pro-20240930

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 September 30, 2024


☐			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 47,305,965 as of October 22, 2024.

Table of Contents

PROS Holdings, Inc.

Form 10-Q

For the Quarterly Period Ended September 30, 2024

Table of Contents


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Interim Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Comprehensive Income (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	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.	Controls and Procedures	24

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosure	26
Item 5.	Other Information	26
Item 6.	Exhibits	26
Signatures		27

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.

Table of Contents

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)


	September 30, 2024		December 31, 2023
Assets:
Current assets:
Cash and cash equivalents	$	140,564	$	168,747

Trade and other receivables, net of allowance of $690 and $574, respectively	48,225		49,058
Deferred costs, current	4,448		4,856
Prepaid and other current assets	10,782		12,013

Total current assets	204,019		234,674
Restricted cash	10,000		10,000
Property and equipment, net	20,391		23,051
Operating lease right-of-use assets	13,770		14,801
Deferred costs, noncurrent	10,690		10,292
Intangibles, net	7,997		11,678
Goodwill	107,970		107,860


Other assets, noncurrent	9,332		9,477
Total assets	$	384,169	$	421,833
Liabilities and Stockholders' (Deficit) Equity:
Current liabilities:
Accounts payable and other liabilities	$	5,270	$	3,034
Accrued liabilities	13,603		13,257
Accrued payroll and other employee benefits	22,831		32,762
Operating lease liabilities, current	3,590		5,655
Deferred revenue, current	114,538		120,955
Current portion of convertible debt, net	—		21,668
Total current liabilities	159,832		197,331
Deferred revenue, noncurrent	2,675		3,669
Convertible debt, net	271,173		272,324
Operating lease liabilities, noncurrent	24,482		25,118
Other liabilities, noncurrent	1,231		1,264
Total liabilities	459,393		499,706
Commitments and contingencies (see Note 9)
Stockholders' (deficit) equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued	—		—
Common stock, $0.001 par value, 75,000,000 shares authorized; 51,953,232 and 51,184,584 shares issued, respectively; 47,272,509 and 46,503,861 shares outstanding, respectively	52		51
Additional paid-in capital	625,085		604,084
Treasury stock, 4,680,723 common shares, at cost	(29,847)		(29,847)
Accumulated deficit	(665,760)		(647,252)
Accumulated other comprehensive loss	(4,754)		(4,909)

Total stockholders' (deficit) equity	(75,224)		(77,873)
Total liabilities and stockholders' (deficit) equity	$	384,169	$	421,833

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 Income (Loss)

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue:
Subscription	$	67,068	$	59,987	$	197,017	$	173,260
Maintenance and support	3,361		4,693		10,341		15,498
Total subscription, maintenance and support	70,429		64,680		207,358		188,758

Services	12,273		12,570		38,045		37,466
Total revenue	82,702		77,250		245,403		226,224
Cost of revenue:
Subscription	14,470		14,510		43,653		42,662
Maintenance and support	1,698		1,769		5,311		5,927
Total cost of subscription, maintenance and support	16,168		16,279		48,964		48,589

Services	12,130		12,185		36,986		37,988
Total cost of revenue	28,298		28,464		85,950		86,577
Gross profit	54,404		48,786		159,453		139,647
Operating expenses:
Selling and marketing	20,074		20,324		66,293		71,214
Research and development	21,081		22,205		67,280		66,343
General and administrative	13,218		14,099		43,335		42,083


Income (loss) from operations	31		(7,842)		(17,455)		(39,993)
Convertible debt interest and amortization	(1,121)		(1,497)		(3,471)		(4,649)
Other income (expense), net	1,531		(4,288)		3,312		(1,046)
Income (loss) before income tax provision	441		(13,627)		(17,614)		(45,688)
Income tax provision	206		241		894		471
Net income (loss)	$	235	$	(13,868)	$	(18,508)	$	(46,159)



Net income (loss) per share:
Basic and diluted	$	—	$	(0.30)	$	(0.39)	$	(1.00)

Weighted average number of shares:
Basic	47,231		46,225		47,038		46,084
Diluted	47,338		46,225		47,038		46,084
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	$	390	$	(359)	$	155	$	(174)

Other comprehensive income (loss), net of tax	390		(359)		155		(174)
Comprehensive income (loss)	$	625	$	(14,227)	$	(18,353)	$	(46,333)

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)


	Nine Months Ended September 30,
	2024		2023
Operating activities:
Net loss	$	(18,508)	$	(46,159)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	6,371		8,301
Amortization of debt premium and issuance costs	(896)		1,094
Share-based compensation	30,219		31,589



Provision for credit losses	52		88
Gain on lease modification	(697)		—
Loss on disposal of assets	774		51


Loss on derivatives	—		4,343
Loss on debt extinguishment	—		1,779
Changes in operating assets and liabilities:
Accounts and unbilled receivables	788		(1,573)
Deferred costs	10		704
Prepaid expenses and other assets	1,158		31
Operating lease right-of-use assets and liabilities	(1,838)		(1,686)
Accounts payable and other liabilities	2,191		(3,375)
Accrued liabilities	1,087		1,489
Accrued payroll and other employee benefits	(9,906)		(242)
Deferred revenue	(7,435)		(401)
Net cash provided by (used in) operating activities	3,370		(3,967)
Investing activities:
Purchases of property and equipment	(669)		(2,168)


Capitalized internal-use software development costs	(58)		—


Investment in equity securities	(113)		(113)



Net cash used in investing activities	(840)		(2,281)
Financing activities:


Proceeds from employee stock plans	2,079		2,170
Tax withholding related to net share settlement of stock awards	(11,296)		(6,831)



Debt issuance costs related to Credit Agreement	—		(837)


Purchase of capped call	—		(22,771)
Repayment of convertible debt	(21,713)		—



Net cash used in financing activities	(30,930)		(28,269)
Effect of foreign currency rates on cash	217		(30)
Net change in cash, cash equivalents and restricted cash	(28,183)		(34,547)
Cash, cash equivalents and restricted cash:
Beginning of period	178,747		203,627
End of period	$	150,564	$	169,080

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents	$	140,564	$	159,080
Restricted cash	10,000		10,000
Total cash, cash equivalents and restricted cash	$	150,564	$	169,080

Supplemental disclosure of cash flow information:
Noncash investing activities:
Purchase of property and equipment accrued but not paid	$	237	$	236

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 September 30, 2024
















	Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Deficit		Accumulated other comprehensive loss		Total Stockholders’ (Deficit) Equity
	Shares	Amount				Shares	Amount
Balance at June 30, 2024	47,129,558	$	52	$	617,894	4,680,723	$	(29,847)	$	(665,995)	$	(5,144)	$	(83,040)

Stock awards net settlement	99,653	—		(1,135)		—	—		—		—		(1,135)
Proceeds from employee stock plans	43,298	—		1,055		—	—		—		—		1,055







Noncash share-based compensation	—	—		7,271		—	—		—		—		7,271

Other comprehensive income (loss)	—	—		—		—	—		—		390		390
Net income (loss)	—	—		—		—	—		235		—		235
Balance at September 30, 2024	47,272,509	$	52	$	625,085	4,680,723	$	(29,847)	$	(665,760)	$	(4,754)	$	(75,224)


	Three Months Ended September 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 June 30, 2023	46,140,736	$	51	$	606,599	4,680,723	$	(29,847)	$	(623,189)	$	(5,068)	$	(51,454)
Stock awards net settlement	58,814	—		(1,163)		—	—		—		—		(1,163)
Proceeds from employee stock plans	48,859	—		1,033		—	—		—		—		1,033








Noncash share-based compensation	—	—		10,933		—	—		—		—		10,933
Other comprehensive income (loss)	—	—		—		—	—		—		(359)		(359)
Net income (loss)	—	—		—		—	—		(13,868)		—		(13,868)
Balance at September 30, 2023	46,248,409	$	51	$	617,402	4,680,723	$	(29,847)	$	(637,057)	$	(5,427)	$	(54,878)

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)

SEC Form 10-Q filed by PROS Holdings Inc.