PROS Holdings, Inc. Reports Third Quarter 2016 Financial Results

PROS Holdings, Inc. (NYSE: PRO), a revenue and profit realization company, today announced financial results for the third quarter ended September 30, 2016.

CEO Andres Reiner stated, "With another solid performance in the third quarter, we are pleased to see that our innovation and cloud strategies continue to help us drive growth and deliver great value to our customers. This has been a breakthrough year for PROS as we have passed several key milestones in our cloud transformation, reflected in our momentum in subscription revenue and annual recurring revenue. We are excited to see our strategic vision unfold as PROS solutions empower our customers to outperform in this era of modern commerce."

Third Quarter 2016 Financial Highlights

Key financial results for the fiscal third quarter 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 to the prior-year period.
 
        GAAP     Non-GAAP
Q3 2016     Q3 2015     % Change Q3 2016     Q3 2015     % Change
Revenue and Bookings:
Revenue $ 38.4 $ 40.9 (6 )% $ 38.4 $ 41.7 (8 )%
Subscription Revenue 9.9 6.9 43 % 9.9 6.9 43 %
Annual Recurring Revenue ("ARR") n/a n/a n/a 114.8 93.8 22 %
Annual Contract Value ("ACV") bookings n/a n/a n/a 5.6 4.5 25 %
Profitability:
Operating Loss (13.1 ) (15.9 ) nm (8.1 ) (6.4 ) nm
Net Loss (15.7 ) (18.2 ) nm (5.7 ) (4.7 ) nm
Net Loss Per Share (0.52 ) (0.61 ) nm (0.19 ) (0.16 ) nm
Adjusted EBITDA n/a n/a n/a (6.9 ) (5.0 ) nm
Cash:
Net cash provided by operating activities 2.2 4.8 (54 )% 2.2 4.8 (54 )%
Free Cash Flow n/a n/a n/a $ 0.5 $ 1.8 (72 )%
 

The attached tables provide a summary of PROS results for the period, including a reconciliation of GAAP to non-GAAP revenue, gross profit, income (loss) from operations, and net income (loss), as well as earnings (loss) per share.

Recent Business Highlights

  • Released new innovations that enable modern commerce such as data-science driven cross-sell recommendations in PROS Smart CPQ, opportunity detection and guidance for B2B sales reps, and cloud analytics for airline group bookings.
  • Showcased as data science innovator at Microsoft Ignite during keynote presentation, and strengthened position within Microsoft Dynamics CRM ecosystem with the addition of PROS Smart CPQ in the  Microsoft AppSource, the marketplace for Azure-based applications.
  • Recognized by Computerworld for powering BRF (formerly Brasil Foods) use of data insights and guidance to drive profitability, helping BRF win a Computerworld Data+ Editor's Choice award.
  • Won four silver Stevie Awards for PROS Smart CPQ for Microsoft Dynamics and Salesforce.com in the category of best B2B software and cloud applications in the Americas and International markets.
  • Launched the Future of Revenue Management thought leadership website to help airlines around the world with management best practices and modern commerce case studies.

Financial Outlook

PROS anticipates the following for the fourth quarter and full year 2016, based on an estimated 30.6 and 30.4 million basic weighted average shares outstanding, respectively, and a 36% non-GAAP estimated tax rate:
 
        Q4 2016 Guidance      

v. Q4 2015 at Mid-

Point
     

Full Year 2016

Guidance
     

v. Prior Year at Mid-

Point
Total Revenue $37 to $38.5 (12)% $150.3 to $151.8 (12)%
Subscription Revenue $10.3 to $10.5 30% $37.5 to $37.7 29%
ARR n/a n/a $119 to $121 22%
ACV Bookings $6.1 to $8.1 11% $26.5 to $28.5 28%
Non-GAAP Loss Per Share $(0.27) to $(0.24) n/a n/a n/a
Adjusted EBITDA $(11) to $(9.5) n/a $(37.8) to $(36.3) n/a
Free Cash Flow n/a n/a $(32.5) to $(30.5) n/a
 

Conference Call

In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on Tuesday, November 1, 2016, at 4:45 p.m. EDT 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 webcast of the conference call can be accessed under the "Investor Relations" section of the Company's website at www.pros.com.

Following the call, an archived webcast will be available in the "Investor Relations" section of the Company's website at www.pros.com. A telephone replay will be available until Tuesday, November 8, 2016, at 1-877-870-5176 (toll-free) or 1-858-384-5517 using the pass code 13645374. An archived webcast of this conference call will also be available in the "Investor Relations" section of the Company's website at www.pros.com.

Analyst Day

PROS Holdings, Inc. will host an analyst day on Thursday, November 10, 2016, at the Sofitel New York. Registration will begin at 10:00 a.m. EST, and the presentation will begin at 10:30 a.m. EST. The Company's executive management team will discuss strategy, performance, and the cloud transformation. Guests can register for the live webcast or to attend in-person in the "Investor Relations" section of the Company's website at www.pros.com.

About PROS

PROS Holdings, Inc. (NYSE: PRO) is a revenue and profit realization company that helps customers realize their potential through the blend of simplicity and data science. PROS offers solutions to help accelerate sales, formulate winning pricing strategies and align product, demand and availability. PROS revenue and profit realization solutions are designed to allow customers to experience meaningful revenue growth, sustained profitability and modernized business processes. To learn more, visit www.pros.com.

Forward-looking Statements

This press release contains forward-looking statements, including statements about our future financial performance; positioning; management's confidence and optimism; customer successes; demand for enterprise revenue and profit realization software solutions; business expansion; business predictability; ARR; ACV bookings; revenue; 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 risks related to: (a) our ability to execute on our cloud-first strategy, (b) reduced revenue and cash flow resulting from our transition to a cloud-first strategy, (c) threats to the security of our or our customer's data, (d) potential business or service disruptions from our third party data centers, cloud platform providers or other unrelated service providers, (e) market acceptance of our new products and product enhancements, (f) the risk that the markets for our software does not grow as anticipated, (g) the length of our sales cycles, (h) the risk that we will not be able to maintain historical maintenance, support and subscription renewal rates, (i) competition from vendors of sales, pricing, revenue management and configure-price-quote solutions as well as from companies internally developing their own solutions, (j) potential unauthorized or improper actions of our personnel, (k) the risk that acquisitions we have and may enter into in the future may be difficult to integrate, fail to achieve our objectives, disrupt our business, dilute stockholder value or divert management attention, (l) any downturn in sales to our target markets, (m) potential delays or other challenges related to the implementation of our solutions, (n) the difficulties of making accurate estimates necessary to complete a project and recognize revenue, (o) personnel risks associated with growing a business generally, (p) the impact that a slowdown in the world or any particular economy has on our business sales cycles, prospects' and customers' spending decisions, timing of implementation decisions, payment and renewal decision, (q) our debt repayment obligations, (r) the impact of currency fluctuations on our results of operations, and (s) civil and political unrest in geographic regions in which we operate. Additional information relating to the uncertainty affecting PROS' business is contained in our filings with the Securities and Exchange Commission. These forward-looking statements represent PROS' expectations as of the date of this press release. 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 financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP (loss) income from operations, annual recurring revenue, annual contract value bookings, total contract value bookings, adjusted EBITDA margin, amortization of convertible debt discount and debt issue costs, tax rate, net income and diluted earnings 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-first transition.

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 revenue, non-GAAP (loss) income from operations, annual recurring revenue, total contract value bookings, annual contract value bookings, and non-GAAP tax rates (collectively the "non-GAAP financial measures") as follows:

Non-GAAP revenue: Business combination accounting principles under GAAP require us to recognize the fair value of software subscription, maintenance and professional services contracts assumed in our acquisitions of SignalDemand, Inc. and Cameleon Software SA. A portion of these software subscription and professional services are deferred and typically recognized over the term of the software subscription contract, so our GAAP revenues during the term of the contract after the acquisition do not reflect the full amount of revenues that would have been reported if the acquired deferred software subscription and professional services revenues were not written down to fair value. The revenue for maintenance is deferred and typically recognized over a one-year period, so our GAAP revenues for the one-year period after the acquisition do not reflect the full amount of revenues that would have been reported if the acquired deferred maintenance revenue was not written down to fair value. The non-GAAP revenue adjustments eliminate the effect of the deferred revenue write-down and include the costs associated with the revenue adjustment. We believe these adjustments to the revenue from these contracts and to the associated costs are useful to investors as an additional means to reflect revenue trends of our business.

Non-GAAP income from operations: Non-GAAP (loss) income from operations includes the non-GAAP revenue discussed above and also excludes the impact of stock-based compensation, amortization of acquisition-related intangibles, amortization of debt discount and issuance costs, recovery of bankruptcy claims, severance, as well as the tax consequences associated with stock-based compensation costs arising from our acquisitions. Non-GAAP (loss) income 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.
  • Amortization of Debt Discount and Issuance Costs: Amortization of debt discount and issuance costs are related to our Senior Notes due 2019. 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 which includes both subscription and maintenance contracts, and excludes perpetual license, term license and service agreements, which are current and contracted with a future start date. ARR should be viewed independently of revenue and any other GAAP measure.

Annual Contract Value Bookings: Annual Contract Value ("ACV") bookings are comprised of the estimated annual value of our Total Contract Value ("TCV") bookings. ACV bookings are comprised of annual maintenance and subscriptions, one seventh of the license TCV, and excludes services and subscription renewals. ACV should be viewed independently of revenue and any other GAAP measure. TCV bookings are comprised of the total value of new customer contracts closed during a specified period, excluding maintenance in excess of one year, and including license, maintenance, services, term license and subscription renewals, that we believe to be firm commitments to provide our software solutions and related services. Bookings by their nature are significantly based on estimates and judgments that we make regarding total contract values, and our bookings growth projections are not meant as a substitute measure for revenue in accordance with GAAP. We believe our bookings growth projection is useful to investors as an additional means to evaluate our business performance.

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 (loss) income before interest expense, provision for income taxes, depreciation and amortization, as adjusted to eliminate the effect of the deferred revenue write-down from our acquisitions of SignalDemand, Inc. and Cameleon Software SA, tax consequences associated with the stock-based compensation costs arising from our acquisitions, amortization of acquisition-related intangibles, depreciation and amortization, impairment of internal-use software and capitalized internal-use software development costs. Adjusted EBITDA should not be considered as an alternative to net (loss) income 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 operating activities, less additions to property, plant and equipment and capitalized internal-use software development costs.

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)
 
          September 30, 2016       December 31, 2015
Assets:
Current assets:
Cash and cash equivalents $ 95,208 $ 161,770
Short-term investments 50,952 2,500
Accounts and unbilled receivables, net of allowance of $360 and $586, respectively 26,443 39,115
Prepaid and other current assets 6,710   7,540  
Total current assets 179,313 210,925
Property and equipment, net 15,456 15,777
Intangibles, net 12,114 14,191
Goodwill 20,718 20,445
Other long-term assets 3,359   1,873  
Total assets $ 230,960   $ 263,211  
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable and other liabilities $ 3,406 $ 8,273
Accrued liabilities 5,235 4,333
Accrued payroll and other employee benefits 13,791 13,084
Deferred revenue 67,275   60,664  
Total current liabilities 89,707 86,354
Long-term deferred revenue 9,939 4,665
Convertible debt, net 120,647 115,860
Other long-term liabilities 687   918  
Total liabilities 220,980   207,797  
Stockholders' 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; 34,938,021 and

34,156,561 shares issued, respectively; 30,520,436 and 29,738,976 shares

outstanding, respectively
35 34
Additional paid-in capital 169,395 158,674
Treasury stock, 4,417,585 common shares, at cost (13,938 ) (13,938 )
Accumulated deficit (141,746 ) (85,034 )
Accumulated other comprehensive loss (3,766 ) (4,322 )
Total stockholders' equity 9,980   55,414  
Total liabilities and stockholders' equity $ 230,960   $ 263,211  
 
 

PROS Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands, except per share data)

(Unaudited)
 
          Three Months Ended September 30,     Nine Months Ended September 30,
2016     2015 2016     2015
Revenue:
License $ 2,419 $ 5,980 $ 8,178 $ 26,564
Services 8,447 12,273 26,873 32,100
Subscription 9,852   6,886   27,196   20,966  
Total license, services and subscription 20,718 25,139 62,247 79,630
Maintenance and support 17,666   15,727   51,103   46,604  
Total revenue 38,384 40,866 113,350 126,234
Cost of revenue:
License 38 51 199 242
Services 7,380 9,138 24,594 27,064
Subscription 4,808   3,105   12,342   9,330  
Total license, services and subscription 12,226 12,294 37,135 36,636
Maintenance and support 3,416   2,972   10,266   9,361  
Total cost of revenue 15,642   15,266   47,401   45,997  
Gross profit 22,742 25,600 65,949 80,237
Operating expenses:
Selling and marketing 13,641 19,639 47,725 55,810
General and administrative 9,253 9,626 27,910 29,786
Research and development 12,964   12,201   39,454   35,098  
Loss from operations (13,116 ) (15,866 ) (49,140 ) (40,457 )
Convertible debt interest and amortization (2,339 ) (2,234 ) (6,943 ) (6,642 )
Other expense, net (26 ) (152 ) (139 ) (571 )
Loss before income tax provision (benefit) (15,481 ) (18,252 ) (56,222 ) (47,670 )
Income tax provision (benefit) 227   (70 ) 490   410  
Net loss $ (15,708 ) $ (18,182 ) $ (56,712 ) $ (48,080 )
Net loss per share:
Basic and diluted $ (0.52 ) $ (0.61 ) $ (1.87 ) $ (1.63 )
Weighted average number of shares:
Basic and diluted 30,469 29,649 30,341 29,530
 
 

PROS Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)
 
         

Three Months Ended

September 30,
   

Nine Months Ended

September 30,
2016     2015 2016     2015
Operating activities:
Net loss $ (15,708 ) $ (18,182 ) $ (56,712 ) $ (48,080 )
Adjustments to reconcile net loss to net cash provided by

operating activities:
Depreciation and amortization 2,423 3,152 7,396 7,923
Amortization of debt discount and issuance costs 1,620 1,514 4,786 4,485
Share-based compensation 3,192 6,631 14,445 21,381
Deferred income tax, net 22 22 64 138
Provision for doubtful accounts (87 ) 66 (226 ) 132
Changes in operating assets and liabilities:
Accounts and unbilled receivables 10,419 9,657 12,899 20,474
Prepaid expenses and other assets 58 (1,891 ) (746 ) (383 )
Accounts payable and other liabilities (1,092 ) (1,615 ) (2,546 ) (3,330 )
Accrued liabilities 247 235 887 364
Accrued payroll and other employee benefits 2,955 1,415 709 (4,909 )
Deferred revenue (1,836 ) 3,823   11,885   8,609  
Net cash provided by (used in) operating activities 2,213 4,827 (7,159 ) 6,804
Investing activities:
Purchases of property and equipment (1,185 ) (3,006 ) (6,524 ) (4,856 )
Capitalized internal-use software development costs (497 ) (569 ) (233 )
Purchases of short-term investments (56,006 ) (23,976 ) (144,934 ) (55,176 )
Proceeds from maturities of short-term investments 47,000   12,700   96,500   32,700  
Net cash used in investing activities (10,688 ) (14,282 ) (55,527 ) (27,565 )
Financing activities:
Exercise of stock options 406 (334 ) 420 433
Proceeds from employee stock plans 620 457 1,090 839
Tax withholding related to net share settlement of stock awards (405 ) (238 ) (5,244 ) (4,966 )
Payment of contingent consideration for PROS France (1,304 ) (1,304 )
Payments of notes payable (105 ) (53 ) (196 ) (212 )
Debt issuance costs related to convertible debt         (408 )
Net cash provided by (used in) financing activities 516 (1,472 ) (3,930 ) (5,618 )
Effect of foreign currency rates on cash 16   44   54   308  
Net change in cash and cash equivalents (7,943 ) (10,883 ) (66,562 ) (26,071 )
Cash and cash equivalents:
Beginning of period 103,151   145,831   161,770   161,019  
End of period $ 95,208   $ 134,948   $ 95,208   $ 134,948  
 

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    

Quarter

over
    Nine Months Ended     Year over
September 30, Quarter September 30, Year
2016     2015 % change 2016     2015 % change
GAAP revenue $ 38,384 $ 40,866 (6 )% $ 113,350 $ 126,234 (10 )%
Non-GAAP adjustment:
Acquisition-related deferred revenue write-down       868         3,065  
Non-GAAP revenue $ 38,384   $ 41,734   (8 )% $ 113,350   $ 129,299   (12 )%
 
GAAP gross profit $ 22,742 $ 25,600 (11 )% $ 65,949 $ 80,237 (18 )%
Non-GAAP adjustments:
Acquisition-related deferred revenue write-down, net of cost of revenue 328 1,167
Amortization of intangible assets 490 553 1,476 1,659
Share-based compensation   544     852     1,720     2,896  
Non-GAAP gross profit $ 23,776   $ 27,333   (13 )% $ 69,145   $ 85,959   (20 )%
 
Non-GAAP gross margin 61.9 % 65.5 % 61.0 % 66.5 %
 
GAAP loss from operations $ (13,116 ) $ (15,866 ) (17 )% $ (49,140 ) $ (40,457 ) 21 %
Non-GAAP adjustments:
Acquisition-related deferred revenue write-down, net of cost of revenue 328 1,167
Amortization of intangible assets 737 1,703 2,288 3,866
Accretion expense for acquisition-related contingent consideration 22
Recovery of bankruptcy claim (626 )
Severance 1,070 756 1,070 756
Share-based compensation   3,192     6,631     14,445     21,381  
Total Non-GAAP adjustments $ 4,999   $ 9,418   $ 17,803   $ 26,566  
Non-GAAP loss from operations $ (8,117 ) $ (6,448 ) 26 % $ (31,337 ) $ (13,891 ) 126 %
 
Non-GAAP loss from operations % of total revenue (21.1 )% (15.5 )% (27.6 )% (10.7 )%
 
GAAP net loss $ (15,708 ) $ (18,182 ) (14 )% $ (56,712 ) $ (48,080 ) 18 %
Non-GAAP adjustments:
Total Non-GAAP adjustments affecting loss from operations 4,999 9,418 17,803 26,566
Amortization of debt discount and issuance costs 1,620 1,514 4,786 4,485
Tax impact related to non-GAAP adjustments   3,418     2,566     12,598     6,376  
Non-GAAP net loss $ (5,671 ) $ (4,684 ) 21 % $ (21,525 ) $ (10,653 ) 102 %
 
Non-GAAP diluted loss per share $ (0.19 ) $ (0.16 ) $ (0.71 ) $ (0.36 )
 
Shares used in computing non-GAAP loss per share 30,469 29,649 30,341 29,530
 
 

PROS Holdings, Inc.

Supplemental Schedule of Non-GAAP Financial Measures

Increase (Decrease) in GAAP Amounts Reported

(In thousands)

(Unaudited)
 
        Three Months Ended September 30,     Nine Months Ended September 30,
2016     2015 2016     2015
Revenue Items
Acquisition-related deferred revenue write-down - service revenue 823 2,766
Acquisition-related deferred revenue write-down - subscription revenue 20 224
 
Acquisition-related deferred revenue write-down - maintenance revenue   25     75  
Total revenue items $   $ 868   $   $ 3,065  
 
Cost of License Items
Amortization of intangible assets 10   10   31   31  
Total cost of license items $ 10   $ 10   $ 31   $ 31  
 
Cost of Services Items
Acquisition-related deferred cost write-down (540 ) (1,898 )
Share-based compensation 424   754   1,289   2,505  
Total cost of services items $ 424   $ 214   $ 1,289   $ 607  
 
Cost of Subscription Items
Amortization of intangible assets 319 382 962 1,145
Share-based compensation 31   35   185   200  
Total cost of subscription items $ 350   $ 417   $ 1,147   $ 1,345  
 
Cost of Maintenance Items
Amortization of intangible assets 161 161 483 483
Share-based compensation 89   63   246   191  
Total cost of maintenance items $ 250   $ 224   $ 729   $ 674  
 
Sales and Marketing Items
Amortization of intangible assets 247 1,067 806 1,956
Severance 1,070 342 1,070 342
Share-based compensation (918 ) 2,229   2,559   6,541  
Total sales and marketing items $ 399   $ 3,638   $ 4,435   $ 8,839  
 
General and Administrative Items
Accretion expense for acquisition-related contingent consideration 22
Amortization of intangible assets 83 6 251
Recovery of bankruptcy claim (626 )
Share-based compensation 2,235   2,280   6,267   8,000  
Total general and administrative items $ 2,235   $ 2,363   $ 6,273   $ 7,647  
 
Research and Development Items
Severance 414 414
Share-based compensation 1,331   1,270   3,899   3,944  
Total research and development items $ 1,331   $ 1,684   $ 3,899   $ 4,358  
 
 

PROS Holdings, Inc.

Supplemental Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands)

(Unaudited)
 
        Three Months Ended September 30,     Nine Months Ended September 30,
2016     2015 2016     2015
Adjusted EBITDA
GAAP Loss from Operations $ (13,116 ) $ (15,866 ) $ (49,140 ) $ (40,457 )
Acquisition-related deferred revenue write-down, net of cost of revenue 328 1,167
Amortization of intangible assets 737 1,703 2,288 3,866
Accretion expense for acquisition-related contingent consideration 22
Recovery of bankruptcy claim (626 )
Severance 1,070 756 1,070 756
Share-based compensation 3,192 6,631 14,445 21,381
Depreciation 1,686 1,449 5,108 4,057
Capitalized internal-use software development costs (497 )   (569 ) (233 )
Adjusted EBITDA $ (6,928 ) $ (4,999 ) $ (26,798 ) $ (10,067 )
 
Free Cash Flow
Net cash provided by (used in) operating activities $ 2,213 $ 4,827 $ (7,159 ) $ 6,804
Purchase of property and equipment (1,185 ) (3,006 ) (6,524 ) (4,856 )
Capitalized internal-use software development costs (497 )   (569 ) (233 )
Free Cash Flow $ 531   $ 1,821   $ (14,252 ) $ 1,715  
 
 
Guidance Q4 2016 Guidance Full Year 2016 Guidance
Low High Low High
Adjusted EBITDA
GAAP Loss from Operations $ (18,850 ) $ (17,350 ) $ (67,915 ) $ (66,415 )
Amortization of intangible assets 700 700 2,950 2,950
Severance 1,070 1,070
Share-based compensation 6,250 6,250 20,695 20,695
Depreciation 1,400 1,400 6,500 6,500
Capitalized internal-use software development costs (500 ) (500 ) (1,100 ) (1,100 )
Adjusted EBITDA $ (11,000 ) $ (9,500 ) $ (37,800 ) $ (36,300 )
 

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