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0001392972false00013929722023-05-022023-05-02

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 2, 2023
PROS logo.jpg
PROS Holdings, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
001-33554
76-0168604
(Commission File Number)
(IRS Employer Identification No.)
 
3200 Kirby Drive, Suite 600
Houston
TX
77098
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code
(713) 335-5151
(Former Name or Former Address, if Changed Since Last Report)
 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐





Item 2.02.
Results of Operations and Financial Condition.

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. o On May 2, 2023, PROS Holdings, Inc. (the "Company") issued a press release announcing financial results for its quarter ended March 31, 2023. A copy of the press release, dated as of May 2, 2023, is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The press release contains forward looking statements regarding the Company and includes cautionary statements identifying important factors that could cause actual results to differ materially from those anticipated.
The information in this Current Report, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any registration statement or other document filed with the Securities and Exchange Commission ("SEC") by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

Item 7.01.
Regulation FD Disclosure.

On May 2, 2023, the Company published the Q1 2023 Investor Presentation ("Investor Presentation") on the Investor Relations section of the Company’s website located at https://ir.pros.com/. From time to time, the Company may also present and/or distribute the Investor Presentation to the investment community to provide updates and summaries of its business. Copy of the Q1 2023 Investor Presentation is furnished herewith as Exhibits 99.2. Investors should note that the Company uses the Investor Relations section of its corporate website to announce material information to investors and the marketplace. While not all of the information that the Company posts on its corporate website is of a material nature, some information could be deemed to be material. Accordingly, the Company encourages investors, the media, and others interested in the Company to review the information that it shares on the Investor Relations section of our website.

The information contained in the Investor Presentation is summary information that is intended to be considered in the context of the Company's SEC filings and other public announcements that the Company may make, by press release or otherwise, from time to time. The Company undertakes no duty or obligation to publicly update or revise the information contained in this report, although it may do so from time to time as its management believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.

The information in this Current Report, including Exhibits 99.2 attached hereto, shall not be deemed "filed" for the purpose of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. The information contained herein and in the accompanying exhibits shall not be incorporated by reference into any registration statement or other document filed with the SEC by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

Item 9.01.
Financial Statements and Exhibits.

(d) Exhibits    
Exhibit No. Exhibit Description
99.1
99.2
104 The cover page from this Current Report on Form 8-K, formatted in Inline XBRL (included as Exhibit 101).





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, hereunto duly authorized.
 
PROS HOLDINGS, INC.
May 2, 2023 /s/ Stefan Schulz
Stefan Schulz
Executive Vice President and Chief Financial Officer






































EX-99.1 2 a2023q1ex991prosearningsre.htm EX-99.1 Document

EXHIBIT 99.1

proslogo.jpg

PROS HOLDINGS, INC. REPORTS FIRST QUARTER 2023 FINANCIAL RESULTS

•Subscription revenue of $56.0 million, up 15% year-over-year.
•Subscription gross margin of 75% and non-GAAP subscription gross margin of 78%, up over 150 basis points year-over-year.
•Driven by PROS outperformance in the first quarter, the company is improving its growth and profitability outlook for the full year of 2023.

HOUSTON – May 2, 2023 — PROS Holdings, Inc. (NYSE: PRO), a leading provider of AI-powered SaaS pricing, CPQ, revenue management, and digital offer marketing solutions, today announced financial results for the first quarter ended March 31, 2023.

“I’m proud of our team for delivering a strong start to 2023 where we drove 15% subscription revenue growth and 75% improvement to adjusted EBITDA year-over-year,” stated CEO Andres Reiner. “We continue to lead the industry in AI that drives measurable ROI for our customers. As a result of our outperformance in the first quarter, we are raising our 2023 full year guidance across all metrics.”

First Quarter 2023 Financial Highlights

Key financial results for the first quarter 2023 are shown below. Throughout this press release all dollar figures are in millions, except net (loss) earnings per share. Unless otherwise noted, all results are on a reported basis and are compared with the prior-year period.
GAAP Non-GAAP
Q1 2023 Q1 2022 Change Q1 2023 Q1 2022  Change
Revenue:
  Total Revenue $73.2 $66.5 10% n/a n/a n/a
  Subscription Revenue $56.0 $48.8 15% n/a n/a n/a
  Subscription and Maintenance Revenue $61.7 $56.6 9% n/a n/a n/a
Profitability:
  Gross Profit $43.6 $39.1 12% $46.6 $41.9 11%
  Operating (Loss) Income $(18.8) $(26.5) $7.7 $(3.5) $(10.8) $7.3
  Net (Loss) Income $(19.0) $(28.6) $9.6 $(2.5) $(9.7) $7.1
  Net (Loss) Earnings Per Share $(0.41) $(0.64) $0.23 $(0.06) $(0.21) $0.15
  Adjusted EBITDA n/a n/a n/a $(2.3) $(9.1) $6.8
Cash:
  Net Cash Used in Operating Activities $(6.1) $(11.0) $4.9 n/a n/a n/a
  Free Cash Flow n/a n/a n/a $(4.5) $(11.5) $7.0
The attached table provides a summary of PROS results for the period, including a reconciliation of GAAP to non-GAAP metrics.

Recent Business Highlights

•Welcomed new customers who are adopting the PROS Platform such as Air Serbia, Atea, Europcar, Meyle, Nature’s Touch, Nok Air, and QuidelOrtho, among others.

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•Named to the Constellation ShortListTM for Price Optimization and Configure, Price, Quote for the sixth consecutive year, in recognition of PROS price optimization and omnichannel selling capabilities that are helping customers drive profitable growth.

•A commissioned Forrester Consulting independent Total Economic ImpactTM study showed an investment in PROS paid for itself within 9 months and generated a 400% return on investment in the first 3 years for interviewed customers.

•Launched our new generation of PROS Dynamic Pricing for Ancillaries powered by AI, expanding PROS leadership position in offer optimization for airlines.

•Selected recipient of the Houston Business Journal’s Diversity in Business Award for PROS exceptional commitment to promoting practices that advance diversity, equity, and inclusion in the workplace.

•Published PROS 2022 ESG Report, highlighting our perspectives on and approach to environmental, social, and governance issues that matter most to PROS customers, employees, and shareholders.

•Announced the PROS 2023 Analyst Day scheduled for Tuesday, May 23, 2023 from 1:30 pm MT to 3:30 pm MT during the 2023 Outperform conference in Denver, CO.

Financial Outlook

PROS currently anticipates the following based on an estimated 46.1 million basic weighted average shares outstanding for the second quarter of 2023 and a 22% non-GAAP estimated tax rate for the second quarter and full year 2023.
Q2 2023 Guidance v. Q2 2022 at Mid-Point Full Year 2023 Guidance v. Prior Year at Mid-Point
Total Revenue $72.2 to $73.2 6% $295.0 to $297.0 7%
Subscription Revenue $56.0 to $56.5 12% $231.7 to $233.7 14%
Subscription ARR n/a n/a $251.0 to $254.0 11%
Non-GAAP Loss Per Share $(0.08) to $(0.05) $0.08 n/a n/a
Adjusted EBITDA $(3.2) to $(2.2) $3.3 $3.5 to $6.5 $19.9
Free Cash Flow n/a n/a $2.5 to $6.5 $26.2
Conference Call
In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on Tuesday, May 2, 2023, at 4:45 p.m. ET to discuss the Company’s financial results and business outlook. To access this call, dial 1-877-407-9039 (toll-free) or 1-201-689-8470. The live and archived webcasts of this call can be accessed under the “Investor Relations” section of the Company’s website at www.pros.com.

A telephone replay will be available until Tuesday, May 9, 2023, 11:59 PM ET at 1-844-512-2921 (toll-free) or 1-412-317-6671 using the pass code 13737916.

About PROS

PROS Holdings, Inc. (NYSE: PRO) is a leading provider of AI-powered SaaS pricing, CPQ, revenue management, and digital offer marketing solutions. Its vision is to optimize every shopping and selling experience. With over 30 years of industry expertise and a proven track record of success, PROS helps B2B and B2C companies across the globe, in a variety of industries, including airlines, manufacturing, distribution, and services, drive profitable growth. The PROS Platform leverages AI to provide real-time predictive insights that enable businesses to drive revenue and margin improvements. To learn more about PROS and our innovative SaaS solutions, please visit our website at www.pros.com.

Forward-looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about our financial outlook; expectations; ability to achieve future growth and profitability; management's confidence and optimism; positioning; customer successes; demand for our software solutions; pipeline; business expansion; revenue; subscription revenue; ARR; non-GAAP earnings (loss) per share; adjusted EBITDA; free cash flow; shares outstanding and effective tax rate.
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The forward-looking statements contained in this press release are based upon our historical performance and our current plans, estimates and expectations and are not a representation that such plans, estimates or expectations will be achieved. Factors that could cause actual results to differ materially from those described herein include, among others, risks related to: (a) the macroeconomic environment, (b) the effects of inflation, (c) the impact of the COVID-19 pandemic, (d) cyberattacks, data breaches and breaches of security measures within our products, systems and infrastructure or products, systems and infrastructure of third parties upon whom we rely, (e) increasing business from customers and maintaining subscription renewal rates, (f) managing our growth and profit objectives effectively, (g) disruptions from our third party data center, software, data, and other unrelated service providers, (h) implementing our solutions, (i) cloud operations, (j) intellectual property and third-party software, (k) acquiring and integrating businesses and/or technologies, (l) catastrophic events, (m) operating globally, including economic and commercial disruptions, (n) potential downturns in sales and lengthy sales cycles, (o) software innovation, (p) competition, (q) market acceptance of our software innovations, (r) maintaining our corporate culture, (s) personnel risks including loss of any key employees and competition for talent, (t) expanding and training our direct and indirect sales force, (u) evolving data privacy, cyber security and data localization laws, (v) our debt repayment obligations, (w) the timing of revenue recognition and cash flow from operations, (x) migrating customers to our latest cloud solutions, and (y) returning to profitability. Additional information relating to the risks and uncertainties affecting our business is contained in our filings with the SEC. These forward-looking statements represent our expectations as of the date hereof. Subsequent events may cause these expectations to change, and PROS disclaims any obligations to update or alter these forward-looking statements in the future, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

PROS has provided in this release certain non-GAAP financial measures, including non-GAAP gross profit and margin, non-GAAP income (loss) from operations or non-GAAP operating income (loss), annual recurring revenue, adjusted EBITDA, free cash flow, non-GAAP tax rate, non-GAAP net income (loss), and earnings (loss) per share or non-GAAP earnings (loss) per share. PROS uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating PROS’ ongoing operational performance and cloud transition. Non-GAAP gross margin can be compared to gross margin which can be calculated from the condensed consolidated statements of loss by dividing gross profit by total revenue. Non-GAAP gross margin is similarly calculated but first adds back to gross profit the portion of certain of the non-GAAP adjustments described below attributable to cost of revenue. Non-GAAP subscription margin can be compared to subscription margin which can be calculated from the condensed consolidated statements of loss by dividing subscription gross profit (subscription revenue minus subscription cost) by subscription revenue. Non-GAAP subscription margin is similarly calculated but first subtracts out from subscription cost the portion of certain of the non-GAAP adjustments described below attributable to cost of subscription. These items and amounts are presented in the Supplemental Schedule of Non-GAAP Financial Measures.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measure as detailed above. A reconciliation of GAAP to the non-GAAP financial measures has been provided in the tables included as part of this press release, and can be found, along with other financial information, in the investor relations portion of our website. PROS' use of non-GAAP financial measures may not be consistent with the presentations by similar companies in PROS' industry. PROS has also provided in this release certain forward-looking non-GAAP financial measures, including non-GAAP income (loss) from operations, annual recurring revenue, non-GAAP earnings (loss) per share, adjusted EBITDA, free cash flow, non-GAAP tax rates, and calculated billings (collectively the "non-GAAP financial measures") as follows:

Non-GAAP income (loss) from operations: Non-GAAP income (loss) from operations excludes the impact of share-based compensation, amortization of acquisition-related intangibles and severance. Non-GAAP income (loss) from operations excludes the following items from non-GAAP estimates:
•Share-Based Compensation: Although share-based compensation is an important aspect of compensation for our employees and executives, our share-based compensation expense can vary because of changes in our stock price and market conditions at the time of grant, varying valuation methodologies, and the variety of award types. Since share-based compensation expense can vary for reasons that are generally unrelated to our performance during any particular period, we believe this could make it difficult for investors to compare our current financial results to previous and future periods. Therefore, we believe it is useful to exclude share-based compensation in order to better understand our business performance and allow investors to compare our operating results with peer companies.
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•Amortization of Acquisition-Related Intangibles:  We view amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company's research and development efforts, trade names, customer lists and customer relationships, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
•Severance: Severance costs relate to the separation of our Chief Operations Officer in Q1 2022 and costs related to other internal role consolidations as well as severance cost incurred in Q4 2022 and Q1 2023 as the Company reprioritized its investments to focus on supporting key growth areas of its business. As a result of this reprioritization, the Company incurred severance, employee benefits, outplacement and related costs. These amounts are unrelated to our core performance during any particular period, and therefore, we believe it is useful to exclude these amounts in order to better understand our business performance and allow investors to compare our results with peer companies.
Non-GAAP earnings (loss) per share: Non-GAAP net income (loss) excludes the items listed above as excluded from non-GAAP income (loss) from operations and also excludes amortization of debt issuance costs and the taxes related to these items and the items excluded from non-GAAP income (loss) from operations. Estimates of non-GAAP earnings (loss) per share are calculated by dividing estimates for non-GAAP net income (loss) by our estimate of weighted average shares outstanding for the future period. In addition to the items listed above as excluded from non-GAAP income (loss) from operations, non-GAAP net income (loss) excludes the following items from non-GAAP estimates:
•Amortization of Debt Issuance Costs: Amortization of debt issuance costs are related to our convertible notes. These amounts are unrelated to our core performance during any particular period, and therefore, we believe it is useful to exclude these amounts in order to better understand our business performance and allow investors to compare our results with peer companies.
•Taxes: We exclude the tax consequences associated with non-GAAP items to provide investors with a useful comparison of our operating results to prior periods and to our peer companies because such amounts can vary significantly. In the fourth quarter of 2014, we concluded that it is more likely than not that we will be unable to fully realize our deferred tax assets and accordingly, established a valuation allowance against those assets. The ongoing impact of the valuation allowance on our non-GAAP effective tax rate has been eliminated to allow investors to better understand our business performance and compare our operating results with peer companies.

Annual Recurring Revenue: Annual Recurring Revenue ("ARR") is used to assess the trajectory of our cloud business. ARR means, as of a specified date, the contracted recurring revenue, including contracts with a future start date, together with annualized overage fees incurred above contracted minimum transactions, and excluding perpetual and term license agreements. ARR should be viewed independently of revenue and any other GAAP measure. Subscription ARR is calculated in the same manner, but excludes maintenance and support ARR.
Non-GAAP Tax Rate: The estimated non-GAAP effective tax rate adjusts the tax effect to quantify the impact of the excluded non-GAAP items.
Adjusted EBITDA: Adjusted EBITDA is defined as GAAP net income (loss) before interest expense, provision for income taxes, depreciation and amortization, as adjusted to eliminate the effect of stock-based compensation cost, severance, amortization of acquisition-related intangibles, and depreciation and amortization. Adjusted EBITDA should not be considered as an alternative to net income (loss) as an indicator of our operating performance.
Free Cash Flow: Free cash flow is a non-GAAP financial measure which is defined as net cash provided by (used in) operating activities, excluding severance payments, less capital expenditures, purchases of other (non-acquisition-related) intangible assets and capitalized internal-use software development costs.
Calculated Billings: Calculated billings is defined as total subscription, maintenance and support revenue plus the change in recurring deferred revenue in a given period.
These non-GAAP estimates are not measurements of financial performance prepared in accordance with GAAP, and we are unable to reconcile these forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information described above which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.
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Investor Contact:
PROS Investor Relations Belinda Overdeput (In thousands, except share and per share amounts)
713-335-5879
ir@pros.com
5


PROS Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)

March 31, 2023 December 31, 2022
Assets:
Current assets:
Cash and cash equivalents
$ 192,376  $ 203,627 
Trade and other receivables, net of allowance of $722 and $609, respectively 45,787  48,178 
Deferred costs, current
6,433  6,032 
Prepaid and other current assets
12,149  9,441 
Total current assets
256,745  267,278 
Property and equipment, net
25,442  25,012 
Operating lease right-of-use assets
14,797  17,474 
Deferred costs, noncurrent
7,938  8,764 
Intangibles, net
16,046  17,851 
Goodwill
107,717  107,561 
Other assets, noncurrent
8,872  9,012 
Total assets
$ 437,557  $ 452,952 
Liabilities and Stockholders’ (Deficit) Equity:
Current liabilities:
Accounts payable and other liabilities
$ 4,197  $ 7,964 
Accrued liabilities
13,356  12,854 
Accrued payroll and other employee benefits
15,624  23,797 
Operating lease liabilities, current
5,461  7,662 
Deferred revenue, current
122,192  108,659 
Total current liabilities
160,830  160,936 
Deferred revenue, noncurrent
6,161  8,298 
Convertible debt, net, noncurrent
290,152  289,779 
Operating lease liabilities, noncurrent
27,135  28,184 
Other liabilities, noncurrent
1,247  1,228 
Total liabilities
485,525  488,425 
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; 50,711,964
and 50,318,726 shares issued, respectively; 46,031,241 and 45,638,003 shares outstanding, respectively
51  50 
Additional paid-in capital
596,805  590,475 
Treasury stock, 4,680,723 common shares, at cost (29,847) (29,847)
Accumulated deficit
(609,900) (590,898)
Accumulated other comprehensive loss
(5,077) (5,253)
Total stockholders’ (deficit) equity
(47,968) (35,473)
Total liabilities and stockholders’ (deficit) equity
$ 437,557  $ 452,952 


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

Three Months Ended March 31,
2023 2022
Revenue:
Subscription $ 55,969  $ 48,765 
Maintenance and support 5,712  7,855 
Total subscription, maintenance and support 61,681  56,620 
Services 11,501  9,872 
Total revenue 73,182  66,492 
Cost of revenue:
Subscription 14,093  13,779 
Maintenance and support 2,282  2,167 
Total cost of subscription, maintenance and support 16,375  15,946 
Services 13,167  11,415 
Total cost of revenue 29,542  27,361 
Gross profit 43,640  39,131 
Operating expenses:
Selling and marketing 26,010  25,287 
Research and development 22,291  24,467 
General and administrative 14,135  14,329 
Impairment of fixed assets —  1,551 
Loss from operations (18,796) (26,503)
Convertible debt interest and amortization (1,576) (1,576)
Other income (expense), net 1,451  (418)
Loss before income tax provision (18,921) (28,497)
Income tax provision 81  143 
Net loss $ (19,002) $ (28,640)
Net loss per share:
Basic and diluted $ (0.41) $ (0.64)
Weighted average number of shares:
Basic and diluted 45,926  45,085 
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PROS Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended March 31,
2023 2022
Operating activities:
Net loss
$ (19,002) $ (28,640)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
3,001  4,647 
Amortization of debt issuance costs 373  373 
Share-based compensation
9,904  11,225 
Provision for credit losses
108  (91)
Loss on disposal of assets
35  — 
Impairment of fixed assets
—  1,551 
Changes in operating assets and liabilities:
Accounts and unbilled receivables
2,239  (12,130)
Deferred costs
425  (48)
Prepaid expenses and other assets
(2,505) (262)
Operating lease right-of-use assets and liabilities (591) (739)
Accounts payable and other liabilities
(3,793) 3,903 
Accrued liabilities
504  (109)
Accrued payroll and other employee benefits
(8,174) (13,246)
Deferred revenue
11,333  22,552 
Net cash used in operating activities (6,143) (11,014)
Investing activities:
Purchases of property and equipment
(1,546) (461)
Net cash used in investing activities (1,546) (461)
Financing activities:
Proceeds from employee stock plans 1,137  1,443 
Tax withholding related to net share settlement of stock awards
(4,710) (212)
Net cash (used in) provided by financing activities (3,573) 1,231 
Effect of foreign currency rates on cash 11  84 
Net change in cash and cash equivalents (11,251) (10,160)
Cash and cash equivalents:
Beginning of period
203,627  227,553 
End of period
$ 192,376  $ 217,393 
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PROS Holdings, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
(Unaudited)
We use these non-GAAP financial measures to assist in the management of the Company because we believe that this information provides a more consistent and complete understanding of the underlying results and trends of the ongoing business due to the uniqueness of these charges.
See breakdown of the reconciling line items on page 10.
Three Months Ended March 31,
Year over Year
2023 2022
% change
GAAP gross profit
$ 43,640  $ 39,131  12  %
Non-GAAP adjustments:
Amortization of acquisition-related intangibles
1,337  1,983 
Severance 749  — 
Share-based compensation
832  825 
Non-GAAP gross profit
$ 46,558  $ 41,939  11  %
Non-GAAP gross margin
63.6  % 63.1  %
GAAP loss from operations
$ (18,796) $ (26,503) (29) %
Non-GAAP adjustments:
Amortization of acquisition-related intangibles
1,806  2,975 
Severance
3,586  1,508 
Share-based compensation
9,904  11,225 
Total Non-GAAP adjustments
15,296  15,708 
Non-GAAP loss from operations
$ (3,500) $ (10,795) (68) %
Non-GAAP loss from operations % of total revenue
(4.8) % (16.2) %
GAAP net loss
$ (19,002) $ (28,640) (34) %
Non-GAAP adjustments:
Total Non-GAAP adjustments affecting loss from operations
15,296  15,708 
Amortization of debt issuance costs
373  373 
Tax impact related to non-GAAP adjustments
797  2,880 
Non-GAAP net loss
$ (2,536) $ (9,679) (74) %
Non-GAAP loss per share
$ (0.06) $ (0.21)
Shares used in computing non-GAAP loss per share
45,926  45,085 
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PROS Holdings, Inc.
Supplemental Schedule of Non-GAAP Financial Measures
Increase (Decrease) in GAAP Amounts Reported
(In thousands)
(Unaudited)
Three Months Ended March 31,
2023 2022
Cost of Subscription Items
  Amortization of acquisition-related intangibles
1,337  1,983 
  Severance 125  — 
  Share-based compensation
125  151 
Total cost of subscription items
$ 1,587  $ 2,134 
Cost of Maintenance Items
  Severance 307  — 
  Share-based compensation
80  91 
Total cost of maintenance items
$ 387  $ 91 
Cost of Services Items
  Severance 317  — 
  Share-based compensation
627  583 
Total cost of services items
$ 944  $ 583 
Sales and Marketing Items
  Amortization of acquisition-related intangibles
469  992 
  Severance
1,595  1,444 
  Share-based compensation
2,928  3,240 
Total sales and marketing items
$ 4,992  $ 5,676 
Research and Development Items
  Severance 1,008  — 
  Share-based compensation
2,350  3,713 
Total research and development items
$ 3,358  $ 3,713 
General and Administrative Items
  Severance
234  64 
  Share-based compensation
3,794  3,447 
Total general and administrative items
$ 4,028  $ 3,511 
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PROS Holdings, Inc.
Supplemental Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands)
(Unaudited)
Three Months Ended March 31,
2023 2022
Adjusted EBITDA
GAAP Loss from Operations
$ (18,796) $ (26,503)
Amortization of acquisition-related intangibles
1,806  2,975 
Severance
3,586  1,508 
Share-based compensation
9,904  11,225 
Depreciation and other amortization
1,195  1,672 
Adjusted EBITDA
$ (2,305) $ (9,123)
Net cash used in operating activities $ (6,143) $ (11,014)
   Severance 3,170  — 
   Purchase of property and equipment
(1,546) (461)
Free Cash Flow
$ (4,519) $ (11,475)
Guidance
Q2 2023 Guidance
Low High
Adjusted EBITDA
  GAAP Loss from Operations
$ (16,900) $ (15,900)
Amortization of acquisition-related intangibles
1,600  1,600 
Share-based compensation
10,900  10,900 
Depreciation and other amortization
1,200  1,200 
Adjusted EBITDA
$ (3,200) $ (2,200)
Full Year 2023 Guidance
Low High
Adjusted EBITDA
  GAAP Loss from Operations
$ (54,300) $ (51,300)
Amortization of acquisition-related intangibles
6,100  6,100 
Severance
3,600  3,600 
Share-based compensation
43,400  43,400 
Depreciation and other amortization
4,700  4,700 
Adjusted EBITDA
$ 3,500  $ 6,500 




11
EX-99.2 3 q12023irdeck.htm EX-99.2 q12023irdeck
PROS Holdings, Inc. First Quarter 2023 Investor Presentation Updated May 2, 2023 ir@pros.com


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 2 Disclaimer / Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about our financial outlook; expectations; ability to achieve future growth and profitability; management's confidence and optimism; positioning; customer successes; demand for our software solutions; pipeline; business expansion; revenue; subscription revenue; ARR; non-GAAP earnings (loss) per share; adjusted EBITDA; free cash flow; shares outstanding and effective tax rate. The forward-looking statements contained in this presentation are based upon our historical performance and our current plans, estimates and expectations and are not a representation that such plans, estimates or expectations will be achieved. Factors that could cause actual results to differ materially from those described herein include, among others, risks related to: (a) the macroeconomic environment, (b) the effects of inflation, (c) the impact of the COVID-19 pandemic, (d) cyberattacks, data breaches and breaches of security measures within our products, systems and infrastructure or products, systems and infrastructure of third parties upon whom we rely, (e) increasing business from customers and maintaining subscription renewal rates, (f) managing our growth and profit objectives effectively, (g) disruptions from our third party data center, software, data, and other unrelated service providers, (h) implementing our solutions, (i) cloud operations, (j) intellectual property and third-party software, (k) acquiring and integrating businesses and/or technologies, (l) catastrophic events, (m) operating globally, including economic and commercial disruptions, (n) potential downturns in sales and lengthy sales cycles, (o) software innovation, (p) competition, (q) market acceptance of our software innovations, (r) maintaining our corporate culture, (s) personnel risks including loss of any key employees and competition for talent, (t) expanding and training our direct and indirect sales force, (u) evolving data privacy, cyber security and data localization laws, (v) our debt repayment obligations, (w) the timing of revenue recognition and cash flow from operations, (x) migrating customers to our latest cloud solutions, and (y) returning to profitability. Additional information relating to the risks and uncertainties affecting our business is contained in our filings with the SEC. These forward-looking statements represent our expectations as of the date hereof. Subsequent events may cause these expectations to change, and PROS disclaims any obligations to update or alter these forward-looking statements in the future, whether as a result of new information, future events or otherwise. This presentation includes certain supplemental non-GAAP financial measures, that we believe are useful to investors as tools for assessing the comparability between periods as well as company by company. Our computation of these measures may not be comparable to other similarly titled measures computed by other companies. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, our financial information and results prepared in accordance with U.S. GAAP included in our periodic filings made with the SEC. Further information relevant to the interpretation of non-GAAP financial measures, and reconciliations of these non-GAAP financial measures to the most comparable GAAP measures, may be found in the Appendix to this presentation.


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 3 To optimize every shopping and selling experience. Our vision…


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 4 PROS at a Glance $282mm+ Total Revenue TTM Q1 2023 84% Recurring Revenue as a % of Q1 2023 Total Revenue $30B+ Underpenetrated, Addressable Market Subscription Revenue Growth YoY Q1 2023 60+ Countries with Customers 15% 93%+ Customer Gross Revenue Retention Rate TTM Q1 2023 Avg. Revenue Uplift Customers Generate Using PROS 8% 2.5T+ Transactions Processed TTM Q1 2023


 
Business Overview


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 6 We believe the combination of artificial intelligence and omnichannel, digital selling technology is critical for businesses to meet buyers’ expectations and thrive in today’s everchanging markets.


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 7 Customer Buying Experience, The New Battlefield 89% of businesses expect to compete mainly on customer experience, up from just 36% in 2010 Source: Gartner


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 8 Customer Buying Experience, The New Battlefield • Speed • Transparency • Personalization • Consistency


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 9 THE CUSTOMER ECOMMERCECRM API+ Robust Product Catalogs Product and Service Configuration Performance Quoting Streamlined Sales Agreements Sales Opportunity Insights Omnichannel Price Management Customer-Specific Price Optimization Real-Time Price Delivery Common Data Model Connected Selling Workflows Shared UX Design System Artificial Intelligence ACTIONABLE INSIGHTS ACTIONABLE INSIGHTS Learn more about The PROS Platform. Marketplace


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 10 THE PASSENGER MobileAirline.com NDC API Revenue Management Dynamic Pricing Ancillary Pricing & Merchandising Bundling & Segmentation Group, Cargo & Corporate Sales Pricing & Shopping Digital Retailing Booking, Ticketing & Servicing Traditional Channels For Travel Common Data Model Connected Selling Workflows Shared UX Design System Artificial Intelligence Digital Offer Marketing ACTIONABLE INSIGHTS ACTIONABLE INSIGHTS Learn more about The PROS Platform for Travel. Marketplace


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 11 The Industry-Leading PROS Platform ✓The only single, fully connected platform in our space • B2B: PROS is the only vendor to be ranked as a Leader by industry analysts in the Price Optimization & Management and Configure-Price- Quote categories. • Travel: PROS is uniquely able to deliver an end-to-end solution that enables airlines as retailers to optimize every shopping and selling experience an airline owns. ✓A high-performance price delivery architecture PROS technology and architecture is featured as a use case of the scale cube in The Art of Scalability, showcasing extreme performance, reliability, and scalability of a distributed real-time platform. ✓Experienced, proven AI at scale Our SaaS native solutions process over 2.5 trillion transactions annually to generate AI-based outcomes for our customers.


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 12 Platform Strategy Provides Numerous Vectors for Growth LAND EXPAND EXTEND Highly differentiated, modularized capabilities with proven ROI and rapid time-to-value drive customer acquisition. Many expansion paths; customers can adopt new modules or capabilities, add new divisions or geographies, or expand in usage volume. Extensible platform empowers PROS partner ecosystem and customers to bring new digital selling innovations to market.


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 13 PROS is a Proven Leader in AI and Machine Learning AI and Machine Learning Solutions International Business Award 2022 Best AI-based Solution for Sales AI Breakthrough Awards 2022 Silver Globee for Business Intelligence Innovation 14th Annual Golden Bridge Business and Innovation Awards 2022 Artificial Intelligence Excellence Award for Automated Reasoning Artificial Intelligence Excellence Awards 2022 Learn more about PROS AI Neural Networks Deep Learning Reinforcement Learning Pricing Optimization Demand Forecasting Explainable AI Extensible AI


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 14 PROS Delivers Significant ROI Learn more about PROS ROI study. +8% +200 bp +67% Revenue Uplift Margin Improvement Efficiency Gain A study of 131 customers’ self-reported results showed, on average, …from the use of PROS solutions.


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 15 Leading Companies Across Industries Choose PROS to Power Commerce Travel Technology Medical Devices & Healthcare Chemicals & Energy Food & Consumables Rental Car, Services & T&L Automotive & Industrial


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 16 Hear What PROS Customers Have to Say This is the first time in our company’s recorded history that we’ve had inflationary pressures and actually been able to increase our margins – and that’s because of PROS.” VP of Pricing Fortune 500 Distributor Our industry certainly has been faced with rising material costs, transportation costs, constraints of supply, throw in a global pandemic, why don't you. The need for technology that's dynamic and flexible, it's critical for businesses in today's day and age. And having PROS be part of our technology ecosystem. That solution has allowed us to continue to be flexible. Senior Director, Pricing Solutions WESCO Anixter In the emerging digital selling landscape, customers are looking for frictionless buying experiences, with immediate responses about pricing and delivery. PROS has proved to be an excellent partner, committed to our success. Jean-Phillippe Bitouzet Saint Gobain Director, Supply Chain & Business Model See all our customer case studies and testimonials on pros.com. Our revenue management team using our new revenue management system did a fantastic job of improving yield for these markets. Well, it's only been six months since we cut over to our new RM system, the team is adapting well, the technology is clearly superior, and we have more that we can do in this space going forward. Brent Overbeek Hawaiian Airlines Chief Revenue Officer Q3 2022 Earnings Call


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 17 PROS TAM is Massive, Global and Growing $30B+ Underpenetrated, Addressable Market(1) Strategic Industries and Geographies +$9B Emerging Industries and Geographies$21B $2.4B Automotive & Industrial $1.6B Food & Consumables $1.3B Healthcare $1.2B Travel $1.0B B2B Services $800mm Technology $700mm Chemicals & Energy (1) TAM represents our estimated global total revenue and market opportunity but does not represent the actual market opportunity that we may target or ultimately service or otherwise derive revenue from. Our estimate of TAM may be revised in the future depending on a variety of factors, including competitive dynamics, our sales efforts, customer needs, industry shifts and other economic factors.


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 18 Go-To-Market Strategy to Drive Market Penetration Direct Sales Model Partner Ecosystem Quota-Carrying Personnel Target Industry Alignment Americas | EMEA | APAC Technology Partners System Integrators


 
Financial Overview


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 20 Subscription Revenue Growth Trajectory ($mm, % YoY Growth) • 25% 5-Year CAGR (2017 through 2022) • Continued growth through the COVID-19 pandemic 1) 2023 dollar value and growth rate based on the mid-point of the Subscription Revenue 2023 Guidance. 2023 expectations are forward-looking statements. Given the risks, uncertainties and assumptions related to PROS’ business and operations, PROS’ actual future results may differ materially from these expectations. Investors should review the Company’s cautionary statements and risk factors referred to in this presentation. 66.1 98.7 145.3 170.5 178.0 204.0 232.7 2017 2018 2019 2020 2021 2022 2023E 49% 17% 47% 4% 15% 1 14%


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 21 Driving Consistent Margin1 Expansion 1) For definitions of non-GAAP measures or reconciliation of non-GAAP to GAAP measures, please refer to the appendix of this presentation. 2) The sequential decline in Non-GAAP Gross Margin was driven by lower services margin than the prior quarter. Services margins can fluctuate quarterly due to seasonality but are expected to be slightly positive on an annualized basis for 2023. 710 basis point improvement in 8 quarters 370+ basis point improvement in 8 quarters 71% 72% 75% 76% 76% 77% 77% 78% 60% 61% 63% 63% 64% 64% 65% 64% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 Q4 '22 Q1 '23 Non-GAAP Subscription Gross Margin Non-GAAP Gross Margin 2


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 22 First Quarter 2023 Earnings Recap $mm (Except Per Share) Q1 2023 Q1 2022 Delta TTM 3/31/2023 TTM 3/31/2022 Delta Total Revenue $73.2 $66.5 10% $282.8 $256.5 10% Subscription Revenue $56.0 $48.8 15% $211.2 $184.1 15% Adjusted EBITDA $(2.3) $(9.1) $6.8 $(8.1) $(24.6) $16.5 Free Cash Flow $(4.5) $(11.5) $7.0 $(14.8) $(27.1) $12.3 Non-GAAP (Loss) Earnings Per Share $(0.06) $(0.21) $0.15 $(0.24) $(0.64) $0.40


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 23 Guidance Summary $mm (Except Per Share) Q2 2023 Guidance v. Q2 2022 at Mid-Point Full Year 2023 Guidance (5/2/2023) v. Prior Year at Mid-Point Prior Full Year 2023 Range (2/9/2023) Total Revenue $72.2 to $73.2 6% $295.0 to $297.0 7% $293.0 to $296.0 Subscription Revenue $56.0 to $56.5 12% $231.7 to $233.7 14% $230.7 to $232.7 Subscription ARR n/a n/a $251.0 to $254.0 11% $250.0 to $253.0 Non-GAAP Loss Per Share $(0.08) to $(0.05) $0.08 n/a n/a n/a Adjusted EBITDA $(3.2) to $(2.2) $3.3 $3.5 to $6.5 $19.9 $3.0 to $6.0 Free Cash Flow n/a n/a $2.5 to $6.5 $26.2 $2.0 to $6.0 Notes: • The 2023 Guidance shown here are forward-looking statements. Given the risks, uncertainties and assumptions related to PROS’ business and operations, PROS’ actual future results may differ materially from these expectations. Investors should review the Company’s cautionary statements and risk factors referred to in this presentation. • Based on an estimated 46.1 million basic weighted average shares outstanding for the second quarter of 2023 and a 22% non-GAAP estimated tax rate for the second quarter and full year 2023. • Please see appendix for a reconciliation of these non-GAAP metrics to GAAP metrics.


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 24 Supplemental Business Metrics Revenue Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 Q4 '22 Q1 '23 Subscription $ 44,224 $ 44,119 $ 47,015 $ 48,765 $ 50,386 $ 51,763 $ 53,127 $ 55,969 Maintenance and Support $ 8,570 $ 8,477 $ 8,390 $ 7,855 $ 7,249 $ 7,071 $ 6,417 $ 5,712 Recurring Revenue $ 52,794 $ 52,596 $ 55,405 $ 56,620 $ 57,635 $ 58,834 $ 59,544 $ 61,681 Services $ 9,607 $ 10,075 $ 9,568 $ 9,872 $ 10,727 $ 11,514 $ 11,391 $ 11,501 Total Revenue $ 62,401 $ 62,671 $ 64,973 $ 66,492 $ 68,362 $ 70,348 $ 70,935 $ 73,182 Recurring Revenue % 85% 84% 85% 85% 84% 84% 84% 84% Revenue by Geography Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 Q4 '22 Q1 '23 United States $ 21,875 $ 23,275 $ 22,866 $ 23,194 $ 23,908 $ 24,952 $ 26,307 $ 26,232 Europe $ 18,562 $ 18,571 $ 20,659 $ 20,823 $ 20,865 $ 20,816 $ 20,981 $ 22,949 Rest of World $ 21,964 $ 20,825 $ 21,448 $ 22,475 $ 23,589 $ 24,580 $ 23,647 $ 24,001 $ in 000s


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 25 Supplemental Business Metrics Financial & Operating Metrics Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 Q4 '22 Q1 '23 Non-GAAP Gross Margin1 60% 61% 63% 63% 64% 64% 65% 64% Non-GAAP Subscription Gross Margin1 71% 72% 75% 76% 76% 77% 77% 78% Non-GAAP Recurring Revenue Gross Margin1 71% 72% 75% 76% 76% 76% 77% 77% Adjusted EBITDA1 $ (4,676) $ (4,438) $ (6,356) $ (9,123) $ (5,970) $ (2,160) $ 2,382 $ (2,305) Cash and Cash Equivalents $ 318,326 $ 308,642 $ 227,553 $ 217,393 $ 215,178 $ 206,824 $ 203,627 $ 192,376 Recurring Deferred Revenue $ 97,510 $ 95,774 $ 96,133 $ 116,948 $ 103,510 $ 105,650 $ 105,468 $ 117,837 Total Deferred Revenue $ 109,131 $ 105,764 $ 106,266 $ 128,802 $ 115,485 $ 116,191 $ 116,957 $ 128,353 TTM Recurring Calculated Billings1 $ 203,468 $ 200,748 $ 213,699 $ 224,858 $ 228,255 $ 238,370 $ 241,968 $ 238,584 Remaining Performance Obligations2 $ 390,500 $ 373,000 $ 360,500 $ 433,100 $ 434,900 $ 442,300 $ 441,500 $ 430,600 Remaining Performance Obligations - Current $ 190,300 $ 180,500 $ 184,600 $ 201,100 $ 197,400 $ 199,300 $ 206,300 $ 210,000 Free Cash Flow1 $ (5,726) $ (8,518) $ (1,334) $ (11,475) $ (2,239) $ (9,067) $ 1,072 $ (4,519) Total Headcount (including contractors) 1,409 1,401 1,545 1,541 1,597 1,626 1,528 1,436 1) For definitions of non-GAAP measures or reconciliation of non-GAAP to GAAP measures, please refer to the appendix of this presentation. 2) 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. $ in 000s


 
Our Values


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 27 Our Mission: To Help People and Companies Outperform We are INNOVATORS Thinking creatively to find new paths to success for our people, our customers, and our business. We CARE Putting people first - our customers, employees, partners, and community - it’s how our company was started, and how we’ll always run it. Looking for every opportunity to create a better PROS and a better experience for our customers, and we hold ourselves accountable. We are OWNERS Learn more about our incredible culture


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 28 Governance, Security, & Environmental Sustainability Governance • LEED Silver certified global HQ • Sustainable data centers worldwide through our partnership with Microsoft • Recycling program in all offices Security PROS Board of Directors and Executive team are committed to adhering to the highest ethical values and promoting transparency. For more detail and a complete list of governance documents and charters, visit the governance page of our website. For further disclosures, read our ESG report. At PROS, security is the responsibility of everyone. We take data security and privacy seriously. ✓ ISO 27001 Certified ✓ ISO 27018 Certified ✓ SOC1 Type 2 Certified ✓ SOC2 Type 2 Certified ✓ Cloud Security Alliance Compliant ✓ GDPR Compliant For more detail on security and compliance, including detail on all certifications we hold, visit the trust and security page of our website. Environmental Sustainability


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 29 25% 25% 27% 26% 26% 29% 17% 21% 23% 24% 25% 33% 2017 2018 2019 2020 2021 2022 27% 30% 30% 29% 33% 37% 32% 35% 35% 36% 36% 2017 2018 2019 2020 2021 2022 Diversity & Inclusion PROS Employee Resource Groups (ERGs) Our ERGs are formed and led by employees, with company support, and any interested employee may join any group. Organized around common life experiences and backgrounds, they serve to champion our diversity initiatives and facilitate a workplace culture of equity and inclusion. Committed to a Diverse & Inclusive Environment We welcome and celebrate diverse perspectives, cultures and experiences. We are truly a ‘people first’ culture where every person is encouraged to bring their authentic selves to work and feel they belong and are valued. Our diversity in thought and action is what makes PROS a special place. Learn more Overall Representation % of All Employees Globally Management % of All Managers Globally Overall Representation % of All Employees U.S. Management % of All Managers U.S. Women at PROS Underrepresented Minorities in the U.S. 2022 figures based on 1,357 global employees as of 12/31/22 2022 figures based on 845 employees in the U.S. as of 12/31/22 Note: Underrepresented Minorities include AA, Hispanic and Multicultural For further disclosures on D&I at PROS, read our ESG report.


 
Appendix


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 31 Supplemental Information – Explanation of Non-GAAP Measures PROS has provided certain financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP gross profit, non-GAAP gross margin, non-GAAP subscription gross margin, non-GAAP recurring revenue gross margin, adjusted EBITDA and free cash flow. PROS uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating PROS’ ongoing operational performance and cloud transition. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measure. A reconciliation of GAAP to the non-GAAP financial measures has been provided in these tables and in the earnings press release. PROS' use of non-GAAP financial measures may not be consistent with the presentations by similar companies in PROS' industry. Non-GAAP gross profit: Non-GAAP gross profit is defined as GAAP gross profit less amortization of acquisition-related intangibles, severance and share-based compensation costs allocated to cost of subscription, maintenance and support, and services. Non-GAAP gross margin is calculated as the percentage of non-GAAP gross profit divided by total revenue. Non-GAAP subscription gross margin and recurring revenue gross margin are similarly calculated to compare the non-GAAP gross profit of subscription revenue and recurring revenue (subscription, maintenance and support revenue), respectively, to total subscription and recurring revenue, respectively. In calculating the non-GAAP gross profit of subscription revenue, the total costs of subscription are adjusted to reduce such costs by the portion of amortization of acquisition-related intangibles, severance and share-based compensation costs allocated to cost of subscription. In calculating the non-GAAP gross profit of recurring revenue, the total costs of subscription, maintenance and support are adjusted to reduce such costs by the portion of amortization of acquisition-related intangibles, severance and share-based compensation costs allocated to cost of subscription and cost of maintenance and support. Adjusted EBITDA: Adjusted EBITDA is defined as GAAP net income (loss) before interest expense, provision for income taxes, depreciation and amortization, as adjusted to eliminate the effect of stock-based compensation cost, severance, acquisition-related expenses, amortization of acquisition-related intangibles, and depreciation and amortization. Adjusted EBITDA should not be considered as an alternative to net loss as an indicator of our operating performance. Free Cash Flow: Free cash flow is a non-GAAP financial measure which is defined as net cash provided by (used in) operating activities, excluding severance payments, less capital expenditures (excluding expenditures for PROS new headquarters), purchases of other (non-acquisition-related) intangible assets and capitalized internal-use software development costs. Calculated Billings: Calculated billings is defined as total subscription, maintenance and support revenue plus the change in recurring deferred revenue in a given period.


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 32 Supplemental Reconciliation of GAAP to Non-GAAP Financial Measures – Guidance (In thousands, Unaudited) Low High Adjusted EBITDA GAAP Loss from Operations $ (16,900) $ (15,900) Amortization of acquisition-related intangibles 1,600 1,600 Share-based compensation 10,900 10,900 Depreciation and other amortization 1,200 1,200 Adjusted EBITDA $ (3,200) $ (2,200) Q2 2023 Guidance Low High Adjusted EBITDA GAAP Loss from Operations $ (54,300) $ (51,300) Amortization of acquisition-related intangibles 6,100 6,100 Severance 3,600 3,600 Share-based compensation 43,400 43,400 Depreciation and other amortization 4,700 4,700 Adjusted EBITDA $ 3,500 $ 6,500 Full Year 2023 Guidance


 
©2023 PROS, Inc. All rights reserved. Confidential and Proprietary page 33 Supplemental Information - GAAP to Non-GAAP Reconciliations (In thousands, Unaudited) Gross Profit Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 GAAP Gross Profit $ 35,997 $ 36,619 $ 38,996 $ 39,131 $ 40,721 $ 42,738 $ 43,467 $ 43,640 Amortization of acquisition-related intangibles 391 384 752 1,983 1,685 1,555 1,441 1,337 Severance - - - - - - 245 749 Share-based compensation 976 951 926 825 1,006 1,050 1,017 832 Non-GAAP Gross Profit $ 37,364 $ 37,954 $ 40,674 $ 41,939 $ 43,412 $ 45,343 $ 46,170 $ 46,558 Non-GAAP Gross Margin 60% 61% 63% 63% 64% 64% 65% 64% Subscription Gross Profit Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 GAAP Subscription Gross Profit $ 30,635 $ 30,997 $ 34,109 $ 34,986 $ 36,640 $ 37,934 $ 39,442 $ 41,876 Amortization of acquisition-related intangibles 391 384 752 1,983 1,685 1,555 1,441 1,337 Severance - - - - - - 8 125 Share-based compensation 178 182 207 151 185 174 148 125 Non-GAAP Subscription Gross Profit $ 31,204 $ 31,563 $ 35,068 $ 37,120 $ 38,510 $ 39,663 $ 41,039 $ 43,463 Non-GAAP Subscription Gross Margin 71% 72% 75% 76% 76% 77% 77% 78% Recurring Revenue Gross Profit Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 GAAP Recurring Revenue Gross Profit $ 37,048 $ 37,430 $ 40,446 $ 40,674 $ 41,901 $ 43,053 $ 43,962 $ 45,306 Amortization of acquisition-related intangibles 391 384 752 1,983 1,685 1,555 1,441 1,337 Severance - - - - - - 8 432 Share-based compensation 305 313 343 242 283 283 266 205 Non-GAAP Recurring Revenue Gross Profit $ 37,744 $ 38,127 $ 41,541 $ 42,899 $ 43,869 $ 44,891 $ 45,677 $ 47,280 Non-GAAP Recurring Revenue Gross Margin 71% 72% 75% 76% 76% 76% 77% 77% Adjusted EBITDA Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 GAAP Loss From Operations $ (16,306) $ (15,808) $ (21,639) $ (26,503) $ (20,537) $ (16,181) $ (14,873) $ (18,796) Acquisition-related expenses - - 2,386 - - - - - Amortization of acquisition-related intangibles 885 845 1,420 2,975 2,597 2,221 1,973 1,806 Severance - - - 1,508 - - 4,034 3,586 Share-based compensation 8,606 8,634 9,665 11,225 10,766 10,626 10,097 9,904 Depreciation and other amortization 2,139 1,891 1,812 1,672 1,204 1,174 1,151 1,195 Adjusted EBITDA $ (4,676) $ (4,438) $ (6,356) $ (9,123) $ (5,970) $ (2,160) $ 2,382 $ (2,305) Free Cash Flow Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Cash Flow From Operations $ (4,985) $ (8,171) $ (970) $ (11,014) $ (1,931) $ (8,991) $ (1,970) $ (6,413) Severance - - - - - - 3,058 3,170 Purchase of property and equipment (excluding new headquarters) (741) (347) (364) (461) (308) (76) (16) (1,546) Free Cash Flow $ (5,726) $ (8,518) $ (1,334) $ (11,475) $ (2,239) $ (9,067) $ 1,072 $ (4,519)


 
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