pro-20230630

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 June 30, 2023


☐			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

(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 46,202,671 as of July 19, 2023.

Table of Contents

PROS Holdings, Inc.

Form 10-Q

For the Quarterly Period Ended June 30, 2023

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	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
Item 4.	Controls and Procedures	23

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosure	25
Item 5.	Other Information	25
Item 6.	Exhibits	25
Signatures		26

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.

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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)


	June 30, 2023		December 31, 2022
Assets:
Current assets:
Cash and cash equivalents	$	184,567	$	203,627

Trade and other receivables, net of allowance of $679 and $609, respectively	54,163		48,178
Deferred costs, current	6,221		6,032
Prepaid and other current assets	11,413		9,441

Total current assets	256,364		267,278

Property and equipment, net	24,659		25,012
Operating lease right-of-use assets	14,050		17,474
Deferred costs, noncurrent	8,234		8,764
Intangibles, net	14,425		17,851
Goodwill	107,724		107,561

Other assets, noncurrent	8,508		9,012
Total assets	$	433,964	$	452,952
Liabilities and Stockholders' (Deficit) Equity:
Current liabilities:
Accounts payable and other liabilities	$	6,874	$	7,964
Accrued liabilities	13,784		12,854
Accrued payroll and other employee benefits	20,109		23,797
Operating lease liabilities, current	4,863		7,662
Deferred revenue, current	116,365		108,659
Current portion of convertible debt, net	143,003		—
Total current liabilities	304,998		160,936
Deferred revenue, noncurrent	5,218		8,298
Convertible debt, net	147,522		289,779
Operating lease liabilities, noncurrent	26,456		28,184
Other liabilities, noncurrent	1,224		1,228
Total liabilities	485,418		488,425
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; 50,821,459 and 50,318,726 shares issued, respectively; 46,140,736 and 45,638,003 shares outstanding, respectively	51		50
Additional paid-in capital	606,599		590,475
Treasury stock, 4,680,723 common shares, at cost	(29,847)		(29,847)
Accumulated deficit	(623,189)		(590,898)
Accumulated other comprehensive loss	(5,068)		(5,253)

Total stockholders' (deficit) equity	(51,454)		(35,473)
Total liabilities and stockholders' (deficit) equity	$	433,964	$	452,952

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

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PROS Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands, except per share data)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue:
Subscription	$	57,304	$	50,386	$	113,273	$	99,151
Maintenance and support	5,093		7,249		10,805		15,104
Total subscription, maintenance and support	62,397		57,635		124,078		114,255

Services	13,395		10,727		24,896		20,599
Total revenue	75,792		68,362		148,974		134,854
Cost of revenue:
Subscription	14,059		13,746		28,152		27,525
Maintenance and support	1,876		1,988		4,158		4,155
Total cost of subscription, maintenance and support	15,935		15,734		32,310		31,680

Services	12,636		11,907		25,803		23,322
Total cost of revenue	28,571		27,641		58,113		55,002
Gross profit	47,221		40,721		90,861		79,852
Operating expenses:
Selling and marketing	24,880		24,020		50,890		49,307
Research and development	21,847		23,401		44,138		47,868
General and administrative	13,849		13,837		27,984		28,166

Impairment of fixed assets	—		—		—		1,551
Loss from operations	(13,355)		(20,537)		(32,151)		(47,040)
Convertible debt interest and amortization	(1,576)		(1,576)		(3,152)		(3,152)
Other income (expense), net	1,791		(2)		3,242		(420)
Loss before income tax provision	(13,140)		(22,115)		(32,061)		(50,612)
Income tax provision	149		291		230		434
Net loss	$	(13,289)	$	(22,406)	$	(32,291)	$	(51,046)



Net loss per share:
Basic and diluted	$	(0.29)	$	(0.50)	$	(0.70)	$	(1.13)

Weighted average number of shares:

Basic and diluted	46,101		45,222		46,013		45,154
Other comprehensive loss, net of tax:
Foreign currency translation adjustment	$	9	$	(628)	$	185	$	(850)

Other comprehensive income (loss), net of tax	9		(628)		185		(850)
Comprehensive loss	$	(13,280)	$	(23,034)	$	(32,106)	$	(51,896)

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

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PROS Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2023		2022
Operating activities:
Net loss	$	(32,291)	$	(51,046)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,752		8,448
Amortization of debt issuance costs	746		746
Share-based compensation	20,656		21,991



Provision for credit losses	88		(300)
Loss on disposal of assets	35		—
Impairment of fixed assets	—		1,551


Changes in operating assets and liabilities:
Accounts and unbilled receivables	(6,070)		6,441
Deferred costs	341		132
Prepaid expenses and other assets	(1,449)		(1,395)
Operating lease right-of-use assets and liabilities	(1,237)		(1,117)
Accounts payable and other liabilities	(1,252)		1,629
Accrued liabilities	1,077		(68)
Accrued payroll and other employee benefits	(3,688)		(9,144)
Deferred revenue	4,607		9,187
Net cash used in operating activities	(12,685)		(12,945)
Investing activities:
Purchases of property and equipment	(1,823)		(769)





Investment in equity securities	—		(169)



Net cash used in investing activities	(1,823)		(938)
Financing activities:


Proceeds from employee stock plans	1,137		1,443
Tax withholding related to net share settlement of stock awards	(5,668)		(212)











Net cash (used in) provided by financing activities	(4,531)		1,231
Effect of foreign currency rates on cash	(21)		277
Net change in cash and cash equivalents	(19,060)		(12,375)
Cash and cash equivalents:
Beginning of period	203,627		227,553
End of period	$	184,567	$	215,178

Supplemental disclosure of cash flow information:
Noncash investing activities:
Purchase of property and equipment accrued but not paid	$	194	$	140

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

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PROS Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

(In thousands, except share data)

(Unaudited)


	Three Months Ended June 30, 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 March 31, 2023	46,031,241	$	51	$	596,805	4,680,723	$	(29,847)	$	(609,900)	$	(5,077)	$	(47,968)

Stock awards net settlement	109,495	—		(958)		—	—		—		—		(958)








Noncash share-based compensation	—	—		10,752		—	—		—		—		10,752

Other comprehensive loss	—	—		—		—	—		—		9		9
Net loss	—	—		—		—	—		(13,289)		—		(13,289)
Balance at June 30, 2023	46,140,736	$	51	$	606,599	4,680,723	$	(29,847)	$	(623,189)	$	(5,068)	$	(51,454)


	Three Months Ended June 30, 2022
	Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Deficit		Accumulated other comprehensive loss		Total Stockholders’ (Deficit) Equity
	Shares	Amount				Shares	Amount
Balance at March 31, 2022	45,179,184	$	50	$	559,148	4,680,723	$	(29,847)	$	(537,292)	$	(4,881)	$	(12,822)
Stock awards net settlement	68,095	—		—		—	—		—		—		—









Noncash share-based compensation	—	—		10,766		—	—		—		—		10,766
Other comprehensive loss	—	—		—		—	—		—		(628)		(628)
Net loss	—	—		—		—	—		(22,406)		—		(22,406)
Balance at June 30, 2022	45,247,279	$	50	$	569,914	4,680,723	$	(29,847)	$	(559,698)	$	(5,509)	$	(25,090)

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

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PROS Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity (Continued)

(In thousands, except share data)

(Unaudited)


	Six Months Ended June 30, 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	447,584	1		(5,669)		—	—		—		—		(5,668)
Proceeds from employee stock plans	55,149	—		1,137		—	—		—		—		1,137







Noncash share-based compensation	—	—		20,656		—	—		—		—		20,656

Other comprehensive loss	—	—		—		—	—		—		185		185
Net loss	—	—		—		—	—		(32,291)		—		(32,291)
Balance at June 30, 2023	46,140,736	$	51	$	606,599	4,680,723

SEC Form 10-Q filed by PROS Holdings Inc.