PROS Holdings, Inc. - Quarter Report: 2021 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
___________________________________________________________________________
FORM 10-Q
___________________________________________________________________________
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended June 30, 2021
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from to .
Commission File Number: 001-33554
___________________________________________________________________________
PROS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
__________________________________________________________________________
| Delaware | 76-0168604 | |||||||
| (State of Incorporation) | (I.R.S. Employer Identification No.) | |||||||
| 3200 Kirby Drive, Suite 600 | 77098 | |||||||||||||||||||
| Houston | TX | |||||||||||||||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||||||||||||||
| (713) | 335-5151 | |||||||||||||||||||
| (Registrant's telephone number, including area code) | ||||||||||||||||||||
| (Former address, if changed since last report) | ||||||||||||||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | |||||||||||||||
| Common stock $0.001 par value per share | PRO | New York Stock Exchange | |||||||||||||||
Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated Filer | ☐ | ||||||||
| Non-Accelerated Filer | ☐ (do not check if a smaller reporting company) | Smaller Reporting Company | ☐ | ||||||||
| Emerging Growth Company | ☐ | ||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares outstanding of the registrant's Common Stock, $0.001 par value, was 44,378,704 as of July 27, 2021.
PROS Holdings, Inc.
Form 10-Q
For the Quarterly Period Ended June 30, 2021
Table of Contents
| Page | ||||||||
| Item 1. | ||||||||
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements in this report other than historical facts are forward-looking and are based on current estimates, assumptions, trends, and projections. Statements which include the words "believes," "seeks," "expects," "may," "should," "intends," "likely," "targets," "plans," "anticipates," "estimates," or the negative version of those words and similar expressions are intended to identify forward-looking statements. Numerous important factors, risks and uncertainties affect our operating results, including, without limitation, those described in our Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q, and could cause our actual results to differ materially, from the results implied by these or any other forward-looking statements made by us or on our behalf. You should pay particular attention to the important risk factors and cautionary statements described in the section of our Annual Report on Form 10-K entitled "Risk Factors" and the section of this Quarterly Report on Form 10-Q entitled "Risk Factors." You should also carefully review the cautionary statements described in the other documents we file with the Securities and Exchange Commission, specifically the Annual Report on Form 10-K, all Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
You should not rely on forward-looking statements as predictions of future events, as we cannot guarantee that future results, levels of activity, performance or achievements will meet expectations. The forward-looking statements made herein are only made as of the date hereof, and we undertake no obligation to publicly update such forward-looking statements for any reason.
3
PART I. FINANCIAL INFORMATION
ITEM 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
PROS Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
| June 30, 2021 | December 31, 2020 | ||||||||||
| Assets: | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 318,326 | $ | 329,134 | |||||||
Trade and other receivables, net of allowance of $1,182 and $4,122, respectively | 41,295 | 49,578 | |||||||||
| Deferred costs, current | 5,879 | 5,941 | |||||||||
| Prepaid and other current assets | 9,376 | 9,647 | |||||||||
| Total current assets | 374,876 | 394,300 | |||||||||
| Property and equipment, net | 34,267 | 36,504 | |||||||||
| Operating lease right-of-use assets | 27,632 | 30,689 | |||||||||
| Deferred costs, noncurrent | 11,196 | 12,544 | |||||||||
| Intangibles, net | 6,596 | 8,341 | |||||||||
| Goodwill | 49,698 | 50,044 | |||||||||
| Other assets, noncurrent | 7,238 | 7,549 | |||||||||
| Total assets | $ | 511,503 | $ | 539,971 | |||||||
| Liabilities and Stockholders' Equity: | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and other liabilities | $ | 5,265 | $ | 4,246 | |||||||
| Accrued liabilities | 12,786 | 13,065 | |||||||||
| Accrued payroll and other employee benefits | 22,543 | 25,514 | |||||||||
| Operating lease liabilities, current | 6,203 | 5,937 | |||||||||
| Deferred revenue, current | 101,235 | 99,156 | |||||||||
| Total current liabilities | 148,032 | 147,918 | |||||||||
| Deferred revenue, noncurrent | 7,896 | 11,372 | |||||||||
| Convertible debt, net | 287,542 | 218,028 | |||||||||
| Operating lease liabilities, noncurrent | 40,837 | 44,099 | |||||||||
| Other liabilities, noncurrent | 1,468 | 1,517 | |||||||||
| Total liabilities | 485,775 | 422,934 | |||||||||
| Commitments and contingencies (see Note 9) | |||||||||||
| 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; 49,020,405 and 48,142,267 shares issued, respectively; 44,339,682 and 43,461,544 shares outstanding, respectively | 49 | 48 | |||||||||
| Additional paid-in capital | 526,926 | 589,040 | |||||||||
Treasury stock, 4,680,723 common shares, at cost | (29,847) | (29,847) | |||||||||
| Accumulated deficit | (467,518) | (438,773) | |||||||||
| Accumulated other comprehensive loss | (3,882) | (3,431) | |||||||||
| Total stockholders' equity | 25,728 | 117,037 | |||||||||
| Total liabilities and stockholders' equity | $ | 511,503 | $ | 539,971 | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
PROS Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands, except per share data)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Subscription | $ | 44,224 | $ | 42,377 | $ | 86,872 | $ | 85,547 | |||||||||||||||
| Maintenance and support | 8,570 | 11,741 | 18,244 | 24,264 | |||||||||||||||||||
| Total subscription, maintenance and support | 52,794 | 54,118 | 105,116 | 109,811 | |||||||||||||||||||
| Services | 9,607 | 9,629 | 18,663 | 20,247 | |||||||||||||||||||
| Total revenue | 62,401 | 63,747 | 123,779 | 130,058 | |||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Subscription | 13,589 | 12,392 | 27,390 | 25,256 | |||||||||||||||||||
| Maintenance and support | 2,157 | 2,610 | 4,415 | 5,400 | |||||||||||||||||||
| Total cost of subscription, maintenance and support | 15,746 | 15,002 | 31,805 | 30,656 | |||||||||||||||||||
| Services | 10,658 | 10,948 | 21,091 | 24,021 | |||||||||||||||||||
| Total cost of revenue | 26,404 | 25,950 | 52,896 | 54,677 | |||||||||||||||||||
| Gross profit | 35,997 | 37,797 | 70,883 | 75,381 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling and marketing | 21,190 | 21,011 | 42,754 | 45,931 | |||||||||||||||||||
| Research and development | 20,095 | 18,397 | 40,553 | 37,533 | |||||||||||||||||||
| General and administrative | 11,018 | 13,528 | 24,472 | 28,408 | |||||||||||||||||||
| Loss from operations | (16,306) | (15,139) | (36,896) | (36,491) | |||||||||||||||||||
| Convertible debt interest and amortization | (1,576) | (2,085) | (3,152) | (4,147) | |||||||||||||||||||
| Other income, net | 4 | 146 | 290 | 977 | |||||||||||||||||||
| Loss before income tax provision | (17,878) | (17,078) | (39,758) | (39,661) | |||||||||||||||||||
| Income tax provision | 168 | 130 | 317 | 282 | |||||||||||||||||||
| Net loss | $ | (18,046) | $ | (17,208) | $ | (40,075) | $ | (39,943) | |||||||||||||||
| Net loss per share: | |||||||||||||||||||||||
| Basic and diluted | $ | (0.41) | $ | (0.40) | $ | (0.90) | $ | (0.92) | |||||||||||||||
| Weighted average number of shares: | |||||||||||||||||||||||
| Basic and diluted | 44,321 | 43,304 | 44,283 | 43,203 | |||||||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustment | $ | 157 | $ | 86 | $ | (451) | $ | (84) | |||||||||||||||
| Other comprehensive income (loss), net of tax | 157 | 86 | (451) | (84) | |||||||||||||||||||
| Comprehensive loss | $ | (17,889) | $ | (17,122) | $ | (40,526) | $ | (40,027) | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
PROS Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Operating activities: | |||||||||||
| Net loss | $ | (40,075) | $ | (39,943) | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | 6,092 | 6,933 | |||||||||
| Amortization of debt discount and issuance costs | 746 | 3,448 | |||||||||
| Share-based compensation | 16,776 | 12,099 | |||||||||
| Provision for doubtful accounts | (1,690) | 5,286 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts and unbilled receivables | 9,919 | 5,116 | |||||||||
| Deferred costs | 1,409 | 1,626 | |||||||||
| Prepaid expenses and other assets | 1,095 | 323 | |||||||||
| Operating lease right-of-use assets and liabilities | 26 | 6,122 | |||||||||
| Accounts payable and other liabilities | 899 | (2,525) | |||||||||
| Accrued liabilities | (201) | (6,623) | |||||||||
| Accrued payroll and other employee benefits | (2,975) | (14,979) | |||||||||
| Deferred revenue | (1,435) | (23,838) | |||||||||
| Net cash used in operating activities | (9,414) | (46,955) | |||||||||
| Investing activities: | |||||||||||
| Purchases of property and equipment | (2,085) | (19,198) | |||||||||
| Capitalized internal-use software development costs | — | (806) | |||||||||
| Investment in equity securities | (501) | — | |||||||||
| Net cash used in investing activities | (2,586) | (20,004) | |||||||||
| Financing activities: | |||||||||||
| Proceeds from employee stock plans | 1,596 | 1,364 | |||||||||
| Tax withholding related to net share settlement of stock awards | (352) | (20,221) | |||||||||
| Net cash provided by (used in) financing activities | 1,244 | (18,857) | |||||||||
| Effect of foreign currency rates on cash | (52) | (104) | |||||||||
| Net change in cash and cash equivalents | (10,808) | (85,920) | |||||||||
| Cash and cash equivalents: | |||||||||||
| Beginning of period | 329,134 | 306,077 | |||||||||
| End of period | $ | 318,326 | $ | 220,157 | |||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Noncash investing activities: | |||||||||||
| Purchase of property and equipment accrued but not paid | $ | 335 | $ | 3,538 | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
PROS Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
(Unaudited)
| Three Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated (Deficit) Retained Earnings | Accumulated other comprehensive loss | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2021 | 44,252,765 | $ | 49 | $ | 518,338 | 4,680,723 | $ | (29,847) | $ | (449,472) | $ | (4,039) | $ | 35,029 | |||||||||||||||||||||||||||||||||
| Stock awards net settlement | 86,917 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Noncash share-based compensation | — | — | 8,588 | — | — | — | — | 8,588 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | 157 | 157 | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (18,046) | — | (18,046) | |||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | 44,339,682 | $ | 49 | $ | 526,926 | 4,680,723 | $ | (29,847) | $ | (467,518) | $ | (3,882) | $ | 25,728 | |||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated (Deficit) Retained Earnings | Accumulated other comprehensive loss | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2020 | 43,291,660 | $ | 48 | $ | 548,014 | 4,680,723 | $ | (29,847) | $ | (384,524) | $ | (4,081) | $ | 129,610 | |||||||||||||||||||||||||||||||||
| Stock awards net settlement | 12,801 | — | (49) | — | — | — | — | (49) | |||||||||||||||||||||||||||||||||||||||
| Noncash share-based compensation | — | — | 5,731 | — | — | — | — | 5,731 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | 86 | 86 | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (17,208) | — | (17,208) | |||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2020 | 43,304,461 | $ | 48 | $ | 553,696 | 4,680,723 | $ | (29,847) | $ | (401,732) | $ | (3,995) | $ | 118,170 | |||||||||||||||||||||||||||||||||
7
PROS Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Continued)
(In thousands, except share data)
(Unaudited)
| Six Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated (Deficit) Retained Earnings | Accumulated other comprehensive loss | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | 43,461,544 | $ | 48 | $ | 589,040 | 4,680,723 | $ | (29,847) | $ | (438,773) | $ | (3,431) | $ | 117,037 | |||||||||||||||||||||||||||||||||
| Stock awards net settlement | 836,168 | 1 | (353) | — | — | — | — | (352) | |||||||||||||||||||||||||||||||||||||||
| Proceeds from employee stock plans | 41,970 | — | 1,596 | — | — | — | — | 1,596 | |||||||||||||||||||||||||||||||||||||||
| Cumulative effect of adoption of ASU 2020-06 | — | — | (80,098) | — | — | 11,330 | — | (68,768) | |||||||||||||||||||||||||||||||||||||||
| Noncash share-based compensation | — | — | 16,741 | — | — | — | — | 16,741 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | (451) | (451) | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (40,075) | — | (40,075) | |||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | 44,339,682 | $ | 49 | $ | 526,926 | 4,680,723 | $ | (29,847) | $ | (467,518) | $ | (3,882) | $ | 25,728 | |||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated (Deficit) Retained Earnings | Accumulated other comprehensive loss | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | 42,630,123 | $ | 47 | $ | 560,496 | 4,680,723 | $ | (29,847) | $ | (361,789) | $ | (3,911) | $ | 164,996 | |||||||||||||||||||||||||||||||||
| Stock awards net settlement | 647,401 | 1 | (20,222) | — | — | — | — | (20,221) | |||||||||||||||||||||||||||||||||||||||
| Proceeds from employee stock plans | 26,774 | — | 1,364 | — | — | — | — | 1,364 | |||||||||||||||||||||||||||||||||||||||
| Warrant exercise | 163 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Noncash share-based compensation | — | — | 12,058 | — | — | — | — | 12,058 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | (84) | (84) | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (39,943) | — | (39,943) | |||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2020 | 43,304,461 | $ | 48 | $ | 553,696 | 4,680,723 | $ | (29,847) | $ | (401,732) | $ | (3,995) | $ | 118,170 | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
PROS Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Nature of Operations
PROS Holdings, Inc., a Delaware corporation, through its operating subsidiaries (collectively, the "Company"), provides software-as-a-service ("SaaS") solutions that optimize shopping and selling experiences. Built on the PROS platform, these intelligent solutions leverage business artificial intelligence ("AI"), intuitive user experiences and process automation to deliver frictionless, personalized purchasing experiences designed to meet the real-time demands of today’s business-to-business ("B2B") and business-to-consumer ("B2C") omnichannel shoppers, regardless of industry. Companies can use these solutions to assess their market environments in real time to deliver customized prices and offers. The Company's solutions enable buyers to move fluidly across its customers’ direct sales, partner, online, mobile and emerging channels with personalized experiences regardless of which channel those buyers choose. The Company's decades of data science and AI expertise are infused into its solutions and are designed to reduce time and complexity through actionable intelligence.
2. Summary of Significant Accounting Policies
Basis of presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission ("SEC"). In management's opinion, the accompanying interim unaudited condensed consolidated financial statements include all adjustments necessary for a fair statement of the financial position of the Company as of June 30, 2021, the results of operations for the three and six months ended June 30, 2021 and 2020, cash flows for the six months ended June 30, 2021 and 2020, and stockholders' equity for the three and six months ended June 30, 2021 and 2020.
Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 ("Annual Report") filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, 2020 was derived from the Company's audited consolidated financial statements but does not include all disclosures required under GAAP.
Risks and uncertainties
Since its initial onset in early 2020, the coronavirus ("COVID-19") pandemic has created significant global uncertainty, and compliance with the various containment measures implemented by governmental authorities has impacted the Company's business, as well as the businesses of its customers, suppliers and other counterparties, and the scope and duration of the outbreak and timeframe for economic recovery is uncertain. As there are no comparable recent events that provide guidance as to the long-term effect of the COVID-19 pandemic, the Company is unable to predict the full impact that COVID-19 will have on its results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures.
Changes in accounting policies
There have been no material changes in the Company’s significant accounting policies and their application as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, except for the Company's adoption of certain accounting standards described in more detail under "Recently adopted accounting pronouncements" in this Note 2 below.
Fair value measurement
The Company's financial assets that are included in cash and cash equivalents and that are measured at fair value on a recurring basis consisted of $293.8 million and $301.3 million at June 30, 2021 and December 31, 2020, respectively, and were invested in treasury money market funds. The fair value of the treasury money market funds is determined based on quoted market prices, which represents level 1 in the fair value hierarchy as defined by ASC 820.
9
Trade and other receivables
Trade and other receivables are primarily comprised of trade receivables, net of allowance for doubtful accounts, contract assets and unbilled receivables. The Company records trade accounts receivable for its unconditional rights to consideration arising from the Company's performance under contracts with customers. The Company's standard billing terms are that payment is due upon receipt of invoice, payable generally within thirty to sixty days. The carrying value of such receivables, net of the allowance for doubtful accounts, represents their estimated net realizable value. When developing its estimate of expected credit losses on trade and other receivables, the Company considers the available information relevant to assessing the collectability of cash flows, which includes a combination of both internal and external information relating to past events, current conditions, and future forecasts as well as relevant qualitative and quantitative factors that relate to the environment in which the Company operates.
Contract assets represent conditional rights to consideration that have been recognized as revenue in advance of billing the customer. Unbilled receivables represent unconditional rights to consideration arising from contingent revenue that have been recognized as revenue in advance of billing the customer.
Deferred costs
Sales commissions earned by the Company's sales representatives are considered incremental and recoverable costs of obtaining a customer contract. Sales commissions are deferred and amortized on a straight-line basis over the period of benefit, which the Company has determined to be five to eight years. The Company determined the period of benefit by taking into consideration its customer contracts, expected renewals of those customer contracts (as the Company currently does not pay an incremental sales commission for renewals), the Company's technology and other factors. The Company also defers amounts earned by employees other than sales representatives who earn incentive payments under compensation plans that are also tied to the value of customer contracts acquired. Deferred costs were $17.1 million and $18.5 million as of June 30, 2021 and December 31, 2020, respectively. Amortization expense for the deferred costs was $1.5 million and $1.4 million for the three months ended June 30, 2021 and 2020, respectively, and $3.1 million and $2.9 million for the six months ended June 30, 2021 and 2020, respectively. Amortization of deferred costs is included in selling and marketing expense in the accompanying unaudited condensed consolidated statements of comprehensive income (loss).
Deferred implementation costs
The Company capitalizes certain contract fulfillment costs, including personnel and other costs (such as hosting, employee salaries, benefits and payroll taxes), that are associated with arrangements where professional services are not distinct from other undelivered obligations in its customer contracts. The Company analyzes implementation costs and capitalizes those costs that are directly related to customer contracts, that are expected to be recoverable, and that enhance the resources which will be used to satisfy the undelivered performance obligations in those contracts. Deferred implementation costs are amortized ratably over the remaining contract term once the revenue recognition criteria for the respective performance obligation has been met and revenue recognition commences. Deferred implementation costs were $2.7 million and $2.9 million as of June 30, 2021 and December 31, 2020, respectively. Amortization expense for the deferred implementation costs was $0.3 million and $0.6 million for the three months ended June 30, 2021 and 2020, respectively, and $0.6 million and $1.0 million for the six months ended June 30, 2021 and 2020, respectively. Deferred implementation costs are included in prepaid and other current assets and other assets, noncurrent in the unaudited condensed consolidated balance sheets. Amortization of deferred implementation costs is included in cost of subscription and cost of services revenues in the accompanying unaudited condensed consolidated statements of comprehensive income (loss).
10
Recently adopted accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options ("Subtopic 470-20") and Derivatives and Hedging - Contracts in an Entity's Own Equity ("Subtopic 815-40"), which simplifies the accounting for certain convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity's own equity, and modifies the guidance on diluted earnings per share calculations as a result of these changes. This new standard is effective for the Company's interim and annual periods beginning January 1, 2022, and earlier adoption is permitted on January 1, 2021. The Company may elect to apply the amendments on a retrospective or modified retrospective basis. The Company early adopted the new standard effective January 1, 2021 on the modified retrospective basis. The adoption decreased additional paid-in capital by $80.1 million related to the equity conversion component of the outstanding convertible notes which was previously separated and recorded in equity, and increased convertible debt, net by $68.8 million related to the removal of the debt discounts and adjustment of debt issuance cost recorded under the previous standard. The net cumulative effect of the adjustments of $11.3 million was recorded as a decrease to the opening balance of the accumulated deficit as of January 1, 2021. As a result of the adoption the non-cash interest expense was lower for three and six months ended June 30, 2021 and will be lower for the remaining term of the outstanding convertible notes. The adoption had no impact on the condensed consolidated statements of cash flows.
Recently issued accounting pronouncements not yet adopted
With the exception of the new standard discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2021, as compared to the recent accounting pronouncements described in the Company's Annual Report, that are of significance or potential significance to the Company.
3. Deferred Revenue and Performance Obligations
Deferred Revenue
For the three months ended June 30, 2021 and 2020, the Company recognized approximately $45.3 million and $48.8 million, respectively, and for the six months ended June 30, 2021 and 2020, the Company recognized approximately $70.3 million and $84.0 million, respectively, of revenue that was included in the deferred revenue balances at the beginning of the respective periods and primarily related to subscription services, maintenance and support, and services.
Performance Obligations
As of June 30, 2021, the Company expects to recognize approximately $390.5 million of revenue from remaining performance obligations. The Company expects, based on the terms of the related, underlying contractual arrangements, to recognize revenue on approximately $190.3 million of these performance obligations over the next 12 months, with the balance recognized thereafter. However, as a result of uncertain economic conditions caused by COVID-19, the amount of revenue recognized from the Company's contractual remaining performance obligations could vary and be less than what the Company expects as revenue recognized could be delayed or not occur depending on the ongoing impact of COVID-19.
4. Disaggregation of Revenue
Revenue by Geography
The geographic information in the table below is presented for the three and six months ended June 30, 2021 and 2020. The Company categorizes geographic revenues based on the location of the customer's headquarters. Because the Company's contracts are predominately denominated in U.S. dollars, it has limited exposure to foreign currency exchange risk as discussed under "Foreign Currency Exchange Risk" of Part I, Item 3 below.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Revenue | Percent | Revenue | Percent | Revenue | Percent | Revenue | Percent | |||||||||||||||||||||||||||||||||||||||
| United States of America | $ | 21,875 | 35 | % | $ | 20,715 | 32 | % | $ | 42,751 | 35 | % | $ | 42,515 | 33 | % | |||||||||||||||||||||||||||||||
| Europe | 18,562 | 30 | % | 17,682 | 28 | % | 37,254 | 30 | % | 37,612 | 29 | % | |||||||||||||||||||||||||||||||||||
| The rest of the world | 21,964 | 35 | % | 25,350 | 40 | % | 43,774 | 35 | % | 49,931 | 38 | % | |||||||||||||||||||||||||||||||||||
| Total revenue | $ | 62,401 | 100 | % | $ | 63,747 | 100 | % | $ | 123,779 | 100 | % | $ | 130,058 | 100 | % | |||||||||||||||||||||||||||||||
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5. Leases
The Company has operating leases for data centers, computer infrastructure, corporate offices and certain equipment. These leases have remaining lease terms ranging from 1 year to 12 years. Some of these leases include options to extend for up to 15 years, and some include options to terminate within 1 year.
As of June 30, 2021, the Company did not have any finance leases.
Supplemental cash flow information related to leases was as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Cash paid for operating lease liabilities | $ | 1,917 | $ | 1,973 | $ | 4,378 | $ | 3,600 | |||||||||||||||
| Right-of-use asset obtained in exchange for operating lease liability | $ | 194 | $ | — | $ | 291 | $ | 1,759 | |||||||||||||||
As of June 30, 2021, maturities of lease liabilities were as follows (in thousands):
| Year Ending December 31, | Amount | |||||||
| Remaining 2021 | $ | 4,894 | ||||||
| 2022 | 10,468 | |||||||
| 2023 | 11,374 | |||||||
| 2024 | 5,383 | |||||||
| 2025 | 4,253 | |||||||
| 2026 | 4,134 | |||||||
| Thereafter | 27,726 | |||||||
| Total operating lease payments | 68,232 | |||||||
| Less: Imputed interest | (19,807) | |||||||
| Less: Anticipated lease incentive | (1,385) | |||||||
| Total operating lease liabilities | $ | 47,040 | ||||||
6. Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended June 30, 2021 and 2020:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| (in thousands, except per share data) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net loss | $ | (18,046) | $ | (17,208) | $ | (40,075) | $ | (39,943) | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average shares (basic) | 44,321 | 43,304 | 44,283 | 43,203 | |||||||||||||||||||
| Dilutive effect of potential common shares | — | — | — | — | |||||||||||||||||||
| Weighted average shares (diluted) | 44,321 | 43,304 | 44,283 | 43,203 | |||||||||||||||||||
| Basic loss per share | $ | (0.41) | $ | (0.40) | $ | (0.90) | $ | (0.92) | |||||||||||||||
| Diluted loss per share | $ | (0.41) | $ | (0.40) | $ | (0.90) | $ | (0.92) | |||||||||||||||
Dilutive potential common shares consist of shares issuable upon the settlement of stock appreciation rights ("SARs"), and the vesting of restricted stock units ("RSUs") and market stock units ("MSUs"). Potential common shares determined to be antidilutive and excluded from diluted weighted average shares outstanding were approximately 1.2 million for the three months ended June 30, 2021 and 2020, and 1.3 million and 1.4 million for the six months ended June 30, 2021 and 2020, respectively. In addition, potential common shares related to the convertible notes determined to be antidilutive and excluded from diluted weighted average shares outstanding were 5.8 million for three and six months ended June 30, 2021, and 2.2 million for the three and six months ended June 30, 2020.
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7. Noncash Share-based Compensation
The Company's 2017 Equity Incentive Plan (as amended and restated, the "2017 Stock Plan") was approved by the Company's stockholders in May 2019 and reserved an aggregate amount of 4,550,000 shares available for issuance. In May 2021, the Company's stockholders approved an amendment to the 2017 Stock Plan increasing the aggregate amount of shares available for issuance to 7,650,000. As of June 30, 2021, 4,047,069 shares remain available for issuance under the 2017 Stock Plan.
The following table presents the number of shares or units outstanding for each award type as of June 30, 2021 and December 31, 2020, respectively, (in thousands):
| Award type | June 30, 2021 | December 31, 2020 | ||||||||||||
| Restricted stock units (time-based) | 1,869 | 1,802 | ||||||||||||
| Restricted stock units (performance-based) | 140 | 162 | ||||||||||||
| Stock appreciation rights | — | 28 | ||||||||||||
| Market stock units | 126 | 111 | ||||||||||||
During the three months ended June 30, 2021, the Company granted 39,695 RSUs (time-based) with a weighted average grant-date fair value of $38.32 per share.
During the six months ended June 30, 2021, the Company granted 823,589 RSUs (time-based) with a weighted average grant-date fair value of $47.59 per share. The Company also granted 125,541 MSUs with a weighted average grant-date fair value of $56.05 to certain executive employees during the six months ended June 30, 2021. These MSUs vest on January 31, 2024 and the actual number of MSUs that will be eligible to vest is based on the total stockholder return of the Company relative to the total stockholder return of the Index over the performance period, as defined by each award's plan documents or individual award agreements. The maximum number of shares issuable upon vesting is 200% of the MSUs initially granted. The Company did not grant any stock options, SARs or performance-based RSUs during the six months ended June 30, 2021.
The assumptions used to value the MSUs granted during the six months ended June 30, 2021 were as follows:
| June 30, 2021 | |||||
| Volatility | 53.29 | % | |||
| Risk-free interest rate | 0.22 | % | |||
| Expected option life in years | 2.97 | ||||
| Dividend yield | — | ||||
Share-based compensation expense is allocated to expense categories on the unaudited condensed consolidated statements of comprehensive income (loss). The following table summarizes share-based compensation expense included in the Company's unaudited condensed consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2021 and 2020:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Share-based compensation: | |||||||||||||||||||||||
| Cost of revenue | $ | 976 | $ | 502 | $ | 1,802 | $ | 1,026 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling and marketing | 2,510 | 1,965 | 4,734 | 3,831 | |||||||||||||||||||
| Research and development | 2,117 | 1,368 | 3,943 | 2,875 | |||||||||||||||||||
| General and administrative | 3,003 | 1,917 | 6,297 | 4,367 | |||||||||||||||||||
| Total included in operating expenses | 7,630 | 5,250 | 14,974 | 11,073 | |||||||||||||||||||
| Total share-based compensation expense | $ | 8,606 | $ | 5,752 | $ | 16,776 | $ | 12,099 | |||||||||||||||
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At June 30, 2021, the Company had an estimated $78.4 million of total unrecognized compensation costs related to share-based compensation arrangements. These costs will be recognized over a weighted average period of 2.8 years.
The Company's Employee Stock Purchase Plan (as amended, the "ESPP") provides for eligible employees to purchase shares on an after-tax basis in an amount between 1% and 10% of their annual pay: (i) on June 30 of each year at a 15% discount of the fair market value of the Company's common stock on January 1 or June 30, whichever is lower, and (ii) on December 31 of each year at a 15% discount of the fair market value of the Company's common stock on July 1 or December 31, whichever is lower. An employee may not purchase more than $5,000 in either of the six-month measurement periods described above or more than $10,000 annually. In May 2021, the Company's stockholders approved an amendment to the ESPP Plan increasing the aggregate amount of shares available for issuance under the ESPP to 1,000,000. During the three and six months ended June 30, 2021, the Company issued zero and 41,970 shares under the ESPP, respectively. As of June 30, 2021, 532,824 shares remain authorized and available for issuance under the ESPP. As of June 30, 2021, the Company held approximately $1.5 million on behalf of employees for future purchases under the ESPP, and this amount was recorded in accrued payroll and other employee benefits in the Company's unaudited condensed consolidated balance sheet.
8. Convertible Senior Notes
The following is a summary of the Company's convertible senior notes as of June 30, 2021 (in thousands):
| Date of Issuance | Unpaid Principal Balance | Net Carrying Amount | Contractual Interest Rates | ||||||||||||||||||||||||||
| Current | Noncurrent | ||||||||||||||||||||||||||||
| 1% Convertible Notes due in 2024 ("2024 Notes") | May 2019 | $ | 143,750 | $ | — | $ | 141,210 | 1% | |||||||||||||||||||||
| 2.25% Convertible Notes due in 2027 ("2027 Notes") | September 2020 | $ | 150,000 | $ | — | $ | 146,332 | 2.25% | |||||||||||||||||||||
The 2027 and 2024 Notes (collectively, the "Notes") are general unsecured obligations and rank senior in right of payment to all of the Company's indebtedness that is expressly subordinated in right of payment to the Notes, rank equally in right of payment with all of the Company's existing and future liabilities that are not so subordinated, are effectively junior to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness and are structurally subordinated to all indebtedness and other liabilities of the Company's subsidiaries (including trade payables but excluding intercompany obligations owed to the Company or its subsidiaries).
Interest related to the 2027 Notes is payable semiannually in arrears in cash on March 15 and September 15 of each year, beginning on March 15, 2021. Interest related to the 2024 Notes is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2019. The 2027 Notes mature on September 15, 2027 and the 2024 Notes mature on May 15, 2024, unless redeemed or converted in accordance with their terms prior to such date.
Each $1,000 of principal of the 2027 Notes will initially be convertible into 23.9137 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $41.82 per share. Each $1,000 of principal of the 2024 Notes will initially be convertible into 15.1394 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $66.05 per share. The initial conversion price for the 2027 and the 2024 Notes is subject to adjustment upon the occurrence of certain specified events.
As of June 30, 2021, the 2027 and 2024 Notes are not yet convertible and their remaining term is approximately 74 months and 34 months, respectively.
As of June 30, 2021 and December 31, 2020, the fair value of the principal amount of the Notes in the aggregate was $342.9 million and $363.8 million, respectively. The estimated fair value was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including the Company's stock price and interest rates, which represents level 2 in the fair value hierarchy.
Effective January 1, 2021, the Company early adopted ASU 2020-06, Debt - Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in an Entity's Own Equity. Upon adoption of the new standard, the Company removed the debt discount and adjusted the debt issuance cost which was previously allocated between the liability and the equity component, resulting in an increase of $68.8 million to convertible debt, net. In addition, the Company recorded a reduction to additional paid-in capital of $80.1 million related to the equity conversion component of the outstanding convertible notes which was previously separated and recorded in equity. The net cumulative impact of the adoption of the standard was recorded as a decrease to accumulated deficit.
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The Notes consist of the following (in thousands):
| June 30, 2021 | December 31, 2020 | ||||||||||
| Liability component: | |||||||||||
| Principal | $ | 293,750 | $ | 293,750 | |||||||
| Less: debt discount and issuance cost, net of amortization | (6,208) | (75,722) | |||||||||
| Net carrying amount | $ | 287,542 | $ | 218,028 | |||||||
Equity component(1) | $ | — | $ | 80,098 | |||||||
(1) Recorded within additional paid-in capital in the unaudited condensed consolidated balance sheet. As of December 31, 2020, it included $47.2 million and $32.9 million related to the 2027 and 2024 Notes, respectively, which was net of $1.3 million and $1.1 million issuance cost in equity, respectively.
The following table sets forth total interest expense recognized related to the Notes (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Coupon interest | $ | 1,203 | $ | 359 | $ | 2,406 | $ | 719 | |||||||||||||||
| Amortization of debt issuance costs | 373 | 158 | 746 | 314 | |||||||||||||||||||
| Amortization of debt discount | — | 1,568 | — | 3,114 | |||||||||||||||||||
| Total | $ | 1,576 | $ | 2,085 | $ | 3,152 | $ | 4,147 | |||||||||||||||
Capped Call Transactions
In September 2020 and in May 2019, in connection with the offering of the 2027 and 2024 Notes, respectively, the Company entered into privately negotiated capped call transactions (collectively, the "Capped Call") with certain option counterparties. The Capped Call transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock initially underlying the Notes, at a strike price that corresponds to the initial conversion price of the Notes, also subject to adjustment, and are exercisable upon conversion of the Notes. The Capped Call transactions are intended to reduce potential dilution to the Company’s common stock and/or offset any cash payments the Company will be required to make in excess of the principal amounts upon any conversion of Notes, and to effectively increase the overall conversion price of the 2027 Notes from $41.82 to $78.90 per share, and for the 2024 Notes from $66.05 to $101.62 per share. As the Capped Call transactions meet certain accounting criteria, they are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of the Capped Call was $25.3 million and $16.4 million for the 2027 and 2024 Notes, respectively, and was recorded as part of additional paid-in capital.
9. Commitments and Contingencies
Litigation
In the ordinary course of business, the Company regularly becomes involved in contract and other negotiations and, in more limited circumstances, becomes involved in legal proceedings, claims and litigation. The outcomes of these matters are inherently unpredictable. The Company is not currently involved in any outstanding litigation that it believes, individually or in the aggregate, will have a material adverse effect on its business, financial condition, results of operations or cash flows.
Purchase commitments
In the ordinary course of business, the Company enters into various purchase commitments for goods and services.
In March 2019, the Company entered into a noncancelable agreement with a computing infrastructure vendor that amended the existing agreement dated June 2017. The amended agreement expires in March 2022. The purchase commitment as of June 30, 2021 was $24.9 million for the remaining period through the expiration of the agreement.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The terms “we,” “us,” “PROS” and “our” refer to PROS Holdings, Inc. and all of its subsidiaries that are consolidated in conformity with generally accepted accounting principles in the United States.
This management's discussion and analysis of financial condition and results of operations should be read along with the unaudited condensed consolidated financial statements and unaudited notes to unaudited condensed consolidated financial statements included in Part I, Item 1 ("Interim Condensed Consolidated Financial Statements (Unaudited)"), as well as the audited consolidated financial statements and notes to consolidated financial statements and management's discussion and analysis of financial condition and results of operations set forth in our Annual Report.
Q2 2021 Financial Overview
For the three and six months ended June 30, 2021, our revenue was impacted by last year's lower customer subscription bookings, project delays and a decrease in revenue retention rates as a result of the COVID-19 pandemic. Our prior year new customer subscription bookings impacted this year’s subscription revenue growth given the lag between subscription bookings and the revenue recognized on those subscription bookings. As a result, our subscription revenue increased 4% and 2% for the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020, and our total revenue decreased 2% and 5% for the three and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. Recurring revenue (which consists of subscription revenue and maintenance and support revenue) as a percentage of total revenue accounted for 85% of total revenue for the three and six months ended June 30, 2021 as compared to 85% and 84% for the three and six months ended June 30, 2020, respectively.
Cash used in operating activities was $9.4 million for the six months ended June 30, 2021, as compared to $47.0 million for the six months ended June 30, 2020. The improvement was primarily attributable to several customers during the first half of 2020 deferring payments as a result of COVID-19 as well as to a lower annual incentive payment in 2021 as compared to prior year.
Free cash flow is another key metric to assess the strength of our business. We define free cash flow, a non-GAAP financial measure, as net cash provided by (used in) operating activities minus capital expenditures (excluding expenditures for our new headquarters), purchases of other (non-acquisition-related) intangible assets and capitalized internal-use software development costs. We believe free cash flow may be useful to investors and other users of our financial information in evaluating the amount of cash generated by our business operations. Free cash flow used during the three months ended June 30, 2021 was $5.7 million, compared to $23.5 million for the three months ended June 30, 2020. Free cash flow used during the six months ended June 30, 2021 was $10.4 million, compared to $49.0 million for the six months ended June 30, 2020. This improvement was primarily due to a $37.5 million decrease in net cash used in operating activities mainly attributable to several customers during the first half of 2020 deferring payments as a result of COVID-19 as well as to a lower annual incentive payment in 2021 as compared to prior year. The following is a reconciliation of free cash flow to the most comparable GAAP measure, net cash used in operating activities (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net cash used in operating activities | $ | (4,985) | $ | (22,782) | $ | (9,414) | $ | (46,955) | |||||||||||||||
| Purchase of property and equipment (excluding new headquarters) | (741) | (306) | (944) | (1,263) | |||||||||||||||||||
| Capitalized internal-use software development costs | — | (394) | — | (806) | |||||||||||||||||||
| Free Cash Flow | $ | (5,726) | $ | (23,482) | $ | (10,358) | $ | (49,024) | |||||||||||||||
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Factors Affecting Our Performance
Key factors and trends that have affected, and we believe will continue to affect, our operating results include:
•COVID-19 Global Impact. The duration of the COVID-19 pandemic remains uncertain, and the pace and timeframe for recovery from the economic impact of COVID-19 continues to vary across the countries and industries in which we do business. The travel industry, a sector served by our solutions, was particularly adversely impacted by unprecedented declines in travel demand in 2020, forcing airlines to respond by significantly reducing capacity, grounding flights, reducing personnel and other costs, adjusting corporate liquidity and, in certain cases, filing for bankruptcy protection. The timeline for recovery of the travel industry remains fluid and dynamic, with significant geographic variation. For example, while airline travel demand in the United States has shown early signs of recovery in 2021 as COVID-19 vaccination rates increase, we expect international travel demand to recover more slowly due to ongoing international travel restrictions as vaccination rates vary significantly by geography. While COVID-19 has accelerated existing trends with respect to digital commerce as explained below, the economic impact and uncertainty attributable to the pandemic has affected our business, also as explained below. The global workplace environment has also substantially changed in the wake of COVID-19. To support the health and well-being of our employees, customers, partners and communities, our global workforce has been primarily working remotely since March 2020; although we have opened our offices where permitted for employees who choose to work in the office. Many of our customers are also continuing to work remotely, which in some cases has delayed, and may continue to impact the timing of new business and implementations of our solutions. The duration and extent of the impact of COVID-19 continues to be unknown and could continue to impact the pace and timing of adoption and implementation of our solutions, cash flow from operations and customer retention. For a full discussion on the risks and uncertainties to our business associated with COVID-19, please see the Risk Factors section of our Annual Report on Form 10-K.
•COVID-19 Financial Impact. Given our primarily subscription-based revenue model, the global economic impact of COVID-19 in 2020 on new customer bookings, revenue retention, contract restructuring, and project delays adversely impacted our revenue in the first half of 2021. Our prior year new customer subscription bookings impacted this year’s subscription revenue growth given the lag between subscription bookings and the revenue recognized on those subscription bookings. Although we supported certain customers who requested concessions during 2020 by deferring payments, we have since collected a substantial majority of the amounts associated with these concessions, as evidenced by our strong cash collections in the first half of 2021. We expect the ongoing global economic impact of COVID-19 will continue to impact our revenue in 2021, as the continuing impact of COVID-19 and rate of economic recovery remains uncertain and varies across industries and geographies.
•Buying Preferences Driving Technology Adoption. Corporate buyers are increasingly demanding the same type of digital buying experience that they enjoy as consumers. Buyers often prefer not to interact with sales representatives as their primary source of research, and increasingly prefer to buy online when they have already decided what to buy. This trend has accelerated as a result of the COVID-19 pandemic. In response, we believe that businesses are increasingly modernizing their sales process to compete in digital commerce by adopting technologies which provide fast, frictionless, and personalized buying experiences across sales channels. We believe we are uniquely positioned to help power these buying experiences with our AI-powered solutions that enable buyers to move fluidly and with personalized experiences across our customers’ direct sales, online, mobile and partner channels.
•Continued Investments. As a result of the economic impact of COVID-19, we are continuing to be measured in our investments and focused on cost control efforts across our organization, while continuing to create awareness for our solutions, expand our customer base and grow our subscription revenues. While we incurred losses in 2020 and in the first half of 2021, we believe our market is large and underpenetrated and intend to continue investing in sales, marketing, customer success, cloud support, security, privacy, infrastructure and other long-term initiatives to expand our ability to sell and renew our subscription offerings globally. We also plan to continue investing in product development to enhance our existing technologies, including initiatives to accelerate customer time-to-value and provide out-of-the-box integration with third-party commerce solutions, and develop new applications and technologies.
•Cloud Migrations. Sales of our cloud-based solutions have, and we expect future sales of our cloud-based solutions will continue to reduce our future maintenance and support revenue, as long-term customers continue to migrate from our legacy licensed solutions to our current cloud solutions.
17
Results of Operations
The following table sets forth certain items in our unaudited condensed consolidated statements of comprehensive income (loss) as a percentage of total revenues for the three and six months ended June 30, 2021 and 2020:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
Subscription | 71 | % | 66 | % | 70 | % | 66 | % | |||||||||||||||
Maintenance and support | 14 | 18 | 15 | 19 | |||||||||||||||||||
| Total subscription, maintenance and support | 85 | 85 | 85 | 84 | |||||||||||||||||||
Services | 15 | 15 | 15 | 16 | |||||||||||||||||||
| Total revenue | 100 | 100 | 100 | 100 | |||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
Subscription | 22 | 19 | 22 | 19 | |||||||||||||||||||
Maintenance and support | 3 | 4 | 4 | 4 | |||||||||||||||||||
| Total cost of subscription, maintenance and support | 25 | 24 | 26 | 24 | |||||||||||||||||||
Services | 17 | 17 | 17 | 18 | |||||||||||||||||||
| Total cost of revenue | 42 | 41 | 43 | 42 | |||||||||||||||||||
| Gross profit | 58 | 59 | 57 | 58 | |||||||||||||||||||
| Operating Expenses: | |||||||||||||||||||||||
Selling and marketing | 34 | 33 | 35 | 35 | |||||||||||||||||||
Research and development | 32 | 29 | 33 | 29 | |||||||||||||||||||
General and administrative | 18 | 21 | 20 | 22 | |||||||||||||||||||
| Total operating expenses | 84 | 83 | 87 | 86 | |||||||||||||||||||
Convertible debt interest and amortization | (3) | (3) | (3) | (3) | |||||||||||||||||||
Other income net | — | — | — | 1 | |||||||||||||||||||
| Loss before income tax provision | (29) | (27) | (32) | (30) | |||||||||||||||||||
Income tax provision | — | — | — | — | |||||||||||||||||||
| Net loss | (29) | % | (27) | % | (32) | % | (31) | % | |||||||||||||||
Revenue:
| Three Months Ended June 30, | Variance | Six Months Ended June 30, | Variance | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2021 | 2020 | $ | % | 2021 | 2020 | $ | % | |||||||||||||||||||||||||||||||||||||||
Subscription | $ | 44,224 | $ | 42,377 | $ | 1,847 | 4 | % | $ | 86,872 | $ | 85,547 | $ | 1,325 | 2 | % | |||||||||||||||||||||||||||||||
Maintenance and support | 8,570 | 11,741 | (3,171) | (27) | % | 18,244 | 24,264 | (6,020) | (25) | % | |||||||||||||||||||||||||||||||||||||
| Total subscription, maintenance and support | 52,794 | 54,118 | (1,324) | (2) | % | 105,116 | 109,811 | (4,695) | (4) | % | |||||||||||||||||||||||||||||||||||||
Services | 9,607 | 9,629 | (22) | — | % | 18,663 | 20,247 | (1,584) | (8) | % | |||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 62,401 | $ | 63,747 | $ | (1,346) | (2) | % | $ | 123,779 | $ | 130,058 | $ | (6,279) | (5) | % | |||||||||||||||||||||||||||||||
Subscription revenue. Subscription revenue increased primarily due to an increase in the sale of new and existing customer subscription contracts as compared to prior year. Our ability to manage customer attrition rates will directly impact our ability to continue to grow our subscription revenue. Due to the uncertainty over how long the economic conditions caused by the COVID-19 pandemic will persist, we expect subscription revenue to grow at a slower pace than what we have historically experienced.
Maintenance and support revenue. Maintenance and support revenue decreased primarily as result of existing maintenance customers migrating to our cloud solutions and a decrease in customer retention due to the impact of COVID-19. We expect maintenance revenue to continue to decline as we continue to migrate maintenance customers to our cloud solutions.
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Services revenue. Services revenue remained flat for the three months ended June 30, 2021. Services revenue decreased for the six months ended June 30, 2021 primarily as a result of the timing of services recognition related to our subscription contracts as compared to the same period in 2020 due to the impact of COVID-19. Services revenue varies from period to period depending on different factors, including the level of professional services required to implement our solutions, the timing of services revenue recognition on certain subscription contracts and any additional professional services requested by our customers during a particular period.
Cost of revenue and gross profit:
| Three Months Ended June 30, | Variance | Six Months Ended June 30, | Variance | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2021 | 2020 | $ | % | 2021 | 2020 | $ | % | |||||||||||||||||||||||||||||||||||||||
Cost of subscription | $ | 13,589 | $ | 12,392 | $ | 1,197 | 10 | % | $ | 27,390 | $ | 25,256 | $ | 2,134 | 8 | % | |||||||||||||||||||||||||||||||
Cost of maintenance and support | 2,157 | 2,610 | (453) | (17) | % | 4,415 | 5,400 | (985) | (18) | % | |||||||||||||||||||||||||||||||||||||
| Total cost of subscription, maintenance and support | 15,746 | 15,002 | 744 | 5 | % | 31,805 | 30,656 | 1,149 | 4 | % | |||||||||||||||||||||||||||||||||||||
Cost of services | 10,658 | 10,948 | (290) | (3) | % | 21,091 | 24,021 | (2,930) | (12) | % | |||||||||||||||||||||||||||||||||||||
| Total cost of revenue | 26,404 | 25,950 | 454 | 2 | % | 52,896 | 54,677 | (1,781) | (3) | % | |||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 35,997 | $ | 37,797 | $ | (1,800) | (5) | % | $ | 70,883 | $ | 75,381 | $ | (4,498) | (6) | % | |||||||||||||||||||||||||||||||
Cost of subscription. Cost of subscription increased primarily due to increased infrastructure costs to support our current subscription customer base. Our subscription gross profit percentages were 69% and 71% for the three months ended June 30, 2021 and 2020, respectively, and 68% and 70% for the six months ended June 30, 2021 and 2020, respectively.
Cost of maintenance and support. Cost of maintenance and support decreased primarily due to a decrease in personnel costs as a result of the need to support a declining maintenance customer base as we migrate customers to our subscription solutions, and a decrease in amortization expense related to intangible assets which were fully amortized in 2021. Maintenance and support gross profit percentages were 75% and 78% for the three months ended June 30, 2021 and 2020, respectively, and 76% and 78% for the six months ended June 30, 2021 and 2020, respectively.
Cost of services. Cost of services decreased for the three and six months ended June 30, 2021 primarily due to the lower utilization of third-party contractors and reduced travel expenses due to the COVID-19 pandemic. Services gross profit percentages were (11)% and (14)% for the three months ended June 30, 2021 and 2020, respectively, and (13)% and (19)% for the six months ended June 30, 2021 and 2020, respectively. Services gross profit percentages for the three and six months ended June 30, 2021 improved primarily as a result of a decrease in utilization of higher cost third-party contractors. Services gross profit percentages vary period to period depending on different factors, including the level of professional services required to implement our solutions, our mix of utilization of employees or third-party contractors and our effective man-day rates.
Gross profit. Gross profit for the three and six months ended June 30, 2021 decreased primarily due to the decrease in total revenue as compared to the same period in 2020.
Operating expenses:
| Three Months Ended June 30, | Variance | Six Months Ended June 30, | Variance | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2021 | 2020 | $ | % | 2021 | 2020 | $ | % | |||||||||||||||||||||||||||||||||||||||
| Selling and marketing | $ | 21,190 | $ | 21,011 | $ | 179 | 1 | % | $ | 42,754 | $ | 45,931 | $ | (3,177) | (7) | % | |||||||||||||||||||||||||||||||
| Research and development | 20,095 | 18,397 | 1,698 | 9 | % | 40,553 | 37,533 | 3,020 | 8 | % | |||||||||||||||||||||||||||||||||||||
| General and administrative | 11,018 | 13,528 | (2,510) | (19) | % | 24,472 | 28,408 | (3,936) | (14) | % | |||||||||||||||||||||||||||||||||||||
Total operating expenses | $ | 52,303 | $ | 52,936 | $ | (633) | (1) | % | $ | 107,779 | $ | 111,872 | $ | (4,093) | (4) | % | |||||||||||||||||||||||||||||||
Selling and marketing expenses. Sales and marketing expenses remained relatively unchanged for the three months ended June 30, 2021. Sales and marketing expenses decreased for the six months ended June 30, 2021 primarily due to a decrease of $1.9 million for sales and marketing events and a decrease in travel expenses of $1.6 million due to the COVID-19 pandemic, partially offset by an increase of $0.3 million in overhead and other costs.
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Research and development expenses. Research and development expenses increased for the three and six months ended June 30, 2021 primarily due to an increase in employee-related costs, including increases of $0.7 million and $1.1 million of non-cash share-based compensation for the three and six months ended June 30, 2021, respectively.
General and administrative expenses. General and administrative expenses decreased primarily due to a $1.1 million and $1.7 million reduction in bad debt expense during the three and six months ended June 30, 2021, respectively, due to improved credit conditions with certain customers. The decrease was partially offset by an increase in employee-related costs, including increases of $1.1 million and $1.9 million of non-cash share-based compensation for the three and six months ended June 30, 2021, respectively.
Other income, net:
| Three Months Ended June 30, | Variance | Six Months Ended June 30, | Variance | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2021 | 2020 | $ | % | 2021 | 2020 | $ | % | |||||||||||||||||||||||||||||||||||||||
| Convertible debt interest and amortization | $ | (1,576) | $ | (2,085) | $ | 509 | (24) | % | $ | (3,152) | $ | (4,147) | $ | 995 | (24) | % | |||||||||||||||||||||||||||||||
| Other income, net | $ | 4 | $ | 146 | $ | (142) | (97) | % | $ | 290 | $ | 977 | $ | (687) | (70) | % | |||||||||||||||||||||||||||||||
Convertible debt interest and amortization. Convertible debt expense for the three and six months ended June 30, 2021 and 2020 related to coupon interest and amortization of debt discount and issuance costs attributable to our Notes. Convertible debt interest and amortization decreased primarily as a result of the adoption of ASU 2020-06 on January 1, 2021. Upon adoption, there was no longer a debt discount on our outstanding notes and as a result the related amortization cost was no longer recognized in 2021.
Other income, net. The change in other income, net for the three and six months ended June 30, 2021, primarily related to a decrease in interest income partially offset by foreign currency impact during the period.
Income tax provision:
| Three Months Ended June 30, | Variance | Six Months Ended June 30, | Variance | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2021 | 2020 | $ | % | 2021 | 2020 | $ | % | |||||||||||||||||||||||||||||||||||||||
| Effective tax rate | (0.9) | % | (0.8) | % | n/a | n/a | (0.8) | % | (0.7) | % | n/a | n/a | |||||||||||||||||||||||||||||||||||
| Income tax provision | $ | 168 | $ | 130 | $ | 38 | 29 | % | $ | 317 | $ | 282 | $ | 35 | 12 | % | |||||||||||||||||||||||||||||||
Income tax provision. The tax provision for the three and six months ended June 30, 2021 included both foreign income and withholding taxes. No tax benefit was recognized on jurisdictions with a projected loss for the year due to the valuation allowances on our deferred tax assets.
Our effective tax rate was (0.9)% and (0.8)% for the three and six months ended June 30, 2021, respectively, and (0.8)% and (0.7)% for the three and six months ended June 30, 2020, respectively. The income tax rate varies from the 21% federal statutory rate primarily due to the valuation allowances on our deferred tax assets. While our expected tax rate would be 0% due to the full valuation allowance on our deferred tax assets, the income tax provision and related effective tax rates is due to foreign income and withholding taxes.
Jurisdictions with a projected loss for the year where no tax benefit can be recognized due to the valuation allowances on our deferred tax assets are excluded from the estimated annual federal effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter depending on the mix and timing of actual earnings versus annual projections.
Liquidity and Capital Resources
At June 30, 2021, we had $318.3 million of cash and cash equivalents and $226.8 million of working capital as compared to $329.1 million of cash and cash equivalents and $246.4 million of working capital at December 31, 2020.
Our principal sources of liquidity are our cash and cash equivalents, cash flows generated from operations and potential borrowings under our $50 million secured Credit Agreement ("Revolver") with the lenders party thereto and Wells Fargo Bank, National Association as agent for the lenders party thereto. The facility expires in July 2022. In addition, we could
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issue convertible senior notes to supplement our overall liquidity position. Our material drivers or variants of operating cash flow are net income (loss), noncash expenses (principally share-based compensation, intangible amortization and amortization of debt discount and issuance costs) and the timing of periodic invoicing and cash collections from customer revenue. Our operating cash flows are also impacted by the timing of payments to our vendors and the payments of our other liabilities.
We believe our existing cash, cash equivalents, including funds available under our Revolver and our current estimates of future operating cash flows, will provide adequate liquidity and capital resources to meet our operational requirements, anticipated capital expenditures and coupon interest payments for our Notes for the next twelve months. Our future working capital requirements will depend on many factors, including the operations of our existing business, potential growth of our subscription services, future acquisitions we might undertake, expansion into complementary businesses, and the impact of COVID-19, including the pace and timing of adoption and implementation of our solutions and customer churn. During the period of uncertainty and volatility related to COVID-19, we will continue to monitor our liquidity.
The following table presents key components of our unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020:
| Six Months Ended June 30, | |||||||||||
| (Dollars in thousands) | 2021 | 2020 | |||||||||
| Net cash used in operating activities | $ | (9,414) | $ | (46,955) | |||||||
| Net cash used in investing activities | (2,586) | (20,004) | |||||||||
| Net cash provided by (used in) financing activities | 1,244 | (18,857) | |||||||||
| Cash and cash equivalents (beginning of period) | 329,134 | 306,077 | |||||||||
| Cash and cash equivalents (end of period) | $ | 318,326 | $ | 220,157 | |||||||
Operating Activities
Net cash used in operating activities for the six months ended June 30, 2021 was $9.4 million. The $37.5 million improvement over last year was primarily attributable to several customers during the first half of 2020 deferring payments as a result of COVID-19 as well as to a lower annual incentive payment in 2021 as compared to prior year.
Investing Activities
Net cash used in investing activities for the six months ended June 30, 2021 was $2.6 million, which was primarily related to capital expenditures of $2.1 million mainly attributable to the build out of our new headquarters which was committed prior to the pandemic and $0.5 million investment in equity securities. The build out of our new headquarters mainly occurred in fiscal year 2020 and as a result capital expenditures decreased in the first half of 2021.
Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2021 was $1.2 million, which was attributable to proceeds from employee stock plans of $1.6 million, partially offset by $0.4 million paid for tax withholdings on vesting of employee share-based awards. Tax withholdings on vesting of employee share-based awards decreased significantly in the first half of 2021 as compared to prior year as a result of a sell-to-cover taxes program established in late 2020 for 2021 employee vested share-based awards.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material. We do not have any relationships with unconsolidated entities or financial partnerships, such as variable interest entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Contractual Obligations and Commitments
Other than changes described in Note 9 above, there have been no material changes to our contractual obligations and commitments disclosed in our Annual Report.
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Credit facility
There were no outstanding borrowings under the Revolver as of June 30, 2021. As of June 30, 2021, we had $0.1 million of unamortized debt issuance costs related to the Revolver included in prepaids and other current assets and other long-term assets in the unaudited condensed consolidated balance sheets. For the three and six months ended June 30, 2021 and 2020, we recorded an immaterial amount of amortization of debt issuance cost which is included in other income, net in the unaudited condensed consolidated statements of comprehensive income (loss).
Recent Accounting Pronouncements
See "Recently adopted accounting pronouncements" in Note 2 above for discussion of recent accounting pronouncements including the respective expected dates of adoption.
Critical accounting policies and estimates
Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. Actual results could differ from those estimates. The complexity and judgment required in our estimation process, as well as issues related to the assumptions, risks and uncertainties inherent in determining the nature and timing of satisfaction of performance obligations and determining the standalone selling price of performance obligations, affect the amounts of revenue, expenses, unbilled receivables and deferred revenue. Estimates are also used for, but not limited to, receivables, allowance for doubtful accounts, operating lease right-of-use assets and operating lease liabilities, useful lives of assets, depreciation, income taxes and deferred tax asset valuation, valuation of stock options, other current liabilities and accrued liabilities. Numerous internal and external factors can affect estimates. Our critical accounting policies related to the estimates and judgments are discussed in our Annual Report under management's discussion and analysis of financial condition and results of operations.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
Although our contracts are predominately denominated in U.S. dollars, we are exposed to foreign currency exchange risk because we also have some contracts denominated in foreign currencies. The effect of a hypothetical 10% adverse change in exchange rates on our foreign denominated receivables as of June 30, 2021 would result in a loss of approximately $0.6 million. We are also exposed to foreign currency risk due to our operating subsidiaries in France, United Kingdom, Canada, Germany, Ireland, Australia, Bulgaria and United Arab Emirates. A hypothetical 10% adverse change in the value of the U.S. dollar in relation to the euro, which is our single most significant foreign currency exposure, would have decreased revenue for the three and six months ended June 30, 2021 by approximately $0.5 million and $1.0 million, respectively. However, due to the relatively low volume of payments made and received through our foreign subsidiaries, we do not believe that we have significant exposure to foreign currency exchange risks. Fluctuations in foreign currency exchange rates could harm our financial results in the future.
We currently do not use derivative financial instruments to mitigate foreign currency exchange risks. We continue to review this matter and may consider hedging certain foreign exchange risks through the use of currency derivatives in future years.
Interest Rate Risk
We are exposed to market risk for changes in interest rates related to the variable interest rate on borrowings under the Revolver. As of June 30, 2021, we had no borrowings under the Revolver.
As of June 30, 2021, we had outstanding principal amounts of $150.0 million and $143.8 million of the 2027 and the 2024 Notes, respectively, which are fixed rate instruments. Therefore, our results of operations are not subject to fluctuations in interest rates. The fair value of the Notes may change when the market price of our stock fluctuates.
We believe that we do not have any material exposure to changes in the fair value as a result of changes in interest rates due to the short-term nature of our cash equivalents.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of June 30, 2021. Based on our evaluation of our disclosure controls and procedures as of June 30, 2021, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the first quarter of 2021, the Company completed the implementation of a new enterprise resource planning ("ERP") system and the internal controls have been updated to reflect the change. There have been no other changes in our internal control over financial reporting during the three months ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that our employees are working remotely due to COVID-19. We are continually monitoring and assessing the impact of COVID-19 on our internal controls to minimize the impact on their design and operating effectiveness.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are a party to legal proceedings and claims arising in the ordinary course of business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition, results of operations or cash flows.
ITEM 1A. RISK FACTORS
There have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A, of our Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We have an ongoing authorization from our board of directors to repurchase up to $15.0 million in shares of our common stock in the open market or through privately negotiated transactions. As of June 30, 2021, $10.0 million remained available for repurchase under the existing repurchase authorization. We did not make any purchases of our common stock under this program for the three months ended June 30, 2021.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| Index to Exhibits | ||||||||||||||||||||||||||
| Provided | Incorporated by Reference | |||||||||||||||||||||||||
| Exhibit No. | Description | Herewith | Form | Filing Date | ||||||||||||||||||||||
| 31.1 | X | |||||||||||||||||||||||||
| 31.2 | X | |||||||||||||||||||||||||
| 32.1* | X | |||||||||||||||||||||||||
| Exhibit No. | Description | |||||||||||||||||||||||||
| 101.INS | XBRL Instance Document. | |||||||||||||||||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document. | |||||||||||||||||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||||||||||||||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |||||||||||||||||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |||||||||||||||||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||||||||||||||||||||
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| * | This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, or otherwise subject to the liability of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934. | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PROS HOLDINGS, INC. | |||||||||||
| August 3, 2021 | By: | /s/ Andres Reiner | |||||||||
| Andres Reiner | |||||||||||
| President and Chief Executive Officer (Principal Executive Officer) | |||||||||||
| August 3, 2021 | By: | /s/ Stefan Schulz | |||||||||
| Stefan Schulz | |||||||||||
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |||||||||||
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