	46,817	45,926
Other comprehensive income, net of tax:
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax	$ (173)	$ 176
Other comprehensive income	(173)	176
Comprehensive income (loss)	(11,530)	(18,826)
Accumulated Other Comprehensive Income, net of tax [Member]
Other comprehensive income, net of tax:
Other comprehensive income	(173)	176
Subscription, maintenance and support
Revenue from Contract with Customer, Including Assessed Tax	67,944	61,681
Cost of Goods and Services Sold	16,475	16,375
Subscription and Circulation [Member]
Revenue from Contract with Customer, Including Assessed Tax	64,349	55,969
Cost of Goods and Services Sold	14,613	14,093
Maintenance [Member]
Revenue from Contract with Customer, Including Assessed Tax	3,595	5,712
Cost of Goods and Services Sold	1,862	2,282
Service [Member]
Revenue from Contract with Customer, Including Assessed Tax	12,744	11,501
Cost of Goods and Services Sold	$ 12,358	$ 13,167

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Operating activities:
Net income (loss)	$ (11,357)	$ (19,002)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, Depletion and Amortization	2,204	3,001
Amortization of Financing Costs and Discounts	(284)	373
Share-based compensation	12,700	9,904
Provision for doubtful accounts	149	108
Gain on lease modification	(697)	0
Loss on Disposition of Other Assets	774	35
Changes in operating assets and liabilities:
Accounts and unbilled receivables	(2,098)	2,239
Increase (Decrease) in Deferred Costs	606	425
Prepaid expenses and other assets	1,070	(2,505)
Increase (Decrease) in Other Noncurrent Assets and Liabilities, Net	(848)	(591)
Accounts payable	(637)	(3,793)
Accrued liabilities	2,327	504
Accrued payroll and other employee benefits	(16,611)	(8,174)
Deferred revenue	8,058	11,333
Net cash provided by (used in) operating activities	(4,644)	(6,143)
Investing activities:
Purchases of property and equipment	(223)	(1,546)
Payments to Acquire Other Productive Assets	(17)	0
Payments to Acquire Other Investments	(113)	0
Net cash provided by (used in) investing activities	(353)	(1,546)
Financing activities:
Proceeds from Stock Plans	1,024	1,137
Tax withholding related to net share settlement of restricted stock units	(8,338)	(4,710)
Net cash provided by (used in) financing activities	(7,314)	(3,573)
Effect of Exchange Rate on Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, Continuing Operations	(13)	11
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Period Increase (Decrease), Including Exchange Rate Effect	(12,324)	(11,251)
Cash, cash equivalents and restricted cash:
Beginning of period	178,747	203,627
End of period	166,423	192,376
Cash and cash equivalents	156,423	192,376
Restricted Cash, Noncurrent	10,000	0
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, Total	166,423	192,376
Capital Expenditures Incurred but Not yet Paid	$ 119	$ 136

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Condensed Consolidated Statement of Stockholders' Equity Statement - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock, Common [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income, net of tax [Member]
Common Stock, Shares, Outstanding, Beginning Balance at Dec. 31, 2022		45,638,003
Stockholders' Equity Attributable to Parent- Beginning Balance at Dec. 31, 2022	$ (35,473)	$ 50	$ 590,475	$ (29,847)	$ (590,898)	$ (5,253)
Treasury Stock, Common, Shares, Beginning Balance at Dec. 31, 2022				4,680,723
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures		338,089
Stock Issued During Period, Value, Restricted Stock Award, Gross	(4,710)	$ 1	(4,711)
Stock Issued During Period, Shares, Employee Stock Purchase Plans		55,149
Proceeds from Stock Plans	1,137		1,137
APIC, Share-based Payment Arrangement, Increase for Cost Recognition	9,904		9,904
Other Comprehensive Income (Loss), Net of Tax	176					176
Net Income (Loss) Attributable to Parent	(19,002)				(19,002)
Stockholders' Equity Attributable to Parent- Ending Balance at Mar. 31, 2023	$ (47,968)	$ 51	596,805	$ (29,847)	(609,900)	(5,077)
Common Stock, Shares, Outstanding, Ending Balance at Mar. 31, 2023		46,031,241
Treasury Stock, Common, Shares, Ending Balance at Mar. 31, 2023				4,680,723
Common Stock, Shares, Outstanding, Beginning Balance at Dec. 31, 2023	46,503,861	46,503,861
Stockholders' Equity Attributable to Parent- Beginning Balance at Dec. 31, 2023	$ (77,873)	$ 51	604,084	$ (29,847)	(647,252)	(4,909)
Treasury Stock, Common, Shares, Beginning Balance at Dec. 31, 2023	4,680,723			4,680,723
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures		424,171
Stock Issued During Period, Value, Restricted Stock Award, Gross	$ (8,338)	$ 1	(8,339)
Stock Issued During Period, Shares, Employee Stock Purchase Plans	40,408	40,408
Proceeds from Stock Plans	$ 1,024		1,024
APIC, Share-based Payment Arrangement, Increase for Cost Recognition	12,700		12,700
Other Comprehensive Income (Loss), Net of Tax	(173)					(173)
Net Income (Loss) Attributable to Parent	(11,357)				(11,357)
Stockholders' Equity Attributable to Parent- Ending Balance at Mar. 31, 2024	$ (84,017)	$ 52	$ 609,469	$ (29,847)	$ (658,609)	$ (5,082)
Common Stock, Shares, Outstanding, Ending Balance at Mar. 31, 2024	46,968,440	46,968,440
Treasury Stock, Common, Shares, Ending Balance at Mar. 31, 2024	4,680,723			4,680,723

XML

Organization and Nature of Operations

3 Months Ended

Mar. 31, 2024

Organization and Nature of Operations [Abstract]

Organization and nature of operations

Organization and Nature of Operations

PROS Holdings, Inc., a Delaware corporation, through its operating subsidiaries (collectively, the "Company"), provides solutions that optimize shopping and selling experiences. PROS solutions leverage artificial intelligence ("AI"), self-learning and automation to ensure that every transactional experience is fast, frictionless and personalized for every shopper, supporting both business-to-business ("B2B") and business-to-consumer ("B2C") companies across industry verticals. Companies can use these selling, pricing, revenue optimization, distribution and retail, and digital offer marketing solutions to assess their market environments in real time to deliver customized prices and offers. The Company's solutions enable their customers to provide the buyers of their products the ability to move fluidly from one sales channel to another, whether direct, partner, online, mobile or other emerging channels, each with a personalized experience regardless of which channel is used. The Company's decades of data science and AI expertise are infused into its solutions and are designed to reduce time and complexity through actionable intelligence.

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Summary of Significant Accounting Policies (Notes)

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Summary of Significant Accounting Policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission ("SEC"). In management's opinion, the accompanying interim unaudited condensed consolidated financial statements include all adjustments necessary for a fair statement of the financial position of the Company as of March 31, 2024, the results of operations for the three months ended March 31, 2024 and 2023, cash flows for the three months ended March 31, 2024 and 2023, and stockholders' (deficit) equity for the three months ended March 31, 2024 and 2023.

Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 ("Annual Report") filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, 2023 was derived from the Company's audited consolidated financial statements but does not include all disclosures required under GAAP.

Changes in accounting policies

There have been no material changes in the Company’s significant accounting policies and their application as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Fair value measurement

The Company's financial assets that are included in cash and cash equivalents and that are measured at fair value on a recurring basis consisted of $150.6 million and $153.2 million at March 31, 2024 and December 31, 2023, respectively, and were invested in treasury, money market funds and interest-bearing deposits in banks. The fair value of those investments is determined based on quoted market prices, which represents level 1 in the fair value hierarchy as defined by ASC 820. See Note 8 for the fair value measurement of the convertible notes.

Deferred costs

Sales commissions earned by the Company's sales representatives are considered incremental and recoverable costs of obtaining a customer contract. Sales commissions are deferred and amortized on a straight-line basis over the period of benefit, which the Company has determined to be five to eight years. The Company determined the period of benefit by taking into consideration its customer contracts, expected renewals of those customer contracts (as the Company currently does not pay an incremental sales commission for renewals), the Company's technology and other factors. The Company also defers amounts earned by employees other than sales representatives who earn incentive payments under compensation plans also tied to the value of customer contracts acquired. Deferred costs were $14.5 million and $15.1 million as of March 31, 2024 and December 31, 2023, respectively. Amortization expense for the deferred costs was $1.3 million and $1.5 million for the three months ended March 31, 2024 and 2023, respectively. Amortization of deferred costs is included in selling and marketing expense in the accompanying unaudited condensed consolidated statements of comprehensive loss.    

Recently issued accounting pronouncements not yet adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and other segment items on an annual and interim basis. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The ASU is to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding income taxes paid by jurisdiction. The new standard is effective for annual periods beginning after December 15, 2024, and early adoption is permitted. The new standard is to be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2024, as compared to the recent accounting pronouncements described in the Company's Annual Report, that are of significance or potential significance to the Company.

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Deferred Revenue and Performance Obligation (Notes)

3 Months Ended

Mar. 31, 2024

Deferred Revenue and Performance Obligation [Abstract]

Deferred revenue and performance obligation [Text Block]

Deferred Revenue and Performance Obligations

    Deferred revenue

For the three months ended March 31, 2024 and 2023, the Company recognized approximately $54.5 million and $49.4 million, respectively, of revenue that was included in the deferred revenue balances at the beginning of the respective periods and primarily related to subscription, maintenance and support, and services.

    Performance obligations

As of March 31, 2024, the Company expects to recognize approximately $447.6 million of revenue from remaining performance obligations. The Company expects, based on the terms of the related underlying contractual arrangements, to recognize revenue on approximately $227.4 million of these performance obligations over the next 12 months, with the balance recognized thereafter. Remaining performance obligations represent contractually committed revenue that has not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue in future periods.

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Disaggregation of Revenue (Notes)

3 Months Ended

Mar. 31, 2024

Disaggregation of Revenue [Abstract]

Disaggregation of Revenue [Text Block]

Disaggregation of Revenue

    Revenue by geography

    The geographic information in the table below is presented for the three months ended March 31, 2024 and 2023. The Company categorizes geographic revenues based on the location of the customer's headquarters.

	Three Months Ended March 31,
	2024				2023
(in thousands)	Revenue		Percent		Revenue		Percent
United States of America	$	26,933	33	%	$	26,232	36	%
Europe	25,671		32	%	22,949		31	%
The rest of the world	28,084		35	%	24,001		33	%
Total revenue	$	80,688	100	%	$	73,182	100	%

XML

Leases (Notes)

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

Lessee, Operating Leases [Text Block]

Leases

    The Company has operating leases for data centers, computer infrastructure, corporate offices and certain equipment. These leases have remaining lease terms ranging from 1 year to 9 years. Some of these leases include options to extend for up to 15 years, and some include options to terminate within 1 year.

    As of March 31, 2024, the Company did not have any finance leases.

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended March 31,
	2024		2023
Cash paid for operating lease liabilities	$	2,233	$	2,251
Right-of-use asset obtained in exchange for operating lease liability	$	2,126	$	—

In February 2024, an existing operating lease was modified due to a reduction of square footage at one of the Company's offices. The result of this modification was an increase in the related right-of-use asset of $2.1 million, an increase in the corresponding lease liability of $1.4 million, and a noncash gain of $0.7 million recorded as a reduction of the lease cost within cost of revenue and operating expenses. In connection with the lease modification, the Company also recorded a loss on disposal of assets of $0.8 million which is included in other income, net in the accompanying unaudited condensed consolidated statements of comprehensive loss.

In January 2023, an existing operating lease was modified due to a change in future payments. The result of the 2023 modification was a decrease in the related right-of-use asset and corresponding lease liability of $1.0 million.

As of March 31, 2024, maturities of lease liabilities were as follows (in thousands):

Year Ending December 31,	Amount
Remaining 2024	$	5,738
2025	3,923
2026	3,895
2027	3,796
2028	3,856
2029	3,912
Thereafter	14,486
Total operating lease payments	39,606
Less: Imputed interest	(8,855)
Total operating lease liabilities	$	30,751

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Earnings per Share (Note)

3 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Earnings per Share

Earnings per Share

    The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
(in thousands, except per share data)	2024		2023
Numerator:
Net loss	$	(11,357)	$	(19,002)
Denominator:
Weighted average shares (basic)	46,817		45,926
Dilutive effect of potential common shares	—		—
Weighted average shares (diluted)	46,817		45,926
Basic loss per share	$	(0.24)	$	(0.41)
Diluted loss per share	$	(0.24)	$	(0.41)

    Dilutive potential common shares consist of shares issuable upon the vesting of restricted stock units ("RSUs") and market stock units ("MSUs"). Potential common shares determined to be antidilutive and excluded from diluted weighted average shares outstanding were approximately 1.5 million and 2.4 million for the three months ended March 31, 2024 and 2023, respectively. In addition, potential common shares related to the convertible notes determined to be antidilutive and excluded from diluted weighted average shares outstanding were 6.7 million and 5.8 million for the three months ended March 31, 2024 and 2023, respectively.

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Noncash Share-based Compensation (Note)

3 Months Ended

Mar. 31, 2024

Noncash Share-based Compensation [Abstract]

Noncash Share-based Compensation

Noncash Share-based Compensation

The Company's 2017 Equity Incentive Plan (as amended and restated, the "2017 Stock Plan") had an aggregate authorized limit of 7,650,000 shares for issuance. In May 2023, the Company's stockholders approved an amendment to the 2017 Stock Plan increasing the aggregate amount of shares available for issuance to 10,550,000. As of March 31, 2024, 3,281,287 shares remain available for issuance under the 2017 Stock Plan.

    The following table presents the number of shares or units outstanding for each award type as of March 31, 2024 and December 31, 2023 (in thousands): 

Award type	March 31, 2024	December 31, 2023
Restricted stock units (time-based)	3,212	2,767
Market stock units	391	358

During the three months ended March 31, 2024, the Company granted 1,196,087 RSUs (time-based) with a weighted average grant-date fair value of $35.69 per share. The Company also granted 131,892 MSUs with a weighted average grant-date fair value of $41.07 to certain executive employees during the three months ended March 31, 2024. These MSUs vest on January 31, 2027 and the actual number of MSUs that will be eligible to vest is based on the total stockholder return of the Company relative to the total stockholder return of the Index over the performance period, as defined by each award's plan documents or individual award agreements. The maximum number of shares issuable upon vesting is 200% of the MSUs initially granted.

The assumptions used to value the MSUs granted during the three months ended March 31, 2024 were as follows:

	Three Months Ended March 31, 2024
Volatility	50.94	%
Risk-free interest rate	3.89	%
Expected award life in years	2.97
Dividend yield	—	%

Share-based compensation expense is allocated to expense categories in the unaudited condensed consolidated statements of comprehensive loss. The following table summarizes share-based compensation expense included in the

Company's unaudited condensed consolidated statements of comprehensive loss for the three months ended March 31, 2024 and 2023 (in thousands):

	Three Months Ended March 31,
	2024		2023
Share-based compensation:
Cost of revenue	$	1,068	$	832
Operating expenses:
Selling and marketing	3,628		2,928
Research and development	3,531		2,350
General and administrative	4,473		3,794
Total included in operating expenses	11,632		9,072
Total share-based compensation expense	$	12,700	$	9,904

    At March 31, 2024, the Company had an estimated $100.0 million of total unrecognized compensation costs related to share-based compensation arrangements. These costs will be recognized over a weighted average period of 2.8 years.

    The Company's Employee Stock Purchase Plan (as amended, the "ESPP") permits eligible employees to purchase Company shares on an after-tax basis in an amount between 1% and 10% of their annual pay: (i) on June 30 of each year at a 15% discount of the fair market value of the Company's common stock on January 1 or June 30, whichever is lower, and (ii) on December 31 of each year at a 15% discount of the fair market value of the Company's common stock on July 1 or December 31, whichever is lower. An employee may not purchase more than $5,000 in either of the six-month measurement periods described above or more than $10,000 annually. In May 2021, the Company's stockholders approved an amendment to the ESPP increasing the aggregate amount of shares available for issuance under the ESPP to 1,000,000. During the three months ended March 31, 2024, the Company issued 40,408 shares under the ESPP. As of March 31, 2024, 242,709 shares remain authorized and available for issuance under the ESPP. As of March 31, 2024, the Company held approximately $0.7 million on behalf of employees for future purchases under the ESPP, and this amount was recorded in accrued payroll and other employee benefits in the Company's unaudited condensed consolidated balance sheet.

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Convertible debt (Notes)

3 Months Ended

Mar. 31, 2024

Debt Disclosure [Abstract]

Long-term Debt [Text Block]

Convertible Senior Notes

The following is a summary of the Company's convertible senior notes as of March 31, 2024 (in thousands):

	Date of Issuance	Unpaid Principal Balance		Contractual Interest Rates
1% Convertible Notes due in 2024 ("2024 Notes")	May 2019	$	21,713	1%
2.25% Convertible Notes due in 2027 ("2027 Notes")	September 2020 and October 2023	$	266,816	2.25%
Total Notes		$	288,529

The 2027 and 2024 Notes (collectively, the "Notes") are general unsecured obligations and rank senior in right of payment to all of the Company's indebtedness that is expressly subordinated in right of payment to the Notes, rank equally in right of payment with all of the Company's existing and future liabilities that are not so subordinated, are effectively junior to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness and are structurally subordinated to all indebtedness and other liabilities of the Company's subsidiaries (including trade payables but excluding intercompany obligations owed to the Company or its subsidiaries).

Interest related to the 2027 Notes is payable semi-annually in arrears in cash on March 15 and September 15 of each year, beginning on March 15, 2021. Interest related to the 2024 Notes is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2019.

The 2027 Notes mature on September 15, 2027 and the 2024 Notes mature on May 15, 2024, unless redeemed or converted in accordance with their terms prior to such date.

Each $1,000 of principal of the 2027 Notes will initially be convertible into 23.9137 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $41.82 per share. Each $1,000 of principal of the 2024

Notes will initially be convertible into 15.1394 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $66.05 per share. The initial conversion price for the 2027 and the 2024 Notes is subject to adjustment upon the occurrence of certain specified events.

On August 23, 2023, the Company entered into legally binding exchange agreements with a limited number of existing holders of the 2024 Notes to exchange approximately $122.0 million aggregate principal amount of the existing 2024 Notes for a principal amount of the 2027 Notes at an exchange ratio to be determined based on the daily volume-weighted average trading price of the Company’s common stock over a thirty-day trading period beginning August 24, 2023 (such exchange transactions, the “Exchange”). On October 10, 2023, the Company settled the exchange agreements for the exchange of $122.0 million aggregate principal amount of its outstanding 2024 Notes for newly issued $116.8 million aggregate principal amount of its outstanding 2027 Notes. Following the settlement of the Exchange, $21.7 million in aggregate principal amount of the 2024 Notes and $266.8 million in aggregate principal amount of the 2027 Notes remain outstanding with terms unchanged. The 2027 Notes issued in the Exchange constitute a further issuance of, and form a single series and will be fungible with, the existing 2027 Notes.

As of March 31, 2024, the 2027 and 2024 Notes are not yet convertible and their remaining term is approximately 42 months and 2 months, respectively.

As of March 31, 2024 and December 31, 2023, the fair value of the principal amount of the Notes in the aggregate was $310.7 million and $320.5 million, respectively. The estimated fair value was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including the Company's stock price and interest rates, which represents level 2 in the fair value hierarchy.

The Notes consist of the following (in thousands):

	March 31, 2024		December 31, 2023
Principal	$	288,529	$	288,529
Debt premium, net of amortization	9,100		9,776
Debt issuance costs, net of amortization	(3,990)		(4,313)
Net carrying amount	$	293,639	$	293,992

The following table sets forth total interest expense recognized related to the Notes (in thousands):

	Three Months Ended March 31,
	2024		2023
Coupon interest	$	1,555	$	1,203
Amortization of debt issuance costs	323		373
Amortization of debt premium	(676)		—
Total	$	1,202	$	1,576

    Capped call transactions

In September 2020 and in May 2019, in connection with the offering of the 2027 and 2024 Notes, respectively, the Company entered into privately negotiated capped call transactions (collectively, the "Capped Call") with certain option counterparties. The Capped Call transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock initially underlying the Notes, at a strike price that corresponds to the initial conversion price of the Notes, also subject to adjustment, and are exercisable upon conversion of the Notes. The Capped Call transactions are intended to reduce potential dilution to the Company’s common stock and/or offset any cash payments the Company will be required to make in excess of the principal amounts upon any conversion of the Notes, and to effectively increase the overall conversion price of the 2027 Notes from $41.82 to $78.90 per share, and for the 2024 Notes from $66.05 to $101.62 per share. As the Capped Call transactions meet certain accounting criteria, they are recorded in stockholders’ (deficit) equity and are not accounted for as derivatives. The cost of the Capped Call was $25.3 million and $16.4 million for the 2027 and 2024 Notes, respectively, and was recorded as part of additional paid-in capital.

In August 2023, in connection with the Exchange, the Company entered into additional capped call transactions (the “Additional Capped Call”) with certain option counterparties. The Company agreed to pay a premium to the option

counterparties for the Additional Capped Call for an amount to be determined based on the volume-weighted average trading price of the Company’s common stock over a thirty-day reference period beginning August 24, 2023. The conversion price of the Additional Capped Call is the same as the 2027 Notes Capped Call above. Initial funding of the Additional Capped Call occurred in the third quarter of 2023. The Additional Capped Call had a deferred premium component indexed to the Company's stock price and required to be settled in cash, and therefore the Additional Capped Call was a derivative instrument that, at inception, did not meet the qualifications for equity classification. On October 10, 2023, the Company settled the deferred premium on the Additional Capped Call resulting in a final value of $22.2 million. Once the deferred premium was settled, the instrument met the requirements for equity classification and the Company reclassified the Additional Capped Call to additional paid-in capital.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

    Litigation

    In the ordinary course of business, the Company regularly becomes involved in contract and other negotiations and, in more limited circumstances, becomes involved in legal proceedings, claims and litigation. The outcomes of these matters are inherently unpredictable. The Company is not currently involved in any outstanding litigation that it believes, individually or in the aggregate, will have a material adverse effect on its business, financial condition, results of operations or cash flows.

Purchase commitments

In the ordinary course of business, the Company enters into various purchase commitments for goods and services, mainly related to infrastructure platforms, business technology software and support, and other services. In January 2023, the Company entered into a noncancelable agreement for software support services with a four-year term. The remaining purchase commitment as of March 31, 2024 was $2.4 million and the agreement expires in March 2027. There were no other material changes outside the ordinary course of business to the noncancellable purchase commitments disclosed in the Annual Report.

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Severance and other related costs

3 Months Ended

Mar. 31, 2024

Restructuring and Related Activities [Abstract]

Restructuring, Impairment, and Other Activities Disclosure

Severance and Other Related Costs

In the quarter ended March 31, 2023, the Company made certain organizational changes and incurred approximately $3.6 million of severance, employee benefits, outplacement and related costs during the period. These costs were recorded primarily as operating expenses in the unaudited condensed consolidated statements of comprehensive loss, mainly research and development, and sales and marketing. During the quarter ended March 31, 2023, cash payments of $3.2 million were recorded for the incurred costs. The Company settled the remaining accrued expense within 2023.

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Other Income and Expenses

3 Months Ended

Mar. 31, 2024

Other Income and Expenses [Abstract]

Other Nonoperating Income and Expense

Other Income, Net

Other income, net consisted of the following (in thousands):

	Three Months Ended March 31,
	2024		2023
Interest income, net	$	1,762	$	1,730
Foreign currency (loss) gain, net	(536)		(203)
Other (1)	(768)		(76)
Total other income, net	$	458	$	1,451

(1) Includes loss on disposal of assets of $0.8 million related to a lease modification in the first quarter of 2024, see Note 5.

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Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Pay vs Performance Disclosure
Net income (loss)	$ (11,357)	$ (19,002)

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Insider Trading Arrangements	3 Months Ended
	Mar. 31, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Basis of presentation

Basis of presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission ("SEC"). In management's opinion, the accompanying interim unaudited condensed consolidated financial statements include all adjustments necessary for a fair statement of the financial position of the Company as of March 31, 2024, the results of operations for the three months ended March 31, 2024 and 2023, cash flows for the three months ended March 31, 2024 and 2023, and stockholders' (deficit) equity for the three months ended March 31, 2024 and 2023.

Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 ("Annual Report") filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, 2023 was derived from the Company's audited consolidated financial statements but does not include all disclosures required under GAAP.

Accounting Standards Update and Change in Accounting Principle

Changes in accounting policies

There have been no material changes in the Company’s significant accounting policies and their application as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Fair value measurement

Fair value measurement

The Company's financial assets that are included in cash and cash equivalents and that are measured at fair value on a recurring basis consisted of $150.6 million and $153.2 million at March 31, 2024 and December 31, 2023, respectively, and were invested in treasury, money market funds and interest-bearing deposits in banks. The fair value of those investments is determined based on quoted market prices, which represents level 1 in the fair value hierarchy as defined by ASC 820. See Note 8 for the fair value measurement of the convertible notes.

Revenue Recognition, Customer Acquisitions [Policy Text Block]

Deferred costs

Sales commissions earned by the Company's sales representatives are considered incremental and recoverable costs of obtaining a customer contract. Sales commissions are deferred and amortized on a straight-line basis over the period of benefit, which the Company has determined to be five to eight years. The Company determined the period of benefit by taking into consideration its customer contracts, expected renewals of those customer contracts (as the Company currently does not pay an incremental sales commission for renewals), the Company's technology and other factors. The Company also defers amounts earned by employees other than sales representatives who earn incentive payments under compensation plans also tied to the value of customer contracts acquired. Deferred costs were $14.5 million and $15.1 million as of March 31, 2024 and December 31, 2023, respectively. Amortization expense for the deferred costs was $1.3 million and $1.5 million for the three months ended March 31, 2024 and 2023, respectively. Amortization of deferred costs is included in selling and marketing expense in the accompanying unaudited condensed consolidated statements of comprehensive loss.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently issued accounting pronouncements not yet adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and other segment items on an annual and interim basis. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The ASU is to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding income taxes paid by jurisdiction. The new standard is effective for annual periods beginning after December 15, 2024, and early adoption is permitted. The new standard is to be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2024, as compared to the recent accounting pronouncements described in the Company's Annual Report, that are of significance or potential significance to the Company.

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Disaggregation of Revenue (Tables)

3 Months Ended

Mar. 31, 2024

Disaggregation of Revenue [Abstract]

Schedule of Disaggregation Of Revenue [Table Text Block]

The geographic information in the table below is presented for the three months ended March 31, 2024 and 2023. The Company categorizes geographic revenues based on the location of the customer's headquarters.

	Three Months Ended March 31,
	2024				2023
(in thousands)	Revenue		Percent		Revenue		Percent
United States of America	$	26,933	33	%	$	26,232	36	%
Europe	25,671		32	%	22,949		31	%
The rest of the world	28,084		35	%	24,001		33	%
Total revenue	$	80,688	100	%	$	73,182	100	%

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Leases (Tables)

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

Supplemental Lease Information [Table Text Block]

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended March 31,
	2024		2023
Cash paid for operating lease liabilities	$	2,233	$	2,251
Right-of-use asset obtained in exchange for operating lease liability	$	2,126	$	—

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

As of March 31, 2024, maturities of lease liabilities were as follows (in thousands):

Year Ending December 31,	Amount
Remaining 2024	$	5,738
2025	3,923
2026	3,895
2027	3,796
2028	3,856
2029	3,912
Thereafter	14,486
Total operating lease payments	39,606
Less: Imputed interest	(8,855)
Total operating lease liabilities	$	30,751

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Earnings per Share (Table)

3 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023:

	Three Months Ended March 31,
(in thousands, except per share data)	2024		2023
Numerator:
Net loss	$	(11,357)	$	(19,002)
Denominator:
Weighted average shares (basic)	46,817		45,926
Dilutive effect of potential common shares	—		—
Weighted average shares (diluted)	46,817		45,926
Basic loss per share	$	(0.24)	$	(0.41)
Diluted loss per share	$	(0.24)	$	(0.41)

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Noncash Share-based Compensation (Tables)

3 Months Ended

Mar. 31, 2024

Noncash Share-based Compensation [Abstract]

Awards outstanding [Table Text Block]

The following table presents the number of shares or units outstanding for each award type as of March 31, 2024 and December 31, 2023 (in thousands): 

Award type	March 31, 2024	December 31, 2023
Restricted stock units (time-based)	3,212	2,767
Market stock units	391	358

Schedule of Share-based Compensation Expense

The following table summarizes share-based compensation expense included in the

Company's unaudited condensed consolidated statements of comprehensive loss for the three months ended March 31, 2024 and 2023 (in thousands):

	Three Months Ended March 31,
	2024		2023
Share-based compensation:
Cost of revenue	$	1,068	$	832
Operating expenses:
Selling and marketing	3,628		2,928
Research and development	3,531		2,350
General and administrative	4,473		3,794
Total included in operating expenses	11,632		9,072
Total share-based compensation expense	$	12,700	$	9,904

Market Stock Units Valuation Assumptions

The assumptions used to value the MSUs granted during the three months ended March 31, 2024 were as follows:

	Three Months Ended March 31, 2024
Volatility	50.94	%
Risk-free interest rate	3.89	%
Expected award life in years	2.97
Dividend yield	—	%

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Convertible debt (Tables)

3 Months Ended

Mar. 31, 2024

Debt Disclosure [Abstract]

Schedule of Debt [Table Text Block]

The following is a summary of the Company's convertible senior notes as of March 31, 2024 (in thousands):

	Date of Issuance	Unpaid Principal Balance		Contractual Interest Rates
1% Convertible Notes due in 2024 ("2024 Notes")	May 2019	$	21,713	1%
2.25% Convertible Notes due in 2027 ("2027 Notes")	September 2020 and October 2023	$	266,816	2.25%
Total Notes		$	288,529

Convertible Debt [Table Text Block]

The Notes consist of the following (in thousands):

	March 31, 2024		December 31, 2023
Principal	$	288,529	$	288,529
Debt premium, net of amortization	9,100		9,776
Debt issuance costs, net of amortization	(3,990)		(4,313)
Net carrying amount	$	293,639	$	293,992

The following table sets forth total interest expense recognized related to the Notes (in thousands):

	Three Months Ended March 31,
	2024		2023
Coupon interest	$	1,555	$	1,203
Amortization of debt issuance costs	323		373
Amortization of debt premium	(676)		—
Total	$	1,202	$	1,576

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Other Income and Expenses (Tables)

3 Months Ended

Mar. 31, 2024

Other Income and Expenses [Abstract]

Schedule of Other Nonoperating Income (Expense)

Other income, net consisted of the following (in thousands):

	Three Months Ended March 31,
	2024		2023
Interest income, net	$	1,762	$	1,730
Foreign currency (loss) gain, net	(536)		(203)
Other (1)	(768)		(76)
Total other income, net	$	458	$	1,451

(1) Includes loss on disposal of assets of $0.8 million related to a lease modification in the first quarter of 2024, see Note 5.

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Summary of Significant Accounting Policies Significant Accounting Policies (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Accounting Policies [Abstract]
Treasury money market funds, at fair value	$ 150.6		$ 153.2
Deferred Costs	14.5		$ 15.1
Amortization of Deferred Charges	$ 1.3	$ 1.5

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Deferred Revenue and Performance Obligation (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Deferred Revenue and Performance Obligation [Abstract]
Deferred Revenue, Revenue Recognized	$ 54.5	$ 49.4
Revenue, Remaining Performance Obligation, Amount	447.6
Revenue Remaining Performance Obligation, to be recognized within 12 months	$ 227.4

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Disaggregation of Revenue Revenue by Geography (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Revenues	$ 80,688	$ 73,182
Percentage of total revenue	100.00%	100.00%
UNITED STATES
Revenues	$ 26,933	$ 26,232
Percentage of total revenue	33.00%	36.00%
Europe [Member]
Revenues	$ 25,671	$ 22,949
Percentage of total revenue	32.00%	31.00%
The rest of the world [Member]
Revenues	$ 28,084	$ 24,001
Percentage of total revenue	35.00%	33.00%

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Leases (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Lessee, Lease, Description [Line Items]
Lessee, Operating Lease, Option to Renew	15 years
Lessee, Operating Lease, Termination Option	1 year
Operating Lease, Payments	$ 2,233	$ 2,251
Right-of-use Asset Obtained in Exchange for Operating Lease Liability	2,126	0
Lease modification, increase in right of use asset	2,100
Lease modification, increase in right of use liability	1,400
Gain on lease modification	(697)	0
Loss on Disposition of Other Assets	$ 774	35
Decrease in right-of-use asset and related lease liability due to modification		$ 1,000
Minimum [Member]
Lessee, Lease, Description [Line Items]
Lessee, Operating Lease, Term of Contract	1 year
Maximum [Member]
Lessee, Lease, Description [Line Items]
Lessee, Operating Lease, Term of Contract	9 years

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Leases Schedule of lease liability maturities (Details) $ in Thousands	Mar. 31, 2024 USD ($)
Lessee, Operating Lease, Liability, to be Paid, Fiscal Year Maturity [Abstract]
Remaining 2024	$ 5,738
2025	3,923
2026	3,895
2027	3,796
2028	3,856
2029	3,912
Thereafter	14,486
Operating Leases, Payments Due	39,606
Lessee, Operating Lease, Liability, Undiscounted Excess Amount	(8,855)
Operating Lease, Liability	$ 30,751

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Earnings per Share (Details) - shares shares in Millions	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Share-based Payment Arrangement [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive potential common shares excluded from computation of earnings per share	1.5	2.4
Convertible Debt Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive potential common shares excluded from computation of earnings per share	6.7	5.8

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Earnings per Share Basis and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Numerator
Net income (loss)	$ (11,357)	$ (19,002)
Denominator
Weighted average shares (basic)	46,817	45,926
Dilutive effect of potential common shares	0	0
Weighted average shares (diluted)	46,817	45,926
Basic Earnings Per Share	$ (0.24)	$ (0.41)
Diluted earnings per share	$ (0.24)	$ (0.41)

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Noncash Share-based Compensation (Details)	3 Months Ended
	Mar. 31, 2024 USD ($) $ / shares shares
Noncash Share-based Compensation (Narrative) [Line Items]
Unrecognized compensation cost related to share-based compensation | $	$ 100,000,000
Weighted average period to recognize cost, in years	2 years 9 months 18 days
Share-based compensation arrangement by share-based payment, Minimum Employee Subscription rate	1.00%
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate	10.00%
Share-based Compensation Arrangement by Share-based Payment Award, Discount from Market Price, Offering Date	15.00%
Maximum Amount Contributable by employees under ESPP- Half yearly | $	$ 5,000
Maximum Amount Contributable By Employees Under ESPP- Annually | $	$ 10,000
Stock Issued During Period, Shares, Employee Stock Purchase Plans	40,408
ESPP contributions by Employees | $	$ 700,000
RSUs
Noncash Share-based Compensation (Narrative) [Line Items]
Awards, other than options, granted in period	1,196,087
Weighted average grant date fair value, per share, of awards granted in period | $ / shares	$ 35.69
Employee Stock [Member]
Noncash Share-based Compensation (Narrative) [Line Items]
Shares reserved for issuance under Plan	1,000,000
Shares available for future grants	242,709
Performance Shares [Member]
Noncash Share-based Compensation (Narrative) [Line Items]
Awards, other than options, granted in period	131,892
Weighted average grant date fair value, per share, of awards granted in period | $ / shares	$ 41.07
2017 Equity Incentive Plan [Member] [Member]
Noncash Share-based Compensation (Narrative) [Line Items]
Shares reserved for issuance under Plan	7,650,000
2017 Amended Equity Incentive Plan [Member]
Noncash Share-based Compensation (Narrative) [Line Items]
Shares reserved for issuance under Plan	10,550,000
Shares available for future grants	3,281,287

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Noncash Share-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 12,700	$ 9,904
Cost of Sales [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	1,068	832
Selling and Marketing Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	3,628	2,928
General and Administrative Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	4,473	3,794
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	3,531	2,350
Operating Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 11,632	$ 9,072

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Noncash Share-based Compensation Awards outstanding (Details) - shares shares in Thousands	Mar. 31, 2024	Dec. 31, 2023
Restricted Stock Unit - time based [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number	3,212	2,767
Market Share Units (MSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number	391	358

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Noncash Share-based Compensation Assumptions (Details) - Market Share Units (MSUs) [Member]	3 Months Ended
	Mar. 31, 2024
Assumptions For Fair Value Calculation of Market Stock Units [Line Items]
Volatility	50.94%
Risk-free interest rate	3.89%
Expected life, in years	2 years 11 months 19 days
Dividend yield	0.00%

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Convertible debt (Details) $ / shares in Units, $ in Thousands		3 Months Ended
	Oct. 10, 2023 USD ($)	Mar. 31, 2024 USD ($) $ / shares	Mar. 31, 2023 USD ($)	Dec. 31, 2023 USD ($)	Aug. 23, 2023 USD ($)
Debt Instrument [Line Items]
Debt Instrument, Face Amount		$ 288,529		$ 288,529
Convertible Debt, Current		21,702		21,668
Convertible Debt, Noncurrent		271,937		272,324
Debt Instrument, Unamortized Premium		9,100		9,776
Debt Instrument, Premium and Debt Issuance Costs, Net		(3,990)		(4,313)
Convertible Debt		293,639		293,992
Debt Instrument, Fair Value Disclosure		310,700		$ 320,500
Debt Instrument, Periodic Payment, Interest		1,555	$ 1,203
Amortization of Financing Costs		323	373
Amortization of Debt Discount (Premium)		(676)	0
Interest Expense, Debt		1,202	$ 1,576
Notes due 2024 [Member]
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 21,700	$ 21,713
Debt Instrument, Interest Rate, Stated Percentage		1.00%
Debt Instrument, Convertible, Conversion Ratio		15.1394
Debt Instrument, Convertible, Stock Price Trigger | $ / shares		$ 66.05
Debt Instrument, Convertible, Remaining Discount Amortization Period		2 months
Partial Extinguishment of Debt, Principal Amount	122,000
Debt Instrument, Convertible, Conversion Price | $ / shares		$ 101.62
Value of capped call		$ 16,400
Notes due 2027
Debt Instrument [Line Items]
Debt Instrument, Face Amount	266,800	$ 266,816
Debt Instrument, Interest Rate, Stated Percentage		2.25%
Debt Instrument, Convertible, Conversion Ratio		23.9137
Debt Instrument, Convertible, Stock Price Trigger | $ / shares		$ 41.82
Debt Instrument, Convertible, Remaining Discount Amortization Period		42 months
Debt Conversion, Converted Instrument, Amount	116,800
Debt Instrument, Convertible, Conversion Price | $ / shares		$ 78.90
Value of capped call		$ 25,300
Notes due 2024- subject to Exchange
Debt Instrument [Line Items]
Debt Instrument, Face Amount					$ 122,000
Notes Exchange
Debt Instrument [Line Items]
Value of capped call	$ 22,200

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Commitments and Contingencies Purchase commitments (Details) $ in Millions	Mar. 31, 2024 USD ($)
Software Support Services Commitment
Long-term Purchase Commitment [Line Items]
Purchase Obligation	$ 2.4

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Severance and other related costs (Details) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($)
Restructuring and Related Activities [Abstract]
Severance Costs	$ 3.6
Cash Payments for Severance and other related	$ 3.2

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Other Income and Expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Interest Income (Expense), Nonoperating, Net	$ 1,762	$ 1,730
Gain (Loss), Foreign Currency Transaction, before Tax	(536)	(203)
Other Nonoperating Income (Expense)	(768)	(76)
Nonoperating Income (Expense)	458	1,451
Loss on Disposition of Other Assets	$ 774	$ 35