Business Wire | Jul 30, 2020 03:20PM EDT

PROS Holdings, Inc. Reports Second Quarter 2020 Financial Results

Jul. 30, 2020

HOUSTON--(BUSINESS WIRE)--Jul. 30, 2020--PROS Holdings, Inc. (NYSE: PRO), a provider of AI-powered solutions that optimize selling in the digital economy, today announced financial results for the second quarter ended June 30, 2020.

"Today's environment has only accentuated the need for businesses to deliver every aspect of commerce digitally," stated CEO Andres Reiner. "We welcomed new customers this quarter and are excited to accelerate their digital selling journeys with our industry leading, AI solutions. We see an attractive, long-term market opportunity in front of us and are confident in our ability to execute upon our strategy to capture it."

Second Quarter 2020 Financial Highlights

Key financial results for the second quarter 2020 are shown below. Throughout this press release, all dollar figures are in millions, except net loss per share. Unless otherwise noted, all results are on a reported basis and are compared with the prior-year period.

GAAP Non-GAAP

Q2 Q2 Change Q2 Q2 Change 2020 2019 2020 2019

Revenue:

Total Revenue $63.7 $63.9 -% n/a n/a n/a

Subscription Revenue $42.4 $35.1 21% n/a n/a n/a

Subscription and Maintenance $54.1 $50.1 8% n/a n/a n/aRevenue

Profitability:

Gross Profit $37.8 $40.3 (6)% $39.4 $41.9 (6)%

Operating Loss $ $ $(3.0) $(7.5) $(3.9) $(3.6) (15.1) (12.1)

Net Loss $ $ $0.3 $(6.0) $(2.8) $(3.2) (17.2) (17.5)

Net Loss Per Share $ $ $0.04 $ $ $ (0.40) (0.44) (0.14) (0.07) (0.07)

Adjusted EBITDA n/a n/a n/a $(5.7) $(1.8) $(3.9)

Cash:

Net Cash Used In Operating $ $(3.5) $ n/a n/a n/aActivities (22.8) (19.2)

Free Cash Flow n/a n/a n/a $ $(5.2) $ (23.5) (18.3)

The attached table provides a summary of PROS results for the period, including a reconciliation of GAAP to non-GAAP metrics.

Recent Business Highlights

* Recognized as a continued Pricing Software Leader in the G2 Summer 2020 Report based upon user reviews of our AI-powered pricing solutions, customer satisfaction, and market presence.

* Named a Major Player in the IDC MarketScape Worldwide Configure Price Quote Applications for Commerce 2020 Vendor Assessment for the strength of our quoting performance, advanced dynamic pricing capabilities, and innovative roadmap.

* Welcomed new customers that are adopting our AI platform to accelerate their shift to digital selling, including Bunzl, Hempel, Ingredion, Novelis, among others.

* Expanded our global partnership with Microsoft via the Business Applications ISV Connect Program to accelerate the penetration of our end-to-end commerce platform within Microsoft Dynamics.

* Supported our Travel and B2B customers with insights from innovative science models leveraging government regulatory information from Oxford University, epidemic data from Johns Hopkins University, and combined customers' data to help our customers and the markets we serve better understand the predictive signals of demand return trends and prepare for the recovery.

* Dedicated Juneteenth as a global "Day of Learning" to further our continued focus on the importance of diversity, inclusion, and equality at PROS and in the broader community.

* Partnered with the Professional Pricing Society to support the pricing community via more than 100 sponsored, certified pricing training courses for industry practitioners and delivered webinars to assist business leaders in effectively managing pricing through market volatility.

* Appointed Les Rechan as Chief Operating Officer to lead PROS global go-to-market efforts including sales, marketing, customer experience and engagement, and partners to accelerate the penetration of AI-powered digital selling solutions and deliver exceptional customer value.

Financial Outlook

Based on information as of July 30, 2020, PROS currently anticipates the following based on an estimated 43.4 million basic weighted average shares outstanding and a 22% non-GAAP estimated tax rate for the third quarter ending September 30, 2020.

Q3 2020 Guidance v. Q3 2019 at Mid-Point

Total Revenue $59.0 to $61.0 (6)%

Subscription Revenue $39.0 to $41.0 4%

Non-GAAP Loss Per Share $(0.22) to $(0.18) $(0.14)

Adjusted EBITDA $(11.5) to $(9.5) $(8.3)

Conference Call

In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on Thursday, July 30, 2020, 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 Thursday, August 13, 2020, at 1-844-512-2921 (toll-free) or 1-412-317-6671 using the pass code 13706070.

About PROS

PROS Holdings, Inc. (NYSE: PRO) provides AI solutions that power commerce in the digital economy. PROS solutions bring intelligence to commerce by providing companies with predictive and prescriptive guidance that enables them to dynamically price, configure and sell their products and services across all channels with speed, precision and consistency. To learn more, visit 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 the business impact of the coronavirus (COVID-19) pandemic; our financial outlook; expectations; ability to achieve future growth and profitability; management's confidence and optimism; positioning; customer successes; demand for our software solutions; business expansion; revenue; subscription revenue; ARR; non-GAAP 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 impact of the COVID-19 pandemic, such as the scope and duration of the outbreak and timeframe for recovery of the travel industry, (b) cybersecurity, (c) maintaining subscription renewal rates, (d) potential downturns in sales, (e) implementing our solutions, (f) software innovation, (g) maintaining our corporate culture, (h) disruptions from our third party data center, software, data, and other unrelated service providers, (i) evolving data privacy, cyber security and data localization laws, (j) cloud operations, (k) managing our growth effectively, (l) operating globally, including economic and commercial disruptions, (m) personnel risks including loss of any key employees, (n) the timing of revenue recognition and cash flow from operations, (o) competition, (p) market acceptance of our software innovations, (q) development of our target markets, (r) increasing business from existing customers, (s) migrating customers to our latest cloud solutions; (t) expanding and training our direct and indirect sales force, (u) our debt repayment obligations, (v) returning to profitability, and (w) acquiring and integrating businesses and/or technologies. 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 loss, annual recurring revenue, adjusted EBITDA, free cash flow, non-GAAP subscription revenue, non-GAAP tax rate, non-GAAP net income (loss) or non-GAAP net loss, and diluted earnings (loss) per share or non-GAAP net 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 statement on income (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 statement on income (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.

PROS also presents certain information in "constant currency," which is also a non-GAAP financial measure. Since PROS has operations outside of the United States reporting in currencies other than the U.S. dollar, the comparability of our operating results reported in U.S. Dollars is affected by foreign currency exchange rate fluctuations because the underlying currencies in which we transact change in value over time compared to the U.S. Dollar. These fluctuations may have a significant effect on our reported results. As such, this release contains references to constant currency measures, which are calculated based on currency rates set at the start of a year and held constant throughout the year. Management believes this supplemental information is useful to investors as a framework for facilitating period-to-period comparisons of our business performance excluding the effects of foreign currency exchange rate fluctuations.

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 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, new headquarters noncash rent expense and debt extinguishment fees. 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. * New Headquarters Noncash Rent Expense: Noncash rent expense is related to our new corporate headquarters and is incurred prior to occupation of this facility. These amounts are unrelated to our core performance during any particular period and 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 the noncash rent expense on the preoccupied new headquarters in order for investors to better understand our business performance and allow investors to compare our operating results with peer companies. * Debt extinguishment fees: Debt extinguishment fees relate to third party fees incurred in connection with the partial retirement of our senior convertible notes due in December 2019. These amounts are unrelated to our core performance during any particular period and 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 the debt extinguishment fees in order for investors to better understand our business performance and allow investors to compare our operating results with peer companies.

Non-GAAP 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 discount and issuance costs and the taxes related to these items and the items excluded from non-GAAP income (loss) from operations. Estimates of non-GAAP loss per share are calculated by dividing estimates for non-GAAP loss by our estimate of 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 Discount and Issuance Costs: Amortization of debt discount and 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. * Loss on Debt Extinguishment: Loss on debt extinguishment relates to the settlement of our senior convertible notes due in December 2019. This amount is unrelated to our core performance during any particular period and 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 the loss on debt extinguishment in order for investors to better understand our business performance and allow investors to compare our operating 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 recognized as license revenue in accordance with GAAP. ARR should be viewed independently of revenue and any other GAAP measure.

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, amortization of acquisition-related intangibles, depreciation and amortization, new headquarters noncash rent expense, debt extinguishment fees and capitalized internal-use software development costs. 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, less capital expenditures (excluding expenditures for PROS new headquarters), 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)

June 30, 2020 December 31, 2019

Assets:

Current assets:

Cash and cash equivalents $ 220,157 $ 306,077

Trade and other receivables, net of allowance 54,677 65,074 of $4,982 and $214, respectively

Deferred costs, current 5,888 5,756

Prepaid and other current assets 8,591 9,038

Total current assets 289,313 385,945

Property and equipment, net 33,662 14,794

Operating lease right-of-use assets 23,169 26,550

Deferred costs, noncurrent 13,720 15,478

Intangibles, net 11,398 14,605

Goodwill 49,116 49,104

Other assets, noncurrent 6,900 6,831

Total assets $ 427,278 $ 513,307

Liabilities and Stockholders' Equity:

Current liabilities:

Accounts payable and other liabilities $ 8,506 $ 9,098

Accrued liabilities 17,700 22,748

Accrued payroll and other employee benefits 17,663 32,656

Operating lease liabilities, current 7,286 7,173

Deferred revenue, current 107,503 124,459

Total current liabilities 158,658 196,134

Deferred revenue, noncurrent 10,893 17,801

Convertible debt, net, noncurrent 114,131 110,704

Operating lease liabilities, noncurrent 24,144 22,391

Other liabilities, noncurrent 1,282 1,281

Total liabilities 309,108 348,311

Stockholders' equity:

Preferred stock, $0.001 par value, 5,000,000 - - shares authorized; none issued

Common stock, $0.001 par value, 75,000,000shares authorized; 47,985,184and 47,310,846 shares issued, respectively; 48 47 43,304,461 and 42,630,123 shares outstanding,respectively

Additional paid-in capital 553,696 560,496

Treasury stock, 4,680,723 common shares, at (29,847 ) (29,847 ) cost

Accumulated deficit (401,732 ) (361,789 )

Accumulated other comprehensive loss (3,995 ) (3,911 )

Total stockholders' equity 118,170 164,996

Total liabilities and stockholders' equity $ 427,278 $ 513,307

PROS Holdings, Inc.

Condensed Consolidated Statements of Income (Loss)

(In thousands, except per share data)

(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Revenue:

Subscription $ 42,377 $ 35,108 $ 85,547 $ 66,029

Maintenance and 11,741 15,040 24,264 30,367 support

Totalsubscription, 54,118 50,148 109,811 96,396 maintenance andsupport

Services 9,629 13,730 20,247 23,613

Total revenue 63,747 63,878 130,058 120,009

Cost of revenue:

Subscription 12,392 9,819 25,256 19,605

Maintenance and 2,610 2,835 5,400 5,637 support

Total cost ofsubscription, 15,002 12,654 30,656 25,242 maintenance andsupport

Services 10,948 10,929 24,021 19,131

Total cost of 25,950 23,583 54,677 44,373 revenue

Gross profit 37,797 40,295 75,381 75,636

Operating expenses:

Selling and 21,011 22,945 45,931 44,430 marketing

General and 13,528 12,040 28,408 23,707 administrative

Research and 18,397 17,455 37,533 33,254 development

Loss from (15,139 ) (12,145 ) (36,491 ) (25,755 ) operations

Convertibledebt interest (2,085 ) (4,274 ) (4,147 ) (8,630 ) andamortization

Other income 146 (862 ) 977 409 (expense), net

Loss beforeincome tax (17,078 ) (17,281 ) (39,661 ) (33,976 ) provision

Income tax 130 236 282 458 provision

Net loss $ (17,208 ) $ (17,517 ) $ (39,943 ) $ (34,434 )



Net loss per share:

Basic and $ (0.40 ) $ (0.44 ) $ (0.92 ) $ (0.89 ) diluted

Weightedaverage number of shares:

Basic and 43,304 39,413 43,203 38,518 diluted

PROS Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Operating activities:

Net loss $ (17,208 ) $ (17,517 ) $ (39,943 ) $ (34,434 )

Adjustments toreconcile netloss to net cash used inoperatingactivities:

Depreciationand 3,513 3,504 6,933 6,829 amortization

Amortization ofdebt discount 1,736 3,179 3,448 6,295 and issuancecosts

Share-based 5,752 5,979 12,099 12,025 compensation

Provision fordoubtful 2,690 - 5,286 - accounts

Loss on debt - 2,266 - 2,266 extinguishment

Changes inoperating assets andliabilities:

Accounts andunbilled (3,773 ) (7,474 ) 5,116 (11,247 ) receivables

Deferred costs 863 (1,040 ) 1,626 (1,933 )

Prepaidexpenses and 1,024 (1,458 ) 323 (3,523 ) other assets

Accountspayable and 2,150 (1,133 ) 3,597 (568 ) otherliabilities

Accrued (2,783 ) 2,597 (6,623 ) 5,231 liabilities

Accrued payrolland other 5,076 7,759 (14,979 ) (4,020 ) employeebenefits

Deferred (21,822 ) (211 ) (23,838 ) 11,435 revenue

Net cash usedin operating (22,782 ) (3,549 ) (46,955 ) (11,644 ) activities

Investing activities:

Purchases ofproperty and (8,205 ) (1,696 ) (19,198 ) (2,307 ) equipment

Capitalizedinternal-usesoftware (394 ) - (806 ) (868 ) developmentcosts

Purchase ofequity - (68 ) - (68 ) securities

Purchase ofintangible - - - (50 ) asset

Net cash usedin investing (8,599 ) (1,764 ) (20,004 ) (3,293 ) activities

Financing activities:

Proceeds fromemployee stock - - 1,364 943 plans

Tax withholdingrelated to netshare (49 ) (4,403 ) (20,221 ) (18,642 ) settlement ofstock awards

Proceeds fromissuance of - 140,156 - 140,156 convertibledebt, net

Debt issuancecosts related - (648 ) - (648 ) to convertibledebt

Purchase of - (16,445 ) - (16,445 ) capped call

Settlement ofconvertible - (75,958 ) - (75,958 ) debt

Proceeds fromtermination of - 64,819 - 64,819 bond hedge

Payment fortermination of - (45,243 ) - (45,243 ) warrant

Net cash (usedin) provided by (49 ) 62,278 (18,857 ) 48,982 financingactivities

Effect offoreign (195 ) (39 ) (104 ) 41 currency rateson cash

Net change incash and cash (31,625 ) 56,926 (85,920 ) 34,086 equivalents

Cash and cash equivalents:

Beginning of 251,782 272,636 306,077 295,476 period

End of period $ 220,157 $ 329,562 $ 220,157 $ 329,562

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 theCompany because we believe that this information provides a more consistent andcomplete understanding of the underlying results and trends of the ongoingbusiness due to the uniqueness of these charges.

See breakdown of the reconciling line items on page 10.

Quarter Year Three Months Ended June 30, over Six Months Ended June 30, over Quarter Year

2020 2019 % 2020 2019 % change change

GAAP gross profit $ 37,797 $ 40,295 (6) % $ 75,381 $ 75,636 - %

Non-GAAP adjustments:

New headquartersnoncash rent 156 160 318 313 expense

Amortization ofacquisition-related 948 993 1,790 2,027 intangibles

Share-based 502 494 1,026 1,032 compensation

Non-GAAP gross $ 39,403 $ 41,942 (6) % $ 78,515 $ 79,008 (1) %profit



Non-GAAP gross 61.8 % 65.7 % 60.4 % 65.8 % margin



GAAP loss from $ (15,139) $ (12,145) 25 % $ (36,491) $ (25,755) 42 %operations

Non-GAAP adjustments:

Debt extinguishment - 319 - 319 fees

New headquartersnoncash rent 554 555 1,109 1,109 expense

Amortization ofacquisition-related 1,375 1,425 2,758 3,008 intangibles

Share-based 5,752 5,979 12,099 12,025 compensation

Total Non-GAAP 7,681 8,278 15,966 16,461 adjustments

Non-GAAP loss from $ (7,458) $ (3,867) 93 % $ (20,525) $ (9,294) 121 %operations



Non-GAAP loss fromoperations % of (11.7) % (6.1) % (15.8) % (7.7) % total revenue



GAAP net loss $ (17,208) $ (17,517) (2) % $ (39,943) $ (34,434) 16 %

Non-GAAP adjustments:

Total Non-GAAPadjustments 7,681 8,278 15,966 16,461 affecting loss fromoperations

Amortization ofdebt discount and 1,726 3,168 3,428 6,274 issuance costs

Loss on debt - 2,266 - 2,266 extinguishment

Tax impact relatedto non-GAAP 1,818 1,022 4,741 2,433 adjustments

Non-GAAP net loss $ (5,983) $ (2,783) 115 % $ (15,808) $ (7,000) 126 %



Non-GAAP diluted $ (0.14) $ (0.07) $ (0.37) $ (0.18) loss per share



Shares used incomputing non-GAAP 43,304 39,413 43,203 38,518 loss per share

PROS Holdings, Inc.

Supplemental Schedule of Non-GAAP Financial Measures

Increase (Decrease) in GAAP Amounts Reported

(In thousands)

(Unaudited)

Three Months Ended Six Months Ended June June 30, 30,

2020 2019 2020 2019

Cost of Subscription Items

New headquarters noncash rent 15 16 29 32 expense

Amortization of 789 831 1,472 1,701 acquisition-related intangibles

Share-based compensation 91 68 178 139

Total cost of subscription items $ 895 $ 915 $ 1,679 $ 1,872



Cost of Maintenance Items

New headquarters noncash rent 25 28 51 56 expense

Amortization of 159 162 318 326 acquisition-related intangibles

Share-based compensation 62 44 128 104

Total cost of maintenance items $ 246 $ 234 $ 497 $ 486



Cost of Services Items

New headquarters noncash rent 116 116 238 225 expense

Share-based compensation 349 382 720 789

Total cost of services items $ 465 $ 498 $ 958 $ 1,014



Sales and Marketing Items

New headquarters noncash rent 106 103 210 206 expense

Amortization of 427 432 968 981 acquisition-related intangibles

Share-based compensation 1,965 1,414 3,831 2,814

Total sales and marketing items $ 2,498 $ 1,949 $ 5,009 $ 4,001



General and Administrative Items

New headquarters noncash rent 98 88 197 181 expense

Debt extinguishment fees - 319 - 319

Share-based compensation 1,917 2,808 4,367 5,620

Total general and administrative $ 2,015 $ 3,215 $ 4,564 $ 6,120 items



Research and Development Items

New headquarters noncash rent 194 204 384 409 expense

Share-based compensation 1,368 1,263 2,875 2,559

Total research and development $ 1,562 $ 1,467 $ 3,259 $ 2,968 items

PROS Holdings, Inc.

Supplemental Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands)

(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019



GAAP Loss from $ (15,139 ) $ (12,145 ) $ (36,491 ) $ (25,755 ) Operations

Amortization ofacquisition-related 1,375 1,425 2,758 3,008 intangibles

New headquartersnoncash rent 554 555 1,109 1,109 expense

Debt extinguishment - 319 - 319 fees

Share-based 5,752 5,979 12,099 12,025 compensation

Depreciation and 2,138 2,079 4,175 3,821 other amortization

Capitalizedinternal-use (394 ) - (806 ) (868 ) softwaredevelopment costs

Adjusted EBITDA $ (5,714 ) $ (1,788 ) $ (17,156 ) $ (6,341 )





Net cash used inoperating $ (22,782 ) $ (3,549 ) $ (46,955 ) $ (11,644 ) activities

Purchase ofproperty andequipment (306 ) (1,658 ) (1,263 ) (2,269 ) (excluding newheadquarters)

Purchase of - - - (50 ) intangible asset

Capitalizedinternal-use (394 ) - (806 ) (868 ) softwaredevelopment costs

Free Cash Flow $ (23,482 ) $ (5,207 ) $ (49,024 ) $ (14,831 )



Guidance

Q3 2020 Guidance

Low High

Adjusted EBITDA

GAAP Loss from $ (20,900 ) $ (18,900 ) Operations

Amortization ofacquisition-related 1,400 1,400 intangibles

New headquartersnoncash rent 600 600 expense

Share-based 5,800 5,800 compensation

Depreciation and 2,100 2,100 other amortization

Capitalizedinternal-use (500 ) (500 ) softwaredevelopment costs

Adjusted EBITDA $ (11,500 ) $ (9,500 )

View source version on businesswire.com: https://www.businesswire.com/news/home/20200730005969/en/

CONTACT: Investor Contact: PROS Investor Relations Shannon Tatz 713-335-5932 ir@pros.com Media Contact: Amanda Parrish 832-924-4731 aparrish@pros.com