PROS(PRO) - 2024 Q2 - Quarterly Results

Second Quarter 2024 Financial Highlights PROS Holdings exceeded Q2 2024 guidance with strong revenue and profitability growth, achieving 80% non-GAAP subscription gross margin - CEO Andres Reiner stated the company delivered a solid quarter, exceeding the high-end of guidance ranges for all metrics, highlighting achievement of the long-term goal of 80% non-GAAP subscription gross margin[2] Q2 2024 Key Financial Metrics (YoY) | Metric | Q2 2024 (GAAP) ($ million) | Q2 2023 (GAAP) ($ million) | Change ($ million) | Q2 2024 (Non-GAAP) ($ million) | Q2 2023 (Non-GAAP) ($ million) | Change ($ million) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $82.0 | $75.8 | +$6.2 | n/a | n/a | n/a | | Subscription Revenue | $65.6 | $57.3 | +$8.3 | n/a | n/a | n/a | | Operating (Loss) Income | $(7.2) | $(13.4) | +$6.2 | $4.4 | $(1.0) | +$5.3 | | Net (Loss) Income | $(7.4) | $(13.3) | +$5.9 | $3.3 | $(0.3) | +$3.6 | | Net (Loss) EPS | $(0.16) | $(0.29) | +$0.13 | $0.07 | $(0.01) | +$0.08 | | Adjusted EBITDA | n/a | n/a | n/a | $5.2 | $0.1 | +$5.1 | | Operating Cash Flow | $6.4 | $(6.5) | +$13.0 | n/a | n/a | n/a | | Free Cash Flow | n/a | n/a | n/a | $6.2 | $(6.2) | +$12.4 | Recent Business Highlights PROS expanded its customer base and platform adoption, earning industry recognition including Microsoft's Global ISV Partner of the Year Award - Welcomed new customers including Air Moana, Atlantic Aviation, Dynata, Lao Airlines, Tropic Air, VitalEdge, and Zeus Fire & Security[6] - Expanded platform use with existing customers such as Aeromexico, Allegiant Air, BASF, Carrier, Cathay Pacific, Hertz, and Ingredion[6] - Won Microsoft's Global ISV Partner of the Year Award for the second time, recognizing excellence in AI innovation and collaboration, including the launch of the PROS Plugin for Microsoft's Copilot for Sales[12] - Hosted the record-breaking 2024 Outperform with PROS Conference, its largest in-person user event, featuring 60 customer speakers[12] Financial Outlook PROS projects continued growth for Q3 and full-year 2024, with total revenue expected to increase by 9% and subscription revenue by 13% Q3 and Full Year 2024 Guidance | Metric | Q3 2024 Guidance ($ million) | Full Year 2024 Guidance ($ million) | YoY Growth (Mid-Point) | | :--- | :--- | :--- | :--- | | Total Revenue | $81.5 - $82.5 | $329.0 - $331.0 | 9% | | Subscription Revenue | $65.8 - $66.3 | $263.5 - $265.5 | 13% | | Subscription ARR | n/a | $280.0 - $284.0 | 9% | | Adjusted EBITDA | $6.5 - $7.5 | $21.0 - $24.0 | +$16.5 | | Free Cash Flow | n/a | $20.0 - $24.0 | +$10.6 | | Non-GAAP EPS | $0.08 - $0.10 | n/a | n/a | - The outlook is based on an estimated 47.8 million diluted weighted average shares for Q3 2024 and a 22% non-GAAP estimated tax rate for Q3 and the full year 2024[7] Consolidated Financial Statements This section presents the company's financial position and performance through detailed Balance Sheets, Statements of Loss, and Cash Flows Condensed Consolidated Balance Sheets PROS reported total assets of $384.9 million and a stockholders' deficit of $83.0 million as of June 30, 2024 Balance Sheet Summary (in thousands) | Account | June 30, 2024 ($ thousands) | December 31, 2023 ($ thousands) | | :--- | :--- | :--- | | Total Current Assets | $203,049 | $234,674 | | Cash and cash equivalents | $139,086 | $168,747 | | Total Assets | $384,900 | $421,833 | | Total Current Liabilities | $166,871 | $197,331 | | Deferred revenue, current | $121,628 | $120,955 | | Total Liabilities | $467,940 | $499,706 | | Total Stockholders' (Deficit) Equity | $(83,040) | $(77,873) | Condensed Consolidated Statements of Loss Q2 2024 total revenue grew to $82.0 million, with GAAP net loss significantly narrowing to $7.4 million from $13.3 million YoY Statement of Loss Summary - Three Months Ended June 30 (in thousands) | Account | 2024 ($ thousands) | 2023 ($ thousands) | | :--- | :--- | :--- | | Total Revenue | $82,013 | $75,792 | | Subscription Revenue | $65,600 | $57,304 | | Gross Profit | $53,194 | $47,221 | | Loss from Operations | $(7,184) | $(13,355) | | Net Loss | $(7,386) | $(13,289) | | Net Loss Per Share | $(0.16) | $(0.29) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities turned positive to $6.4 million in Q2 2024, a $13.0 million improvement YoY Cash Flow Summary - Three Months Ended June 30 (in thousands) | Activity | 2024 ($ thousands) | 2023 ($ thousands) | | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | $6,420 | $(6,542) | | Net Cash Used in Investing Activities | $(256) | $(277) | | Net Cash Used in Financing Activities | $(23,536) | $(958) | | Net Change in Cash | $(17,337) | $(7,809) | Reconciliation of GAAP to Non-GAAP Financial Measures This section reconciles GAAP financial results to non-GAAP measures, adjusting for items like share-based compensation and amortization of intangibles Reconciliation of GAAP Loss from Operations to Non-GAAP Income from Operations (Q2 2024, in thousands) | Description | Amount ($ thousands) | | :--- | :--- | | GAAP Loss from Operations | $(7,184) | | Share-based compensation | $10,248 | | Amortization of acquisition-related intangibles | $1,300 | | Non-GAAP Income from Operations | $4,364 | Reconciliation of GAAP Net Loss to Non-GAAP Net Income (Q2 2024, in thousands) | Description | Amount ($ thousands) | | :--- | :--- | | GAAP Net Loss | $(7,386) | | Total non-GAAP adjustments affecting operations | $11,548 | | Amortization of debt premium and issuance costs | $(372) | | Tax impact related to non-GAAP adjustments | $(539) | | Non-GAAP Net Income | $3,251 | Reconciliation to Adjusted EBITDA (Q2 2024, in thousands) | Description | Amount ($ thousands) | | :--- | :--- | | GAAP Loss from Operations | $(7,184) | | Amortization of acquisition-related intangibles | $1,300 | | Share-based compensation | $10,248 | | Depreciation and other amortization | $891 | | Capitalized internal-use software development costs | $(41) | | Adjusted EBITDA | $5,214 | Explanation of Non-GAAP Financial Measures PROS utilizes non-GAAP measures like Adjusted EBITDA, Free Cash Flow, and Subscription ARR to provide insights into operational performance - Non-GAAP measures exclude items like share-based compensation, amortization of acquisition-related intangibles, and severance to facilitate comparison of financial results across periods and with peer companies[16][17] - Adjusted EBITDA is defined as GAAP net income (loss) adjusted for interest, taxes, depreciation, amortization, share-based compensation, severance, and capitalized software development costs[20] - Free Cash Flow is defined as net cash from operating activities, excluding severance payments, less capital expenditures and capitalized internal-use software development costs[21] - Subscription Annual Recurring Revenue (ARR) represents the contracted subscription revenue as of a specific date, including future start date contracts and annualized overage fees, used to assess the trajectory of the cloud business[18]