PROS(PRO) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Interim Condensed Consolidated Financial Statements (Unaudited) Unaudited interim financials for Q2 2025 show 8% revenue growth, a reduced net loss, and balance sheet shifts from recent debt transactions Condensed Consolidated Balance Sheets Total assets increased to $443.0 million, liabilities grew to $527.9 million primarily from convertible debt, widening the stockholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $178,958 | $161,983 | | Total current assets | $261,206 | $239,116 | | Total assets | $443,041 | $419,902 | | Liabilities & Equity | | | | Deferred revenue, current | $135,497 | $130,977 | | Convertible debt, net | $312,027 | $270,797 | | Total liabilities | $527,920 | $488,605 | | Total stockholders' (deficit) equity | $(84,879) | $(68,703) | Condensed Consolidated Statements of Comprehensive Loss Q2 2025 total revenue increased 8% to $88.7 million, with net loss significantly reduced to $1.8 million due to a debt extinguishment gain Q2 Financial Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Subscription Revenue | $73,333 | $65,600 | +12% | | Total Revenue | $88,715 | $82,013 | +8% | | Gross Profit | $59,520 | $53,194 | +12% | | Loss from Operations | $(7,599) | $(7,184) | +6% | | Net Loss | $(1,756) | $(7,386) | -76% | | Diluted Net Loss per Share | $(0.10) | $(0.16) | -38% | Six-Month Financial Performance (in thousands, except per share data) | Metric | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Subscription Revenue | $144,163 | $129,949 | +11% | | Total Revenue | $175,037 | $162,701 | +8% | | Gross Profit | $117,910 | $105,049 | +12% | | Loss from Operations | $(11,424) | $(17,486) | -35% | | Net Loss | $(5,445) | $(18,743) | -71% | | Diluted Net Loss per Share | $(0.16) | $(0.40) | -60% | Condensed Consolidated Statements of Cash Flows H1 2025 operating cash flow improved to $4.4 million, while financing activities provided $14.1 million, primarily from new convertible debt issuance Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,430 | $1,776 | | Net cash used in investing activities | $(26) | $(609) | | Net cash provided by (used in) financing activities | $14,115 | $(30,850) | | Net change in cash, cash equivalents and restricted cash | $16,975 | $(29,661) | - The significant shift in financing cash flow from a use of $30.9M in H1 2024 to a source of $14.1M in H1 2025 was primarily due to the issuance of new convertible debt ($50.0M) and the purchase of a Capped Call ($27.9M) in 2025, compared to a repayment of convertible debt ($21.7M) in 2024[19] Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, a $4.2 million gain on debt extinguishment from convertible note exchanges, and $494.7 million in remaining performance obligations - As of June 30, 2025, the company has $494.7 million in remaining performance obligations, of which it expects to recognize $252.7 million as revenue over the next 12 months[38] - In June 2025, the company exchanged approximately $186.9 million of its 2027 Notes for new 2030 Notes and sold an additional $50.0 million of 2030 Notes This resulted in a $4.2 million gain on debt extinguishment[53][54][55] - In connection with the new 2030 Notes, the company entered into Capped Call Transactions for approximately $27.9 million to reduce potential stock dilution and effectively increase the conversion price from $20.48 to $30.34 per share[66][67] - Total unrecognized compensation cost related to share-based arrangements was $106.5 million as of June 30, 2025, which is expected to be recognized over a weighted average period of 2.7 years[51] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 performance, noting 12% subscription revenue growth, improved gross margins, macroeconomic impacts, AI adoption, and sufficient liquidity Q2 2025 Financial Overview Q2 2025 highlights include 12% subscription revenue growth, 8% total revenue increase, 86% recurring revenue, and an improved 79% subscription gross margin - Subscription revenue increased by 12% for the three months ended June 30, 2025, compared to the same period in 2024[76] - Gross revenue retention rates remained above 93% for the twelve months ended June 30, 2025[77] - Subscription gross profit margin was 79% for Q2 2025, an improvement from 78% in Q2 2024, due to optimization of cloud infrastructure[78] Factors Affecting Our Performance Performance is influenced by a challenging macroeconomic environment leading to measured buying, while rapid AI interest and digital purchasing trends drive demand - The uncertain macroeconomic environment is driving measured buying behavior, more complex customer review cycles, and a focus on smaller initial purchases with rapid ROI[80] - Rapid market interest in generative AI is driving businesses to invest in AI applications, which fuels demand for the company's solutions[80] - Long-term trends toward digital purchasing are increasing demand for technology that provides fast, frictionless, and consistent buying experiences across all sales channels[80][81] Results of Operations Q2 2025 total revenue grew 8% driven by 12% subscription growth, gross profit margin improved to 67%, and operating expenses rose 11% due to employee costs Revenue Breakdown and Growth (in thousands) | Revenue Stream | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Subscription | $73,333 | $65,600 | +12% | $144,163 | $129,949 | +11% | | Maintenance and support | $2,567 | $3,385 | -24% | $5,297 | $6,980 | -24% | | Services | $12,815 | $13,028 | -2% | $25,577 | $25,772 | -1% | | Total revenue | $88,715 | $82,013 | +8% | $175,037 | $162,701 | +8% | Operating Expense Breakdown and Growth (in thousands) | Expense Category | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Selling and marketing | $26,791 | $23,537 | +14% | $50,799 | $46,219 | +10% | | Research and development | $23,019 | $21,786 | +6% | $45,626 | $46,199 | -1% | | General and administrative | $17,309 | $15,055 | +15% | $32,909 | $30,117 | +9% | | Total operating expenses | $67,119 | $60,378 | +11% | $129,334 | $122,535 | +6% | - The increase in Selling and Marketing expenses was primarily due to higher employee-related costs, including a $1.1 million severance accrual for a former executive, and increased spending on sales and marketing events[91] - The increase in General and Administrative expenses was mainly driven by higher noncash share-based compensation related to stock awards for the new CEO and accelerated expense for the retiring former CEO[93] Liquidity and Capital Resources As of June 30, 2025, the company held $179.0 million in cash and cash equivalents, with sufficient liquidity from cash, operating cash flows, and a $50 million credit facility for the next twelve months - At June 30, 2025, the company had $179.0 million in cash and cash equivalents and $10.0 million in restricted cash[99] - The company's principal sources of liquidity are cash, cash flows from operations, and a potential $50 million from its credit agreement[100] - There were no outstanding borrowings under the company's credit facility as of June 30, 2025[108] Item 3. Quantitative and Qualitative Disclosures about Market Risk No material changes in the company's exposure to market risks have occurred since its Annual Report on Form 10-K - There have been no material changes in the company's exposure to market risks from those disclosed in its Annual Report[113] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - As of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[114] - No changes in internal control over financial reporting occurred during the quarter that would have a material effect[115] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business - The company is not currently aware of any legal proceedings that would have a material adverse effect on its business[116] Item 1A. Risk Factors No material changes to the company's risk factors have occurred since its Annual Report on Form 10-K - There have been no material changes in the Company's risk factors from those disclosed in its Annual Report[117] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[118] Item 5. Other Information No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during Q2 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the three months ended June 30, 2025[121]