PROS(PRO) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Interim Condensed Consolidated Financial Statements (Unaudited) This section presents PROS Holdings, Inc.'s unaudited interim consolidated financial statements for Q2 2023 Condensed Consolidated Balance Sheets Total assets decreased to $434.0 million by June 30, 2023, with $143.0 million convertible debt reclassified to current liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $184,567 | $203,627 | | Total current assets | $256,364 | $267,278 | | Total assets | $433,964 | $452,952 | | Current portion of convertible debt, net | $143,003 | $0 | | Total current liabilities | $304,998 | $160,936 | | Total liabilities | $485,418 | $488,425 | | Total stockholders' (deficit) equity | $(51,454) | $(35,473) | Condensed Consolidated Statements of Comprehensive Loss Q2 2023 total revenue grew 11% to $75.8 million, with net loss improving to $13.3 million from $22.4 million Q2 and H1 2023 vs 2022 Performance (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | Y/Y Change | H1 2023 | H1 2022 | Y/Y Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $75,792 | $68,362 | +11% | $148,974 | $134,854 | +10% | | Subscription Revenue | $57,304 | $50,386 | +14% | $113,273 | $99,151 | +14% | | Gross Profit | $47,221 | $40,721 | +16% | $90,861 | $79,852 | +14% | | Loss from Operations | $(13,355) | $(20,537) | +35% | $(32,151) | $(47,040) | +32% | | Net Loss | $(13,289) | $(22,406) | +41% | $(32,291) | $(51,046) | +37% | | Net Loss per Share | $(0.29) | $(0.50) | +42% | $(0.70) | $(1.13) | +38% | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities remained flat at $12.7 million for H1 2023, with a total net decrease in cash of $19.1 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(12,685) | $(12,945) | | Net cash used in investing activities | $(1,823) | $(938) | | Net cash (used in) provided by financing activities | $(4,531) | $1,231 | | Net change in cash and cash equivalents | $(19,060) | $(12,375) | Notes to Condensed Consolidated Financial Statements Notes detail $407.6 million in remaining performance obligations, convertible debt terms, $3.6 million severance, and a new $50 million credit agreement - As of June 30, 2023, the company had $407.6 million in remaining performance obligations, with $204.2 million expected to be recognized as revenue over the next 12 months[41] - The company has two series of convertible senior notes: $143.75 million at 1% due in 2024 and $150.0 million at 2.25% due in 2027; the 2024 Notes are now classified as a current liability[56] - In the first quarter of 2023, the company incurred approximately $3.6 million in severance and related costs due to organizational changes[67] - Subsequent to the quarter end, on July 21, 2023, the company entered into a new three-year, $50 million secured revolving credit agreement[68] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, highlighting 14% subscription revenue growth, improved operating loss, and adequate liquidity - Subscription revenue grew by 14% for both the three and six months ended June 30, 2023, compared to the same periods in 2022[71] - Recurring revenue (subscription plus maintenance) constituted 82% of total revenue in Q2 2023, with gross revenue retention rates remaining above 93% for the trailing twelve months[72] - Key factors affecting performance include the complex macroeconomic environment, a strategic focus on profitable growth, the ongoing recovery of the travel industry, and increased demand for digital purchasing and AI-powered solutions[75][77] - Free cash flow usage for the six months ended June 30, 2023 improved to $10.8 million from $13.7 million in the prior year, primarily due to increased cash collections and lower annual incentive payments[74] Quantitative and Qualitative Disclosures about Market Risk Primary market risks are foreign currency and interest rate, with limited foreign currency exposure and minimal interest rate risk from fixed-rate notes - A hypothetical 10% adverse change in the euro exchange rate would have decreased revenue by approximately $1.2 million for Q2 2023[111] - The company's outstanding convertible notes are fixed-rate instruments, so results of operations are not subject to fluctuations in interest rates[113] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2023[115] - No changes in internal control over financial reporting occurred during Q2 2023 that have materially affected, or are reasonably likely to materially affect, internal controls[116] PART II. OTHER INFORMATION 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 or claims that it believes will have a material adverse effect on its business[118] Risk Factors Indebtedness from convertible notes and new credit agreement poses risks to future financing and cash flow, with no other material changes - The company's indebtedness from its convertible notes and potential borrowings under its new credit facility could impair its ability to obtain additional financing and adversely affect financial condition[120][123] - The new $50.0 million credit agreement contains covenants that restrict the company's ability to create liens, incur more debt, and engage in certain transactions[122] Unregistered Sales of Equity Securities and Use of Proceeds No common stock was repurchased in Q2 2023, with $10.0 million remaining available under the current repurchase authorization - No common stock was repurchased during Q2 2023; $10.0 million remains available under the current repurchase authorization[124] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[125] Mine Safety Disclosure The company reported no mine safety disclosures - None[126] Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement in Q2 2023 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement in Q2 2023[127] Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and XBRL data files Signatures