Pros holdings, inc. reports first quarter 2023 financial results
Houston--(business wire)--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. 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. 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. 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. pros holdings, inc. condensed consolidated balance sheets (in thousands, except share and per share amounts) (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 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 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 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 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 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
