PROS HOLDINGS, INC. REPORTS FOURTH QUARTER AND FULL YEAR 2016 FINANCIAL RESULTS

February 07, 2017

  • Subscription revenue up 37% year-over-year for the fourth quarter, and up 31% for the full year 2016.
  • ARR of $122.2 million as of December 31, 2016, up 24% year-over-year.
  • ACV bookings up 45% year-over-year for the fourth quarter, and up 38% for the full year 2016.

HOUSTON – February 7, 2017 — PROS Holdings, Inc. (NYSE: PRO), a revenue and profit realization company, today announced financial results for the fourth quarter and full year ended December 31, 2016.

“2016 was a breakthrough year for PROS as we transformed to a cloud company and executed on our mission of helping companies outperform,” stated CEO Andres Reiner.  “We are pleased with our strong fourth quarter finish and full year performance, exceeding guidance on all of our key growth metrics. We enter 2017 confident that we have the right team, the right strategy, and the right solutions to capitalize on a large market opportunity as more companies turn to data science-driven solutions to power modern commerce.”

CFO Stefan Schulz said, “We made great progress in 2016 toward our long-term profitability goals and passed several key milestones related to our cloud transition. We outperformed on expenses and free cash flow while delivering strong revenue and bookings, which underscores our improvements in execution and productivity and the great value we deliver to customers. We are a stronger company coming into 2017 and well-positioned to continue our momentum.”

Fourth Quarter and Full Year 2016 Financial Highlights

Key financial results for the fourth quarter and full year 2016 are shown below. Throughout this press release, all dollar figures are in millions, except net loss per share.  Unless otherwise noted, all results are on a reported basis and are compared to the prior year period.

  GAAP   Non-GAAP
  Q4 2016   Q4 2015   % Change   Q4 2016   Q4 2015   % Change
Revenue and Bookings:                      
  Revenue $ 39.9     $ 42.0     (5 )%   $ 39.9     $ 42.7     (7 )%
  Subscription Revenue 11.0     8.0     37 %   11.0     8.0     37 %
  Annual Recurring Revenue (“ARR”) n/a   n/a   n/a   122.2     98.2     24 %
  Annual Contract Value (“ACV”) bookings n/a   n/a   n/a   9.3     6.4     45 %
Profitability:                      
  Operating Loss (16.3 )   (15.0 )   nm   (9.6 )   (3.5 )   nm
  Net Loss (18.5 )   (17.7 )   nm   (6.5 )   (2.8 )   nm
  Net Loss Per Share (0.61 )   (0.60 )   nm   (0.21 )   (0.09 )   nm
  Adjusted EBITDA n/a   n/a   n/a   (8.6 )   (2.0 )   nm
Cash:                      
  Net cash (used in) provided by operating activities (7.2 )   8.7     nm   (7.2 )   8.7     nm
  Free Cash Flow n/a   n/a   n/a   $ (10.0 )   $ 6.8     nm

 

  GAAP   Non-GAAP
  FY 2016   FY 2015   % Change   FY 2016   FY 2015   % Change
Revenue and Bookings:                      
  Revenue $ 153.3     $ 168.2     (9 )%   $ 153.3     $ 172.0     (11 )%
  Subscription Revenue 38.2     29.0     32 %   38.2     29.2     31 %
  Annual Recurring Revenue (“ARR”) n/a   n/a   n/a   122.2     98.2     24 %
  Annual Contract Value (“ACV”) bookings n/a   n/a   n/a   29.7     21.5     38 %
Profitability:                      
  Operating Loss (65.4 )   (55.5 )   nm   (40.9 )   (17.4 )   nm
  Net Loss (75.2 )   (65.8 )   nm   (28.0 )   (13.4 )   nm
  Net Loss Per Share (2.47 )   (2.23 )   nm   (0.92 )   (0.45 )   nm
  Adjusted EBITDA n/a   n/a   n/a   (35.4 )   (12.1 )   nm
Cash:                      
  Net cash (used in) provided by operating activities (14.3 )   15.5     nm   (14.3 )   15.5     nm
  Free Cash Flow n/a   n/a   n/a   $ (24.3 )   $ 8.5     nm

 

The attached tables provide a summary of PROS results for the period, including a reconciliation of GAAP to non-GAAP revenue, gross profit, income (loss) from operations, and net income (loss), as well as earnings (loss) per share.

2016 and Recent Business Highlights

  • Surpassed key milestones in cloud transformation in 2016: 100% of net new companies added purchased cloud solutions; expanded global data center footprint from four to eleven; doubled the number of product releases.
  • Released new innovations that enable modern commerce, such as data science-driven cross-sell recommendations, opportunity detection, offer personalization, and cloud analytics.
  • Completed first Microsoft Azure deployment of PROS real-time dynamic pricing solution for airlines, leveraging Microsoft cloud environments to process an average of 12 million transactions per day at less than 100 milliseconds each, with a better than 99.99% uptime.
  • Showcased PROS progressive culture of caring, innovation, and ownership at the Grace Hopper Conference for Women in Computing with gold level sponsorship and three members of BLAZE, the PROS women’s network, speaking on data science, technical writing and career development.

Financial Outlook

PROS anticipates the following for the first quarter and full year 2017, based on an estimated 31.0 and 31.2 million basic weighted average shares outstanding, respectively, and a 36% non-GAAP estimated tax rate:

  Q1 2017 Guidance   v. Q1 2016 at Mid-Point   Full Year 2017 Guidance   v. Prior Year at Mid-Point
Total Revenue $38 to $39   2%   $162.5 to $165.5   7%
Subscription Revenue $11.5 to $11.8   42%   $54 to $55   43%
ARR n/a   n/a   $147 to $149   21%
Non-GAAP Loss Per Share $(0.30) to $(0.29)   n/a   n/a   n/a
Adjusted EBITDA $(13) to $(12)   n/a   $(35) to $(34)   n/a
Free Cash Flow n/a   n/a   $(21) to $(19)   n/a

Conference Call

In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on Tuesday, February 7, 2017, at 4:45 p.m. ET to discuss the Company’s financial results and business outlook. To access this call, dial 1-877-407-9039 (toll free) or 1-201-689-8470. The live webcast of the conference call can be accessed under the “Investor Relations” section of the Company’s website at www.pros.com.

Following the call, an archived webcast will be available in the “Investor Relations” section of the Company’s website at www.pros.com. A telephone replay will be available until Tuesday, February 14, 2017, at 1-877-870-5176 (toll free) or 1-858-384-5517 using the pass code 13651356. An archived webcast of this conference call will also be available in the “Investor Relations” section of the Company’s website at www.pros.com.

About PROS

PROS Holdings, Inc. (NYSE: PRO) is a revenue and profit realization company that helps customers realize their potential through the blend of simplicity and data science. PROS offers solutions to help accelerate sales, formulate winning pricing strategies and align product, demand and availability. PROS revenue and profit realization solutions are designed to allow customers to experience meaningful revenue growth, sustained profitability and modernized business processes. To learn more, visit www.pros.com.

Forward-looking Statements

This press release contains forward-looking statements, including statements about our future financial performance; positioning; management’s confidence and optimism; customer successes; demand for enterprise revenue and profit realization software solutions; business expansion; business predictability; ARR; revenue; adjusted EBITDA; free cash flow; shares outstanding and effective tax rate. The forward-looking statements contained in this press release are based upon our historical performance and our current plans, estimates and expectations and are not a representation that such plans, estimates or expectations will be achieved. Factors that could cause actual results to differ materially from those described herein include risks related to: (a) our ability to execute on our cloud-first strategy, (b) reduced revenue and cash flow resulting from our transition to a cloud-first strategy, (c) threats to the security of our or our customer’s data, (d) potential business or service disruptions from our third party data centers, cloud platform providers or other unrelated service providers, (e) market acceptance of our new products and product enhancements, (f) the risk that the markets for our software does not grow as anticipated, (g) the length of our sales cycles, (h) the risk that we will not be able to maintain historical maintenance, support and subscription renewal rates, (i) competition from vendors of sales, pricing, revenue management and configure-price-quote solutions as well as from companies internally developing their own solutions, (j) potential unauthorized or improper actions of our personnel, (k) the risk that acquisitions we have and may enter into in the future may be difficult to integrate, fail to achieve our objectives, disrupt our business, dilute stockholder value or divert management attention, (l) any downturn in sales to our target markets, (m) potential delays or other challenges related to the implementation of our solutions, (n) the difficulties of making accurate estimates necessary to complete a project and recognize revenue, (o) personnel risks associated with growing a business generally, (p) the impact that a slowdown in the world or any particular economy has on our business sales cycles, prospects’ and customers’ spending decisions, timing of implementation decisions, payment and renewal decision, (q) our debt repayment obligations, (r) the impact of currency fluctuations on our results of operations, and (s) civil and political unrest in geographic regions in which we operate. Additional information relating to the uncertainty affecting PROS’ business is contained in our filings with the Securities and Exchange Commission. These forward-looking statements represent PROS’ expectations as of the date of this press release. Subsequent events may cause these expectations to change, and PROS disclaims any obligations to update or alter these forward-looking statements in the future, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

PROS has provided in this release certain financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP (loss) income from operations, annual recurring revenue, annual contract value bookings, adjusted EBITDA, free cash flow, tax rate, net income and diluted earnings 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-first 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 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 revenue, non-GAAP (loss) income from operations, annual recurring revenue, annual contract value bookings, adjusted EBITDA, free cash flow and non-GAAP tax rates (collectively the “non-GAAP financial measures”) as follows:

Non-GAAP revenue:  Business combination accounting principles under GAAP require us to recognize the fair value of software subscription, maintenance and professional services contracts assumed in our acquisitions of SignalDemand, Inc. and Cameleon Software SA. A portion of these software subscription and professional services are deferred and typically recognized over the term of the software subscription contract, so our GAAP revenues during the term of the contract after the acquisition do not reflect the full amount of revenues that would have been reported if the acquired deferred software subscription and professional services revenues were not written down to fair value. The revenue for maintenance is deferred and typically recognized over a one-year period, so our GAAP revenues for the one-year period after the acquisition do not reflect the full amount of revenues that would have been reported if the acquired deferred maintenance revenue was not written down to fair value. The non-GAAP revenue adjustments eliminate the effect of the deferred revenue write-down and include the costs associated with the revenue adjustment. We believe these adjustments to the revenue from these contracts and to the associated costs are useful to investors as an additional means to reflect revenue trends of our business.

Non-GAAP income from operations:  Non-GAAP (loss) income from operations includes the non-GAAP revenue discussed above and also excludes the impact of stock-based compensation, amortization of acquisition-related intangibles, amortization of debt discount and issuance costs, recovery of bankruptcy claims, severance, as well as impairment of internal-use software. Non-GAAP (loss) income from operations excludes the following items from non-GAAP estimates:

  • Share-Based Compensation:  Although share-based compensation is an important aspect of compensation for our employees and executives, our share-based compensation expense can vary because of changes in our stock price and market conditions at the time of grant, varying valuation methodologies, and the variety of award types. Since share-based compensation expense can vary for reasons that are generally unrelated to our performance during any particular period, we believe this could make it difficult for investors to compare our current financial results to previous and future periods. Therefore, we believe it is useful to exclude share-based compensation in order to better understand our business performance and allow investors to compare our operating results with peer companies.
  • Amortization of Acquisition-Related Intangibles:  We view amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company’s research and development efforts, trade names, customer lists and customer relationships, as items arising from pre-acquisition activities determined at the time of an acquisition.  While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
  • Amortization of Debt Discount and Issuance Costs: Amortization of debt discount and issuance costs are related to our Senior Notes due 2019. 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.
  • Impairment of Internal-Use Software: We review the software that has been capitalized for impairment when events or changes in circumstances indicate the software might be impaired. From time to time, we may determine that an impairment is required under GAAP. Since the impairment of internal-use software 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 any such impairments in order to better understand our business performance and allow investors to compare our operating results with peer companies.
  • Taxes: We exclude the tax consequences associated with non-GAAP items to provide investors with a useful comparison of our operating results to prior periods and to our peer companies because such amounts can vary significantly.  In the fourth quarter of 2014, we concluded that it is more likely than not that we will be unable to fully realize our deferred tax assets and accordingly, established a valuation allowance against those assets. The ongoing impact of the valuation allowance on our non-GAAP effective tax rate has been eliminated to allow investors to better understand our business performance and compare our operating results with peer companies.

Annual Recurring Revenue: Annual Recurring Revenue (“ARR”) is used to assess the trajectory of our cloud business. ARR means, as of a specified date, the contracted recurring revenue which includes both subscription and maintenance contracts, and excludes perpetual license, term license and service agreements, which are current and contracted with a future start date. ARR should be viewed independently of revenue and any other GAAP measure.

Annual Contract Value Bookings: Annual Contract Value (“ACV”) bookings are comprised of the estimated annual value of our Total Contract Value (“TCV”) bookings. ACV bookings are comprised of annual maintenance and subscriptions, one seventh of the license TCV, and excludes services and subscription renewals. ACV should be viewed independently of revenue and any other GAAP measure. TCV bookings are comprised of the total value of new customer contracts closed during a specified period, excluding maintenance in excess of one year, and including license, maintenance, services, term license and subscription renewals, that we believe to be firm commitments to provide our software solutions and related services. Bookings by their nature are significantly based on estimates and judgments that we make regarding total contract values, and our bookings growth projections are not meant as a substitute measure for revenue in accordance with GAAP. We believe our bookings growth projection is useful to investors as an additional means to evaluate our business performance.

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 (loss) income before interest expense, provision for income taxes, depreciation and amortization, as adjusted to eliminate the effect of the deferred revenue write-down from our acquisitions of SignalDemand, Inc. and Cameleon Software SA, tax consequences associated with the stock-based compensation costs arising from our acquisitions, amortization of acquisition-related intangibles, depreciation and amortization, impairment of internal-use software and capitalized internal-use software development costs. Adjusted EBITDA should not be considered as an alternative to net (loss) income 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 operating activities, less additions to property, plant and equipment, purchases of other (non-acquisition-related) intangible assets and capitalized internal-use software development costs.

These non-GAAP estimates are not measurements of financial performance prepared in accordance with GAAP, and we are unable to reconcile these forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information described above which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.

Investor Contact:

PROS Investor Relations
Tim Girgenti
713-335-5879
ir@pros.com

Media Contact:

PROS Public Relations
Yvonne Donaldson
713-335-5310
ydonaldson@pros.com

 

PROS Holdings, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

    December 31, 2016   December 31, 2015
Assets:        
Current assets:        
Cash and cash equivalents   $ 118,039     $ 161,770  
Short-term investments   15,996     2,500  
Accounts and unbilled receivables, net of allowance of $760 and $586, respectively   33,285     39,115  
Prepaid and other current assets   6,337     7,540  
Total current assets   173,657     210,925  
Property and equipment, net   15,238     15,777  
Intangibles, net   12,650     14,191  
Goodwill   20,096     20,445  
Other long-term assets   6,013     1,873  
Total assets   $ 227,654     $ 263,211  
Liabilities and Stockholders’ Equity:        
Current liabilities:        
Accounts payable and other liabilities   $ 2,744     $ 8,273  
Accrued liabilities   7,279     4,333  
Accrued payroll and other employee benefits   18,349     13,084  
Deferred revenue   68,349     60,664  
Total current liabilities   96,721     86,354  
Long-term deferred revenue   11,389     4,665  
Convertible debt, net   122,299     115,860  
Other long-term liabilities   639     918  
Total liabilities   231,048     207,797  
Stockholders’ equity:        
Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued        
Common stock, $0.001 par value, 75,000,000 shares authorized; 35,001,236 and 34,156,561 shares issued, respectively; 30,583,651 and 29,738,976 shares outstanding, respectively   35     34  
Additional paid-in capital   175,678     158,674  
Treasury stock, 4,417,585 common shares, at cost   (13,938 )   (13,938 )
Accumulated deficit   (160,259 )   (85,034 )
Accumulated other comprehensive loss   (4,910 )   (4,322 )
Total stockholders’ equity   (3,394 )   55,414  
Total liabilities and stockholders’ equity   $ 227,654     $ 263,211  

 

PROS Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands, except per share data)

(Unaudited)

 

    Three Months Ended December 31,   Year Ended December 31,
    2016   2015   2016   2015
Revenue:                
License   $ 3,636     $ 6,152     $ 11,814     $ 32,716  
Services   7,866     10,775     34,739     42,875  
Subscription   10,962     8,023     38,158     28,989  
Total license, services and subscription   22,464     24,950     84,711     104,580  
Maintenance and support   17,462     17,062     68,565     63,666  
Total revenue   39,926     42,012     153,276     168,246  
Cost of revenue:                
License   47     62     246     304  
Services   7,453     9,083     32,047     36,147  
Subscription   5,037     3,456     17,379     12,786  
Total license, services and subscription   12,537     12,601     49,672     49,237  
Maintenance and support   3,415     2,812     13,681     12,173  
Total cost of revenue   15,952     15,413     63,353     61,410  
Gross profit   23,974     26,599     89,923     106,836  
Operating expenses:                
Selling and marketing   16,255     18,336     63,980     74,146  
General and administrative   10,627     8,731     38,537     38,517  
Research and development   13,350     11,682     52,804     46,780  
Impairment of internal-use software       2,890         2,890  
Loss from operations   (16,258 )   (15,040 )   (65,398 )   (55,497 )
Convertible debt interest and amortization   (2,376 )   (2,272 )   (9,319 )   (8,914 )
Other expense, net   101     (90 )   (38 )   (661 )
Loss before income tax (benefit) provision   (18,533 )   (17,402 )   (74,755 )   (65,072 )
Income tax (benefit) provision   (20 )   329     470     739  
Net loss   $ (18,513 )   $ (17,731 )   $ (75,225 )   $ (65,811 )
Net loss per share:                
Basic and diluted   $ (0.61 )   $ (0.60 )   $ (2.47 )   $ (2.23 )
Weighted average number of shares:                
Basic and diluted   30,557     29,722     30,395     29,578  

 

PROS Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

    Three Months Ended December 31,   Year Ended December 31,
    2016   2015   2016   2015
Operating activities:                
Net loss   $ (18,513 )   $ (17,731 )   $ (75,225 )   $ (65,811 )
Adjustments to reconcile net loss to net cash provided by

operating activities:

               
Depreciation and amortization   2,111     2,472     9,507     10,395  
Amortization of debt discount and issuance costs   1,653     1,554     6,439     6,039  
Share-based compensation   6,021     6,483     20,466     27,864  
Deferred income tax, net   (24 )   27     40     165  
Provision for doubtful accounts   400     (414 )   174     (282 )
Loss on disposal of assets   19     167     19     167  
Impairment of internal-use software       2,890         2,890  
Changes in operating assets and liabilities:                
Accounts and unbilled receivables   (7,228 )   11,800     5,671     32,274  
Prepaid expenses and other assets   (169 )   612     (915 )   229  
Accounts payable and other liabilities   (359 )   (719 )   (2,905 )   (4,049 )
Accrued liabilities   1,914     436     2,801     800  
Accrued payroll and other employee benefits   4,486     2,861     5,195     (2,048 )
Deferred revenue   2,503     (1,710 )   14,388     6,899  
Net cash (used in) provided by operating activities   (7,186 )   8,728     (14,345 )   15,532  
Investing activities:                
Purchases of property and equipment   (717 )   (1,938 )   (7,241 )   (6,794 )
Purchase of equity securities   (2,000 )       (2,000 )    
Capitalized internal-use software development costs   (479 )       (1,048 )   (233 )
Purchase of intangible asset   (1,625 )       (1,625 )    
Change in restricted cash       100         100  
Purchases of short-term investments   (10,056 )   (2,521 )   (154,990 )   (57,697 )
Proceeds from maturities of short-term investments   45,000     22,500     141,500     55,200  
Net cash provided by (used in) investing activities   30,123     18,141     (25,404 )   (9,424 )
Financing activities:                
Exercise of stock options   469     273     889     706  
Proceeds from employee stock plans           1,090     839  
Tax withholding related to net share settlement of stock awards   (223 )   (158 )   (5,467 )   (5,124 )
Payment of contingent consideration for PROS France               (1,304 )
Payments of notes payable       (51 )   (196 )   (263 )
Debt issuance costs related to convertible debt               (408 )
Net cash provided by (used in) financing activities   246     64     (3,684 )   (5,554 )
Effect of foreign currency rates on cash   (352 )   (111 )   (298 )   197  
Net change in cash and cash equivalents   22,831     26,822     (43,731 )   751  
Cash and cash equivalents:                
Beginning of period   95,208     134,948     161,770     161,019  
End of period   $ 118,039     $ 161,770     $ 118,039     $ 161,770  

 

PROS Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

(Unaudited)

We use these non-GAAP financial measures to assist in the management of the Company because we believe that this information provides a more consistent and complete understanding of the underlying results and trends of the ongoing business due to the uniqueness of these charges.

See breakdown of the reconciling line items on page 10.

            Three Months Ended December 31,   Quarter over Quarter   Year Ended December 31,   Year over Year
            2016   2015   % change   2016   2015   % change
GAAP revenue   $39,926   $42,012   (5)%   $153,276   $168,246   (9)%
  Non-GAAP adjustment:                        
  Acquisition-related deferred revenue write-down     701         3,766    
Non-GAAP revenue   $39,926   $42,713   (7)%   $153,276   $172,012   (11)%
                                 
GAAP gross profit   $23,974   $26,599   (10)%   $89,923   $106,836   (16)%
  Non-GAAP adjustments:                        
  Acquisition-related deferred revenue write-down, net of cost of revenue     206         1,373    
  Amortization of intangible assets   481   542       1,957   2,201    
  Share-based compensation   547   823       2,267   3,719    
Non-GAAP gross profit   $25,002   $28,170   (11)%   $94,147   $114,129   (18)%
                                 
Non-GAAP gross margin   62.6%   66.0%       61.4%   66.3%    
                                 
GAAP loss from operations   $(16,258)   $(15,040)   8%   $(65,398)   $(55,497)   18%
  Non-GAAP adjustments:                        
  Acquisition-related deferred revenue write-down, net of cost of revenue     206         1,373    
  Amortization of intangible assets   683   974       2,971   4,840    
  Accretion expense for acquisition-related contingent consideration             22    
  Impairment of internal-use software     2,890         2,890    
  Recovery of bankruptcy claim             (626)    
  Severance     940       1,070   1,696    
  Share-based compensation   6,021   6,483       20,466   27,864    
  Total Non-GAAP adjustments   $6,704   $11,493       $24,507   $38,059    
Non-GAAP loss from operations   $(9,554)   $(3,547)   169%   $(40,891)   $(17,438)   134%
                                 
Non-GAAP loss from operations % of total revenue   (23.9)%   (8.3)%       (26.7)%   (10.1)%    
                                 
GAAP net loss   $(18,513)   $(17,731)   4%   $(75,225)   $(65,811)   14%
  Non-GAAP adjustments:                        
  Total Non-GAAP adjustments affecting loss from operations   6,704   11,493       24,507   38,059    
  Amortization of debt discount and issuance costs   1,653   1,554       6,439   6,039    
  Tax impact related to non-GAAP adjustments   3,643   1,895       16,241   8,271    
Non-GAAP net loss   $(6,513)   $(2,789)   134%   $(28,038)   $(13,442)   109%
                           
Non-GAAP diluted loss per share   $(0.21)   $(0.09)       $(0.92)   $(0.45)    
                         
Shares used in computing non-GAAP loss per share   30,557   29,722       30,395   29,578    

 

PROS Holdings, Inc.

Supplemental Schedule of Non-GAAP Financial Measures

Increase (Decrease) in GAAP Amounts Reported

(In thousands)

(Unaudited

      Three Months Ended December 31,   Year Ended December 31,
      2016   2015   2016   2015
Revenue Items                
  Acquisition-related deferred revenue write-down – service revenue       683         3,449  
  Acquisition-related deferred revenue write-down – subscription revenue       2         226  
  Acquisition-related deferred revenue write-down – maintenance revenue       16         91  
  Total revenue items   $     $ 701     $     $ 3,766  
                   
Cost of License Items                
  Amortization of intangible assets   10     10     41     41  
  Total cost of license items   $ 10     $ 10     $ 41     $ 41  
                 
Cost of Services Items                
  Acquisition-related deferred cost write-down       (495 )       (2,393 )
  Share-based compensation   401     835     1,690     3,340  
  Total cost of services items   $ 401     $ 340     $ 1,690     $ 947  
                   
Cost of Subscription Items                
  Amortization of intangible assets   315     374     1,277     1,519  
  Share-based compensation   64     (76 )   249     124  
  Total cost of subscription items   $ 379     $ 298     $ 1,526     $ 1,643  
                   
Cost of Maintenance Items                
  Amortization of intangible assets   156     158     639     641  
  Share-based compensation   82     64     328     255  
  Total cost of maintenance items   $ 238     $ 222     $ 967     $ 896  
                   
Sales and Marketing Items                
  Amortization of intangible assets   202     350     1,008     2,306  
  Severance       940     1,070     1,282  
  Share-based compensation   1,265     1,995     3,824     8,536  
  Total sales and marketing items   $ 1,467     $ 3,285     $ 5,902     $ 12,124  
                 
General and Administrative Items                
  Accretion expense for acquisition-related contingent consideration               22  
  Amortization of intangible assets       82     6     333  
  Recovery of bankruptcy claim               (626 )
  Share-based compensation   2,773     2,293     9,040     10,293  
  Total general and administrative items   $ 2,773     $ 2,375     $ 9,046     $ 10,022  
                 
Research and Development Items                
  Severance               414  
  Share-based compensation   1,436     1,372     5,335     5,316  
  Total research and development items   $ 1,436     $ 1,372     $ 5,335     $ 5,730  
                         
Impairment of internal-use software   $     $ 2,890     $     $ 2,890  

 

PROS Holdings, Inc.

Supplemental Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands)

(Unaudited)

 

      Three Months Ended December 31,   Year Ended December 31,
      2016   2015   2016   2015
Adjusted EBITDA                
  GAAP Loss from Operations   $ (16,258 )   $ (15,040 )   $ (65,398 )   $ (55,497 )
  Acquisition-related deferred revenue write-down, net of cost of revenue       206         1,373  
  Amortization of intangible assets   683     974     2,971     4,840  
  Accretion expense for acquisition-related contingent consideration               22  
  Impairment of internal-use software       2,890         2,890  
  Recovery of bankruptcy claim               (626 )
  Severance       940     1,070     1,696  
  Share-based compensation   6,021     6,483     20,466     27,864  
  Depreciation   1,428     1,498     6,536     5,555  
  Capitalized internal-use software development costs   (479 )       (1,048 )   (233 )
  Adjusted EBITDA   $ (8,605 )   $ (2,049 )   $ (35,403 )   $ (12,116 )
                   
Free Cash Flow                
  Net cash (used in) provided by operating activities   $ (7,186 )   $ 8,728     $ (14,345 )   $ 15,532  
  Purchase of property and equipment   (717 )   (1,938 )   (7,241 )   (6,794 )
  Purchase of intangible asset   (1,625 )       (1,625 )    
  Capitalized internal-use software development costs   (479 )       (1,048 )   (233 )
  Free Cash Flow   $ (10,007 )   $ 6,790     $ (24,259 )   $ 8,505  
                 
                 
Guidance   Q1 2017 Guidance   Full Year 2017 Guidance
    Low   High   Low   High
Adjusted EBITDA                
  GAAP Loss from Operations   $ (20,875 )   $ (19,875 )   $ (67,050 )   $ (66,050 )
  Amortization of intangible assets   650     650     2,700     2,700  
  Share-based compensation   6,125     6,125     24,850     24,850  
  Depreciation   1,350     1,350     5,500     5,500  
  Capitalized internal-use software development costs   (250 )   (250 )   (1,000 )   (1,000 )
  Adjusted EBITDA   $ (13,000 )   $ (12,000 )   $ (35,000 )   $ (34,000 )