0001392972 12/31 2024 Q1 FALSE xbrli:shares iso4217:USD iso4217:USD xbrli:shares xbrli:pure 0001392972 2024-01-01 2024-03-31 0001392972 dei:FormerAddressMember 2024-01-01 2024-03-31 0001392972 2024-05-01 0001392972 2024-03-31 0001392972 2023-12-31 0001392972 us-gaap:SubscriptionAndCirculationMember 2024-01-01 2024-03-31 0001392972 us-gaap:SubscriptionAndCirculationMember 2023-01-01 2023-03-31 0001392972 us-gaap:MaintenanceMember 2024-01-01 2024-03-31 0001392972 us-gaap:MaintenanceMember 2023-01-01 2023-03-31 0001392972 pro:SubscriptionMaintenanceAndSupportMember 2024-01-01 2024-03-31 0001392972 pro:SubscriptionMaintenanceAndSupportMember 2023-01-01 2023-03-31 0001392972 us-gaap:ServiceMember 2024-01-01 2024-03-31 0001392972 us-gaap:ServiceMember 2023-01-01 2023-03-31 0001392972 2023-01-01 2023-03-31 0001392972 2022-12-31 0001392972 2023-03-31 0001392972 us-gaap:CommonStockMember 2023-12-31 0001392972 us-gaap:AdditionalPaidInCapitalMember 2023-12-31 0001392972 us-gaap:TreasuryStockCommonMember 2023-12-31 0001392972 us-gaap:RetainedEarningsMember 2023-12-31 0001392972 pro:AccumulatedOtherComprehensiveIncomenetoftaxMember 2023-12-31 0001392972 us-gaap:CommonStockMember 2024-01-01 2024-03-31 0001392972 us-gaap:AdditionalPaidInCapitalMember 2024-01-01 2024-03-31 0001392972 pro:AccumulatedOtherComprehensiveIncomenetoftaxMember 2024-01-01 2024-03-31 0001392972 us-gaap:RetainedEarningsMember 2024-01-01 2024-03-31 0001392972 us-gaap:CommonStockMember 2024-03-31 0001392972 us-gaap:AdditionalPaidInCapitalMember 2024-03-31 0001392972 us-gaap:TreasuryStockCommonMember 2024-03-31 0001392972 us-gaap:RetainedEarningsMember 2024-03-31 0001392972 pro:AccumulatedOtherComprehensiveIncomenetoftaxMember 2024-03-31 0001392972 us-gaap:CommonStockMember 2022-12-31 0001392972 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001392972 us-gaap:TreasuryStockCommonMember 2022-12-31 0001392972 us-gaap:RetainedEarningsMember 2022-12-31 0001392972 pro:AccumulatedOtherComprehensiveIncomenetoftaxMember 2022-12-31 0001392972 us-gaap:CommonStockMember 2023-01-01 2023-03-31 0001392972 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-03-31 0001392972 pro:AccumulatedOtherComprehensiveIncomenetoftaxMember 2023-01-01 2023-03-31 0001392972 us-gaap:RetainedEarningsMember 2023-01-01 2023-03-31 0001392972 us-gaap:CommonStockMember 2023-03-31 0001392972 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0001392972 us-gaap:TreasuryStockCommonMember 2023-03-31 0001392972 us-gaap:RetainedEarningsMember 2023-03-31 0001392972 pro:AccumulatedOtherComprehensiveIncomenetoftaxMember 2023-03-31 0001392972 country:US 2024-01-01 2024-03-31 0001392972 country:US 2023-01-01 2023-03-31 0001392972 srt:EuropeMember 2024-01-01 2024-03-31 0001392972 srt:EuropeMember 2023-01-01 2023-03-31 0001392972 pro:TherestoftheworldMember 2024-01-01 2024-03-31 0001392972 pro:TherestoftheworldMember 2023-01-01 2023-03-31 0001392972 srt:MinimumMember 2024-03-31 0001392972 srt:MaximumMember 2024-03-31 0001392972 us-gaap:StockCompensationPlanMember 2024-01-01 2024-03-31 0001392972 us-gaap:StockCompensationPlanMember 2023-01-01 2023-03-31 0001392972 us-gaap:ConvertibleDebtSecuritiesMember 2024-01-01 2024-03-31 0001392972 us-gaap:ConvertibleDebtSecuritiesMember 2023-01-01 2023-03-31 0001392972 pro:A2017EquityIncentivePlanMemberMember 2024-03-31 0001392972 pro:A2017AmendedEquityIncentivePlanMember 2024-03-31 0001392972 pro:RestrictedStockUnittimebasedMember 2024-03-31 0001392972 pro:RestrictedStockUnittimebasedMember 2023-12-31 0001392972 pro:MarketShareUnitsMsusMember 2024-03-31 0001392972 pro:MarketShareUnitsMsusMember 2023-12-31 0001392972 us-gaap:RestrictedStockUnitsRSUMember 2024-01-01 2024-03-31 0001392972 us-gaap:PerformanceSharesMember 2024-01-01 2024-03-31 0001392972 pro:MarketShareUnitsMsusMember 2024-01-01 2024-03-31 0001392972 us-gaap:CostOfSalesMember 2024-01-01 2024-03-31 0001392972 us-gaap:CostOfSalesMember 2023-01-01 2023-03-31 0001392972 us-gaap:SellingAndMarketingExpenseMember 2024-01-01 2024-03-31 0001392972 us-gaap:SellingAndMarketingExpenseMember 2023-01-01 2023-03-31 0001392972 us-gaap:ResearchAndDevelopmentExpenseMember 2024-01-01 2024-03-31 0001392972 us-gaap:ResearchAndDevelopmentExpenseMember 2023-01-01 2023-03-31 0001392972 us-gaap:GeneralAndAdministrativeExpenseMember 2024-01-01 2024-03-31 0001392972 us-gaap:GeneralAndAdministrativeExpenseMember 2023-01-01 2023-03-31 0001392972 us-gaap:OperatingExpenseMember 2024-01-01 2024-03-31 0001392972 us-gaap:OperatingExpenseMember 2023-01-01 2023-03-31 0001392972 us-gaap:EmployeeStockMember 2024-03-31 0001392972 pro:Notesdue2024Member 2024-03-31 0001392972 pro:NotesDue2027Member 2024-03-31 0001392972 pro:NotesDue2027Member 2024-01-01 2024-03-31 0001392972 pro:Notesdue2024Member 2024-01-01 2024-03-31 0001392972 pro:NotesDue2024SubjectToExchangeMember 2023-08-23 0001392972 pro:Notesdue2024Member 2023-10-10 2023-10-10 0001392972 pro:NotesDue2027Member 2023-10-10 2023-10-10 0001392972 pro:Notesdue2024Member 2023-10-10 0001392972 pro:NotesDue2027Member 2023-10-10 0001392972 pro:NotesExchangeMember 2023-10-10 0001392972 pro:SoftwareSupportServicesCommitmentMember 2024-03-31
Table of Contents

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 March 31, 2024
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 every Interactive Data File required to be submitted 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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ | Accelerated Filer | ☐
Non-Accelerated Filer | ☐ | 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 47,004,361 as of May 1, 2024.

Table of Contents
PROS Holdings, Inc.
Form 10-Q
For the Quarterly Period Ended March 31, 2024
Table of Contents

|  | Page
PART I. FINANCIAL INFORMATION |
Item 1. | Interim Condensed Consolidated Financial Statements (Unaudited) |
| Condensed Consolidated Balance Sheets | 4
| Condensed Consolidated Statements of Comprehensive Loss | 5
| Condensed Consolidated Statements of Cash Flows | 6
| Condensed Consolidated Statements of Stockholders' (Deficit) Equity | 7
| Notes to Condensed Consolidated Financial Statements | 8
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 15
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 22
Item 4. | Controls and Procedures | 22
PART II. OTHER INFORMATION |
Item 1. | Legal Proceedings | 23
Item 1A. | Risk Factors | 23
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 23
Item 3. | Defaults Upon Senior Securities | 23
Item 4. | Mine Safety Disclosure | 23
Item 5. | Other Information | 23
Item 6. | Exhibits | 23
Signatures | 25

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

Table of Contents
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)

| March 31, 2024 |  | December 31, 2023
Assets: |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 156,423 |  |  | $ | 168,747 |
Trade and other receivables, net of allowance of $724 and $574, respectively | 51,035 |  |  | 49,058 |
Deferred costs, current | 4,642 |  |  | 4,856 |
Prepaid and other current assets | 10,809 |  |  | 12,013 |
Total current assets | 222,909 |  |  | 234,674 |
Restricted cash | 10,000 |  |  | 10,000 |
Property and equipment, net | 21,572 |  |  | 23,051 |
Operating lease right-of-use assets | 15,824 |  |  | 14,801 |
Deferred costs, noncurrent | 9,899 |  |  | 10,292 |
Intangibles, net | 10,378 |  |  | 11,678 |
Goodwill | 107,641 |  |  | 107,860 |
Other assets, noncurrent | 9,666 |  |  | 9,477 |
Total assets | $ | 407,889 |  |  | $ | 421,833 |
Liabilities and Stockholders' (Deficit) Equity: |  |  |
Current liabilities: |  |  |
Accounts payable and other liabilities | $ | 2,535 |  |  | $ | 3,034 |
Accrued liabilities | 14,985 |  |  | 13,257 |
Accrued payroll and other employee benefits | 16,157 |  |  | 32,762 |
Operating lease liabilities, current | 5,135 |  |  | 5,655 |
Deferred revenue, current | 128,359 |  |  | 120,955 |
Current portion of convertible debt, net | 21,702 |  |  | 21,668 |
Total current liabilities | 188,873 |  |  | 197,331 |
Deferred revenue, noncurrent | 4,289 |  |  | 3,669 |
Convertible debt, net | 271,937 |  |  | 272,324 |
Operating lease liabilities, noncurrent | 25,616 |  |  | 25,118 |
Other liabilities, noncurrent | 1,191 |  |  | 1,264 |
Total liabilities | 491,906 |  |  | 499,706 |
Commitments and contingencies (see Note 9) |  |  |
Stockholders' (deficit) 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; 51,649,163 and 51,184,584 shares issued, respectively; 46,968,440 and 46,503,861 shares outstanding, respectively | 52 |  |  | 51 |
Additional paid-in capital | 609,469 |  |  | 604,084 |
Treasury stock, 4,680,723 common shares, at cost | (29,847) |  |  | (29,847) |
Accumulated deficit | (658,609) |  |  | (647,252) |
Accumulated other comprehensive loss | (5,082) |  |  | (4,909) |
Total stockholders' (deficit) equity | (84,017) |  |  | (77,873) |
Total liabilities and stockholders' (deficit) equity | $ | 407,889 |  |  | $ | 421,833 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

Table of Contents
PROS Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands, except per share data)
(Unaudited)

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
Revenue: |  |  |  |  |  |  |
Subscription |  |  |  |  | $ | 64,349 |  |  | $ | 55,969 |
Maintenance and support |  |  |  |  | 3,595 |  |  | 5,712 |
Total subscription, maintenance and support |  |  |  |  | 67,944 |  |  | 61,681 |
Services |  |  |  |  | 12,744 |  |  | 11,501 |
Total revenue |  |  |  |  | 80,688 |  |  | 73,182 |
Cost of revenue: |  |  |  |  |  |  |
Subscription |  |  |  |  | 14,613 |  |  | 14,093 |
Maintenance and support |  |  |  |  | 1,862 |  |  | 2,282 |
Total cost of subscription, maintenance and support |  |  |  |  | 16,475 |  |  | 16,375 |
Services |  |  |  |  | 12,358 |  |  | 13,167 |
Total cost of revenue |  |  |  |  | 28,833 |  |  | 29,542 |
Gross profit |  |  |  |  | 51,855 |  |  | 43,640 |
Operating expenses: |  |  |  |  |  |  |
Selling and marketing |  |  |  |  | 22,682 |  |  | 26,010 |
Research and development |  |  |  |  | 24,413 |  |  | 22,291 |
General and administrative |  |  |  |  | 15,062 |  |  | 14,135 |
Loss from operations |  |  |  |  | (10,302) |  |  | (18,796) |
Convertible debt interest and amortization |  |  |  |  | (1,202) |  |  | (1,576) |
Other income, net |  |  |  |  | 458 |  |  | 1,451 |
Loss before income tax provision |  |  |  |  | (11,046) |  |  | (18,921) |
Income tax provision |  |  |  |  | 311 |  |  | 81 |
Net loss |  |  |  |  | $ | (11,357) |  |  | $ | (19,002) |
Net loss per share: |  |  |  |  |  |  |
Basic and diluted |  |  |  |  | $ | (0.24) |  |  | $ | (0.41) |
Weighted average number of shares: |  |  |  |  |  |  |
Basic and diluted |  |  |  |  | 46,817 |  |  | 45,926 |
Other comprehensive (loss) income, net of tax: |  |  |  |  |  |  |
Foreign currency translation adjustment |  |  |  |  | $ | (173) |  |  | $ | 176 |
Other comprehensive (loss) income, net of tax |  |  |  |  | (173) |  |  | 176 |
Comprehensive loss |  |  |  |  | $ | (11,530) |  |  | $ | (18,826) |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

Table of Contents
PROS Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

| Three Months Ended March 31,
| 2024 |  | 2023
Operating activities: |  |  |
Net loss | $ | (11,357) |  |  | $ | (19,002) |
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
Depreciation and amortization | 2,204 |  |  | 3,001 |
Amortization of debt premium and issuance costs | (284) |  |  | 373 |
Share-based compensation | 12,700 |  |  | 9,904 |
Provision for credit losses | 149 |  |  | 108 |
Gain on lease modification | (697) |  |  | — |
Loss on disposal of assets | 774 |  |  | 35 |
Changes in operating assets and liabilities: |  |  |
Accounts and unbilled receivables | (2,098) |  |  | 2,239 |
Deferred costs | 606 |  |  | 425 |
Prepaid expenses and other assets | 1,070 |  |  | (2,505) |
Operating lease right-of-use assets and liabilities | (848) |  |  | (591) |
Accounts payable and other liabilities | (637) |  |  | (3,793) |
Accrued liabilities | 2,327 |  |  | 504 |
Accrued payroll and other employee benefits | (16,611) |  |  | (8,174) |
Deferred revenue | 8,058 |  |  | 11,333 |
Net cash used in operating activities | (4,644) |  |  | (6,143) |
Investing activities: |  |  |
Purchases of property and equipment | (223) |  |  | (1,546) |
Capitalized internal-use software development costs | (17) |  |  | — |
Investment in equity securities | (113) |  |  | — |
Net cash used in investing activities | (353) |  |  | (1,546) |
Financing activities: |  |  |
Proceeds from employee stock plans | 1,024 |  |  | 1,137 |
Tax withholding related to net share settlement of stock awards | (8,338) |  |  | (4,710) |
Net cash used in financing activities | (7,314) |  |  | (3,573) |
Effect of foreign currency rates on cash | (13) |  |  | 11 |
Net change in cash, cash equivalents and restricted cash | (12,324) |  |  | (11,251) |
Cash, cash equivalents and restricted cash: |  |  |
Beginning of period | 178,747 |  |  | 203,627 |
End of period | $ | 166,423 |  |  | $ | 192,376 |
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets |  |  |
Cash and cash equivalents | $ | 156,423 |  |  | $ | 192,376 |
Restricted cash | 10,000 |  |  | — |
Total cash, cash equivalents and restricted cash | $ | 166,423 |  |  | $ | 192,376 |
Supplemental disclosure of cash flow information: |  |  |
Noncash investing activities: |  |  |
Purchase of property and equipment accrued but not paid | $ | 119 |  |  | $ | 136 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

Table of Contents
PROS Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
(In thousands, except share data)
(Unaudited)

| Three Months Ended March 31, 2024
| Common Stock |  | Additional Paid-In Capital |  | Treasury Stock |  | Accumulated Deficit |  | Accumulated other comprehensive loss |  | Total Stockholders’ (Deficit) Equity
| Shares |  | Amount |  |  | Shares |  | Amount |  |  |
Balance at December 31, 2023 | 46,503,861 |  |  | $ | 51 |  |  | $ | 604,084 |  |  | 4,680,723 |  |  | $ | (29,847) |  |  | $ | (647,252) |  |  | $ | (4,909) |  |  | $ | (77,873) |
Stock awards net settlement | 424,171 |  |  | 1 |  |  | (8,339) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (8,338) |
Proceeds from employee stock plans | 40,408 |  |  | — |  |  | 1,024 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,024 |
Noncash share-based compensation | — |  |  | — |  |  | 12,700 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 12,700 |
Other comprehensive (loss) income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (173) |  |  | (173) |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (11,357) |  |  | — |  |  | (11,357) |
Balance at March 31, 2024 | 46,968,440 |  |  | $ | 52 |  |  | $ | 609,469 |  |  | 4,680,723 |  |  | $ | (29,847) |  |  | $ | (658,609) |  |  | $ | (5,082) |  |  | $ | (84,017) |

| Three Months Ended March 31, 2023
| Common Stock |  | Additional Paid-In Capital |  | Treasury Stock |  | Accumulated Deficit |  | Accumulated other comprehensive loss |  | Total Stockholders’ (Deficit) Equity
| Shares |  | Amount |  |  | Shares |  | Amount |  |
Balance at December 31, 2022 | 45,638,003 |  |  | $ | 50 |  |  | $ | 590,475 |  |  | 4,680,723 |  |  | $ | (29,847) |  |  | $ | (590,898) |  |  | $ | (5,253) |  |  | $ | (35,473) |
Stock awards net settlement | 338,089 |  |  | 1 |  |  | (4,711) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4,710) |
Proceeds from employee stock plans | 55,149 |  |  | — |  |  | 1,137 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,137 |
Noncash share-based compensation | — |  |  | — |  |  | 9,904 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 9,904 |
Other comprehensive (loss) income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 176 |  |  | 176 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (19,002) |  |  | — |  |  | (19,002) |
Balance at March 31, 2023 | 46,031,241 |  |  | $ | 51 |  |  | $ | 596,805 |  |  | 4,680,723 |  |  | $ | (29,847) |  |  | $ | (609,900) |  |  | $ | (5,077) |  |  | $ | (47,968) |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

Table of Contents
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 solutions that optimize shopping and selling experiences. PROS solutions leverage artificial intelligence ("AI"), self-learning and automation to ensure that every transactional experience is fast, frictionless and personalized for every shopper, supporting both business-to-business ("B2B") and business-to-consumer ("B2C") companies across industry verticals. Companies can use these selling, pricing, revenue optimization, distribution and retail, and digital offer marketing solutions to assess their market environments in real time to deliver customized prices and offers. The Company's solutions enable their customers to provide the buyers of their products the ability to move fluidly from one sales channel to another, whether direct, partner, online, mobile or other emerging channels, each with a personalized experience regardless of which channel is used. 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 March 31, 2024, the results of operations for the three months ended March 31, 2024 and 2023, cash flows for the three months ended March 31, 2024 and 2023, and stockholders' (deficit) equity for the three months ended March 31, 2024 and 2023.
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, 2023 ("Annual Report") filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, 2023 was derived from the Company's audited consolidated financial statements but does not include all disclosures required under GAAP.
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, 2023.
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 $150.6 million and $153.2 million at March 31, 2024 and December 31, 2023, respectively, and were invested in treasury, money market funds and interest-bearing deposits in banks. The fair value of those investments is determined based on quoted market prices, which represents level 1 in the fair value hierarchy as defined by ASC 820. See Note 8 for the fair value measurement of the convertible notes.
8

Table of Contents
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 also tied to the value of customer contracts acquired. Deferred costs were $14.5 million and $15.1 million as of March 31, 2024 and December 31, 2023, respectively. Amortization expense for the deferred costs was $1.3 million and $1.5 million for the three months ended March 31, 2024 and 2023, respectively. Amortization of deferred costs is included in selling and marketing expense in the accompanying unaudited condensed consolidated statements of comprehensive loss.
Recently issued accounting pronouncements not yet adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and other segment items on an annual and interim basis. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The ASU is to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding income taxes paid by jurisdiction. The new standard is effective for annual periods beginning after December 15, 2024, and early adoption is permitted. The new standard is to be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.
There have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2024, 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 March 31, 2024 and 2023, the Company recognized approximately $54.5 million and $49.4 million, respectively, of revenue that was included in the deferred revenue balances at the beginning of the respective periods and primarily related to subscription, maintenance and support, and services.
Performance obligations
As of March 31, 2024, the Company expects to recognize approximately $447.6 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 $227.4 million of these performance obligations over the next 12 months, with the balance recognized thereafte r. R emaining performance obligations represent contractually committed revenue that has not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue in future periods.
9

Table of Contents
4. Disaggregation of Revenue
Revenue by geography
The geographic information in the table below is presented for the three months ended March 31, 2024 and 2023. The Company categorizes geographic revenues based on the location of the customer's headquarters.

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
(in thousands) |  |  |  |  |  |  |  |  | Revenue |  | Percent |  | Revenue |  | Percent
United States of America |  |  |  |  |  |  |  |  | $ | 26,933 |  |  | 33 | % |  | $ | 26,232 |  |  | 36 | %
Europe |  |  |  |  |  |  |  |  | 25,671 |  |  | 32 | % |  | 22,949 |  |  | 31 | %
The rest of the world |  |  |  |  |  |  |  |  | 28,084 |  |  | 35 | % |  | 24,001 |  |  | 33 | %
Total revenue |  |  |  |  |  |  |  |  | $ | 80,688 |  |  | 100 | % |  | $ | 73,182 |  |  | 100 | %

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 9 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 March 31, 2024, the Company did not have any finance leases.
Supplemental cash flow information related to leases was as follows (in thousands):

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
Cash paid for operating lease liabilities |  |  |  |  | $ | 2,233 |  |  | $ | 2,251 |
Right-of-use asset obtained in exchange for operating lease liability |  |  |  |  | $ | 2,126 |  |  | $ | — |

In February 2024, an existing operating lease was modified due to a reduction of square footage at one of the Company's offices. The result of this modification was an increase in the related right-of-use asset of $2.1 million, an increase in the corresponding lease liability of $1.4 million, and a noncash gain of $0.7 million recorded as a reduction of the lease cost within cost of revenue and operating expenses. In connection with the lease modification, the Company also recorded a loss on disposal of assets of $0.8 million which is included in other income, net in the accompanying unaudited condensed consolidated statements of comprehensive loss.
In January 2023, an existing operating lease was modified due to a change in future payments. The result of the 2023 modification was a decrease in the related right-of-use asset and corresponding lease liability of $1.0 million.
As of March 31, 2024, maturities of lease liabilities were as follows (in thousands):

Year Ending December 31, |  | Amount
Remaining 2024 |  | $ | 5,738 |
2025 |  | 3,923 |
2026 |  | 3,895 |
2027 |  | 3,796 |
2028 |  | 3,856 |
2029 |  | 3,912 |
Thereafter |  | 14,486 |
Total operating lease payments |  | 39,606 |
Less: Imputed interest |  | (8,855) |
Total operating lease liabilities |  | $ | 30,751 |

10

Table of Contents
6. Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023:

|  |  | Three Months Ended March 31,
(in thousands, except per share data) |  |  |  |  | 2024 |  | 2023
Numerator: |  |  |  |  |  |  |
Net loss |  |  |  |  | $ | (11,357) |  |  | $ | (19,002) |
Denominator: |  |  |  |  |  |  |
Weighted average shares (basic) |  |  |  |  | 46,817 |  |  | 45,926 |
Dilutive effect of potential common shares |  |  |  |  | — |  |  | — |
Weighted average shares (diluted) |  |  |  |  | 46,817 |  |  | 45,926 |
Basic loss per share |  |  |  |  | $ | (0.24) |  |  | $ | (0.41) |
Diluted loss per share |  |  |  |  | $ | (0.24) |  |  | $ | (0.41) |

Dilutive potential common shares consist of shares issuable upon 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 1.5 million and 2.4 million for the three months ended March 31, 2024 and 2023, respectively. In addition, potential common shares related to the convertible notes determined to be antidilutive and excluded from diluted weighted average shares outstanding were 6.7 million and 5.8 million for the three months ended March 31, 2024 and 2023, respectively.
7. Noncash Share-based Compensation
The Company's 2017 Equity Incentive Plan (as amended and restated, the "2017 Stock Plan") had an aggregate authorized limit of 7,650,000 shares for issuance. In May 2023, the Company's stockholders approved an amendment to the 2017 Stock Plan increasing the aggregate amount of shares available for issuance to 10,550,000. As of March 31, 2024, 3,281,287 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 March 31, 2024 and December 31, 2023 (in thousands):

Award type |  | March 31, 2024 |  | December 31, 2023
Restricted stock units (time-based) |  | 3,212 |  |  | 2,767 |
Market stock units |  | 391 |  |  | 358 |

During the three months ended March 31, 2024, the Company granted 1,196,087 RSUs (time-based) with a weighted average grant-date fair value of $35.69 per share. The Company also granted 131,892 MSUs with a weighted average grant-date fair value of $41.07 to certain executive employees during the three months ended March 31, 2024. These MSUs vest on January 31, 2027 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 assumptions use d to value the MSUs granted during the three months ended March 31, 2024 were as follows:

| Three Months Ended March 31, 2024 |  |
Volatility | 50.94 | % |  |
Risk-free interest rate | 3.89 | % |  |
Expected award life in years | 2.97 |  |
Dividend yield | — | % |  |

Share-based compensation expense is allocated to expense categories in the unaudited condensed consolidated statements of comprehensive loss. The following table summarizes share-based compensation expense included in the
11

Table of Contents
Company's unaudited condensed consolidated statements of comprehensive loss for the three months ended March 31, 2024 and 2023 (in thousands):

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
Share-based compensation: |  |  |  |  |  |  |
Cost of revenue |  |  |  |  | $ | 1,068 |  |  | $ | 832 |
Operating expenses: |  |  |  |  |  |  |
Selling and marketing |  |  |  |  | 3,628 |  |  | 2,928 |
Research and development |  |  |  |  | 3,531 |  |  | 2,350 |
General and administrative |  |  |  |  | 4,473 |  |  | 3,794 |
Total included in operating expenses |  |  |  |  | 11,632 |  |  | 9,072 |
Total share-based compensation expense |  |  |  |  | $ | 12,700 |  |  | $ | 9,904 |

At March 31, 2024, the Company had an estimated $100.0 million of total unrecognized compensation costs related to share-based compensation arrangements. These costs will be recognized over a weighted average period o f 2.8 years.
The Company's Employee Stock Purchase Plan (as amended, the "ESPP") permits eligible employees to purchase Company 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 Dec ember 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 increasing the aggregate amount of shares available for issuance under the ESPP to 1,000,000. During the three months ended March 31, 2024, the Company issued 40,408 shares under the ESPP. As of March 31, 2024, 242,709 shares remain authorized and available for issuance under the ESPP. As of March 31, 2024, the Company held approximately $0.7 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 March 31, 2024 (in thousands):

| Date of Issuance |  | Unpaid Principal Balance |  |  |  | Contractual Interest Rates
1% Convertible Notes due in 2024 ("2024 Notes") | May 2019 |  | $ | 21,713 |  |  |  |  |  |  | 1%
2.25% Convertible Notes due in 2027 ("2027 Notes") | September 2020 and October 2023 |  | $ | 266,816 |  |  |  |  |  |  | 2.25%
Total Notes |  |  | $ | 288,529 |  |  |  |  |  |  |

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 semi-annually 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
12

Table of Contents
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.
On August 23, 2023, the Company entered into legally binding exchange agreements with a limited number of existing holders of the 2024 Notes to exchange approximately $122.0 million aggregate principal amount of the existing 2024 Notes for a principal amount of the 2027 Notes at an exchange ratio to be determined based on the daily volume-weighted average trading price of the Company’s common stock over a thirty-day trading period beginning August 24, 2023 (such exchange transactions, the “Exchange”). On October 10, 2023, the Company settled the exchange agreements for the exchange of $122.0 million aggregate principal amount of its outstanding 2024 Notes for newly issued $116.8 million aggregate principal amount of its outstanding 2027 Notes. Following the settlement of the Exchange, $21.7 million in aggregate principal amount of the 2024 Notes and $266.8 million in aggregate principal amount of the 2027 Notes remain outstanding with terms unchanged. The 2027 Notes issued in the Exchange constitute a further issuance of, and form a single series and will be fungible with, the existing 2027 Notes.
As of March 31, 2024, the 2027 and 2024 Notes are not yet convertible and their remaining term is approximately 42 months and 2 months, respectively.
As of March 31, 2024 and December 31, 2023, the fair value of the principal amount of the Notes in the aggregate was $310.7 million and $320.5 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.
The Notes consist of the following (in thousands):

| March 31, 2024 |  | December 31, 2023
Principal | $ | 288,529 |  |  | $ | 288,529 |
Debt premium, net of amortization | 9,100 |  |  | 9,776 |
Debt issuance costs, net of amortization | (3,990) |  |  | (4,313) |
Net carrying amount | $ | 293,639 |  |  | $ | 293,992 |

The following table sets forth total interest expense recognized related to the Notes (in thousands):

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
Coupon interest |  |  |  |  | $ | 1,555 |  |  | $ | 1,203 |
Amortization of debt issuance costs |  |  |  |  | 323 |  |  | 373 |
Amortization of debt premium |  |  |  |  | (676) |  |  | — |
Total |  |  |  |  | $ | 1,202 |  |  | $ | 1,576 |

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 the 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’ (deficit) 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.
In August 2023, in connection with the Exchange, the Company entered into additional capped call transactions (the “Additional Capped Call”) with certain option counterparties. The Company agreed to pay a premium to the option
13

Table of Contents
counterparties for the Additional Capped Call for an amount to be determined based on the volume-weighted average trading price of the Company’s common stock over a thirty-day reference period beginning August 24, 2023. The conversion price of the Additional Capped Call is the same as the 2027 Notes Capped Call above. Initial funding of the Additional Capped Call occurred in the third quarter of 2023. The Additional Capped Call had a deferred premium component indexed to the Company's stock price and required to be settled in cash, and therefore the Additional Capped Call was a derivative instrument that, at inception, did not meet the qualifications for equity classification. On October 10, 2023, the Company settled the deferred premium on the Additional Capped Call resulting in a final value of $22.2 million. Once the deferred premium was settled, the instrument met the requirements for equity classification and the Company reclassified the Additional Capped Call to 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, mainly related to infrastructure platforms, business technology software and support, and other services. In January 2023, the Company entered into a noncancelable agreement for software support services with a four-year term. The remaining purchase commitment as of March 31, 2024 was $2.4 million and the agreement expires in March 2027. There were no other material changes outside the ordinary course of business to the noncancellable purchase commitments disclosed in the Annual Report.
10. Severance and Other Related Costs
In the quarter ended March 31, 2023, the Company made certain organizational changes and incurred approximately $3.6 million of severance, employee benefits, outplacement and related costs during the period. These costs were recorded primarily as operating expenses in the unaudited condensed consolidated statements of comprehensive loss, mainly research and development, and sales and marketing. During the quarter ended March 31, 2023, cash payments of $3.2 million were recorded for the incurred costs. The Company settled the remaining accrued expense within 2023.
11. Other Income, Net
Other income, net consisted of the following (in thousands):

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
Interest income, net |  |  |  |  | $ | 1,762 |  |  | $ | 1,730 |
Foreign currency (loss) gain, net |  |  |  |  | (536) |  |  | (203) |
Other (1) |  |  |  |  | (768) |  |  | (76) |
Total other income, net |  |  |  |  | $ | 458 |  |  | $ | 1,451 |

(1) Includes loss on disposal of assets of $0.8 million related to a lease modification in the first quarter of 2024, see Note 5.
14

Table of Contents
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.
Q1 2024 Financial Overview
In the first quarter of 2024, we continued to grow our subscription revenue, increasing subscription revenue by 15% for the three months ended March 31, 2024, as compared to the same period in 2023. Total revenue increased 10% for the three months ended March 31, 2024, as compared to the same period in 2023.
For the three months ended March 31, 2024, recurring revenue (which consists of subscription revenue and maintenance and support revenue) accounted for 84% of total revenue. Our gross revenue retention rates remained above 93% during the twelve months ended March 31, 2024.
Cash used in operating activities was $4.6 million for the three months ended March 31, 2024 as compared to $6.1 million for the three months ended March 31, 2023. The improvement was primarily due to an increase in cash collections, partially offset by a higher annual incentive payment in 2024 as compared to prior year. In addition, there was a severance payment of $3.2 million in the first quarter of 2023.
Free cash flow is a 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, excluding severance payments, less capital expenditures 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 March 31, 2024 was $4.9 million, compared to $4.5 million for the three months ended March 31, 2023.
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 March 31,
|  |  |  |  | 2024 |  | 2023
Net cash used in operating activities |  |  |  |  | $ | (4,644) |  |  | $ | (6,143) |
Severance |  |  |  |  | — |  |  | 3,170 |
Purchase of property and equipment |  |  |  |  | (223) |  |  | (1,546) |
Capitalized internal-use software development costs |  |  |  |  | (17) |  |  | — |
Free cash flow |  |  |  |  | $ | (4,884) |  |  | $ | (4,519) |

Factors Affecting Our Performance
Key factors and trends that have affected, and we believe will continue to affect, our operating results include:
•Macroeconomic and Geopolitical Environment. The companies we serve continue to navigate a complex macroeconomic environment impacted by inflation, higher interest rates, volatile capital and financial markets, supply chain disruptions, tight labor markets, pricing volatility, geopolitical conflicts, including the Russia-Ukraine and Middle East conflicts, shifting regulations and other local and regional macroeconomic conditions. Uncertain macroeconomic and industry conditions in the geographies where we operate create a continued challenging selling environment for enterprise technology deployments, including in some cases more complex customer review and approval cycles. Despite this environment, we remain confident in our ability to help our customers drive profitable growth by optimizing their shopping and selling experiences. For example, pricing volatility and inflation are catalysts for demand for our AI-driven price optimization and management solutions. We believe in the near term that new
15

Table of Contents
customers will continue to emphasize smaller scope initial purchases and fast return on their investments. We believe this emphasis will require solid execution by our teams to capitalize on these demand drivers.
•Profitable Growth as a Priority. We continue to focus on profitability by investing in a disciplined manner to drive revenue growth and support our long-term initiatives. This includes investments designed to accelerate our customer time-to-value, improve efficiency and operations, further leveraging AI in our business operations, provide out-of-the-box integration with third-party commerce solutions and develop new applications and technologies. We expect our product development, sales and marketing, and general and administrative expenses as a percentage of total revenues will decrease long-term as we increase our revenues and focus on profitability.
•Artificial Intelligence. The rapidly evolving market interest in generative AI and associated interest in all aspects of AI continues to drive businesses around the world and across industries to consider, invest in and use applications leveraging AI. For example, companies use AI to extract insights from their data, improve and customize their offerings, and drive process and operating efficiencies. Our AI-powered solutions enable buyers to move fluidly and with personalized experiences across our customers’ sales channels, and our digital offer marketing solutions help our customers drive their buyers directly into their direct selling channels. The pace of change across industries helps fuel demand for our solutions as businesses look to replace manual processes with AI. We have utilized AI in our solutions for years and our deep experience in AI continues to influence our category-leading solutions. For example, our current AI uses a deep neural network to leverage all available data and attributes to improve prediction accuracy. We are also utilizing and considering new ways to expand AI use in our own business operations to drive efficienci es, improve knowledge management, gain insights and increase productivity.
•Travel Industry Stabilizing. The travel industry continues to recover from the unprecedented disruption caused by the pandemic with global air passenger traffic recovering to pre-pandemic levels during the first quarter of 2024. Despite significant geographic and individual airline variances in the timetable for full recovery and persistent operational, cost and supply chain headwinds, including continued challenges in bringing new plane capacity online, airline analysts continue to forecast strong travel demand and overall airline industry profitability in 2024. However, these trends could be impacted negatively if inflation further impacts consumer disposable income or if business travel does not recover to pre-pandemic levels. As airlines stabilize and plan for future growth, we believe our solutions are well-positioned, particularly as airlines look to manage their capacity and enhance their digital marketing, booking capabilities, and ancillary offerings.
•Digital Purchasing Driving Technology Adoption. We believe the long-term trends toward digital purchasing by both consumers and corporate buyers drives demand for technology that provides fast, frictionless and personalized buying experiences across direct sales, partner, online, mobile and emerging channels. Buyers often prefer not to interact with sales representatives as their primary source of research, and to buy online when they have already decided what to buy. For example, in the airline industry, the pandemic accelerated a long-term trend towards direct booking channels, and we anticipate airlines continuing to invest in technology to enhance their ability to capture a greater percentage of bookings and provide increasingly personalized offers through their own channels such as their websites. We believe companies increasingly compete based on customer experience and must adopt technologies which power consistent offers and experiences across sales channels.
16

Table of Contents
Results of Operations
The following table sets forth certain items in our unaudited condensed consolidated statements of comprehensive loss as a percentage of total revenues for the three months ended March 31, 2024 and 2023:

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
Revenue: |  |  |  |  |  |  |
Subscription |  |  |  |  | 80 | % |  | 76 | %
Maintenance and support |  |  |  |  | 4 |  |  | 8 |
Total subscription, maintenance and support |  |  |  |  | 84 |  |  | 84 |
Services |  |  |  |  | 16 |  |  | 16 |
Total revenue |  |  |  |  | 100 |  |  | 100 |
Cost of revenue: |  |  |  |  |  |  |
Subscription |  |  |  |  | 18 |  |  | 19 |
Maintenance and support |  |  |  |  | 2 |  |  | 3 |
Total cost of subscription, maintenance and support |  |  |  |  | 20 |  |  | 22 |
Services |  |  |  |  | 15 |  |  | 18 |
Total cost of revenue |  |  |  |  | 36 |  |  | 40 |
Gross profit |  |  |  |  | 64 |  |  | 60 |
Operating Expenses: |  |  |  |  |  |  |
Selling and marketing |  |  |  |  | 28 |  |  | 36 |
Research and development |  |  |  |  | 30 |  |  | 30 |
General and administrative |  |  |  |  | 19 |  |  | 19 |
Total operating expenses |  |  |  |  | 77 |  |  | 85 |
Convertible debt interest and amortization |  |  |  |  | (1) |  |  | (2) |
Other income, net |  |  |  |  | 1 |  |  | 2 |
Loss before income tax provision |  |  |  |  | (14) |  |  | (26) |
Income tax provision |  |  |  |  | — |  |  | — |
Net loss |  |  |  |  | (14) | % |  | (26) | %

Revenue:

|  |  |  |  | Three Months Ended March 31, |  | Variance
(Dollars in thousands) |  |  |  |  |  |  |  |  | 2024 |  | 2023 |  | $ |  | %
Subscription |  |  |  |  |  |  |  |  | $ | 64,349 |  |  | $ | 55,969 |  |  | $ | 8,380 |  |  | 15 | %
Maintenance and support |  |  |  |  |  |  |  |  | 3,595 |  |  | 5,712 |  |  | (2,117) |  |  | (37) | %
Total subscription, maintenance and support |  |  |  |  |  |  |  |  | 67,944 |  |  | 61,681 |  |  | 6,263 |  |  | 10 | %
Services |  |  |  |  |  |  |  |  | 12,744 |  |  | 11,501 |  |  | 1,243 |  |  | 11 | %
Total revenue |  |  |  |  |  |  |  |  | $ | 80,688 |  |  | $ | 73,182 |  |  | $ | 7,506 |  |  | 10 | %

Subscription revenue. Subscription revenue increased primarily due to an increase in new and existing customer subscription contracts.
Maintenance and support revenue. Maintenance and support revenue decreased primarily as a result of existing maintenance customers migrating to our cloud solutions and, to a lesser extent, customer maintenance churn. We expect maintenance revenue to continue to decline as we continue to migrate maintenance customers to our cloud solutions.
Services revenue. Services revenue increased primarily as a result of higher sales of professional services to our existing customers. 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 efficiencies in our solutions implementations requiring less professional services during a particular period.
17

Table of Contents
Cost of revenue and gross profit:

|  |  |  |  | Three Months Ended March 31, |  | Variance
(Dollars in thousands) |  |  |  |  |  |  |  |  | 2024 |  | 2023 |  | $ |  | %
Cost of subscription |  |  |  |  |  |  |  |  | $ | 14,613 |  |  | $ | 14,093 |  |  | $ | 520 |  |  | 4 | %
Cost of maintenance and support |  |  |  |  |  |  |  |  | 1,862 |  |  | 2,282 |  |  | (420) |  |  | (18) | %
Total cost of subscription, maintenance and support |  |  |  |  |  |  |  |  | 16,475 |  |  | 16,375 |  |  | 100 |  |  | 1 | %
Cost of services |  |  |  |  |  |  |  |  | 12,358 |  |  | 13,167 |  |  | (809) |  |  | (6) | %
Total cost of revenue |  |  |  |  |  |  |  |  | 28,833 |  |  | 29,542 |  |  | (709) |  |  | (2) | %
Gross profit |  |  |  |  |  |  |  |  | $ | 51,855 |  |  | $ | 43,640 |  |  | $ | 8,215 |  |  | 19 | %

Cost of subscription. Cost of subscription increased primarily due to higher infrastructure cost to support the growth in our current subscription customer base and higher employee-related costs mainly due to an increase in headcount. These increases were partially offset by a decrease in amortization expense for intangible assets and internal-use software expense for the three months ended March 31, 2024. O ur subscription gross profit percentages were 77% and 75% for the three months ended March 31, 2024 and 2023, respectively.
Cost of maintenance and support. Cost of maintenance and support decreased due to lower personnel costs as our maintenance customer base declined primarily with migrations to our subscription solutions. Maintenance and support gross profit percentages were 48% and 60% for the three months ended March 31, 2024 and 2023, respectively. Gross profit percentages decreased in 2024 as compared to prior year primarily due to lower maintenance and support revenue an d the cost of maintenance and support being partially fixed.
Cost of services. Cost of services decreased primarily due to prior organizational headcount changes and other allocated overhead. Services gross profit percentages were 3% and (14)% for the three months ended March 31, 2024 and 2023, respectively. Services gross profit percentages improved in 2024 compared to 2023 primarily due to an increase in services revenue as well as a decrease in cost of services. Services gross profit percentages vary period to period depending on different factors, including the level of professional services required to implement our solutions, the utilization of our employees and our effective man-day rates.
Operating expenses:

|  |  |  |  | Three Months Ended March 31, |  | Variance
(Dollars in thousands) |  |  |  |  |  |  |  |  | 2024 |  | 2023 |  | $ |  | %
Selling and marketing |  |  |  |  |  |  |  |  | $ | 22,682 |  |  | $ | 26,010 |  |  | $ | (3,328) |  |  | (13) | %
Research and development |  |  |  |  |  |  |  |  | 24,413 |  |  | 22,291 |  |  | 2,122 |  |  | 10 | %
General and administrative |  |  |  |  |  |  |  |  | 15,062 |  |  | 14,135 |  |  | 927 |  |  | 7 | %
Total operating expenses |  |  |  |  |  |  |  |  | $ | 62,157 |  |  | $ | 62,436 |  |  | $ | (279) |  |  | — | %

Selling and marketing expenses. S elling and marketing expenses decreased primarily due to a decrease in employee-related costs, including severance cost in prior year, sales and marketing events and initiatives, travel and other overhead costs. The decrease was partially offset by an increase in noncash share-based compensation expense due to the acceleration of share-based compensation expense for equity awards related to the change of employment of a senior employee in the first quarter of 2024.
Research and development expenses. Research and development expenses increased primarily due to higher employee-related expenses. The increase in research and development expenses also included higher noncash share-based compensation expense due to the acceleration of share-based compensation expense for equity awards related to the change of employment of a senior employee in the first quarter of 2024.
General and administrative expenses. General and administrative expenses increased primarily due to higher employee-related expenses, including share-based compensation.
18

Table of Contents
Non-operating expenses:

|  |  |  |  | Three Months Ended March 31, |  | Variance
(Dollars in thousands) |  |  |  |  |  |  |  |  | 2024 |  | 2023 |  | $ |  | %
Convertible debt interest and amortization |  |  |  |  |  |  |  |  | $ | (1,202) |  |  | $ | (1,576) |  |  | $ | 374 |  |  | (24) | %
Other income, net |  |  |  |  |  |  |  |  | $ | 458 |  |  | $ | 1,451 |  |  | $ | (993) |  |  | (68) | %

Convertible debt interest and amortization. Our convertible debt expense consisted of coupon interest, amortization of debt premium and debt issuance costs attributable to our Notes. The decrease in expense was related to the exchange of about 85% of PROS outstanding convertible notes due in May 2024 for newly issued convertible notes due in September 2027. See Note 8 for more information.
Other income, net. The change in other income, net was primarily related to loss on disposal of assets associated with a lease modification. See Note 5 for more information.
Income tax provision:

|  |  |  |  | Three Months Ended March 31, |  | Variance
(Dollars in thousands) |  |  |  |  |  |  |  |  | 2024 |  | 2023 |  | $ |  | %
Effective tax rate |  |  |  |  |  |  |  |  | (2.8) | % |  | (0.4) | % |  | n/a |  | n/a
Income tax provision |  |  |  |  |  |  |  |  | $ | 311 |  |  | $ | 81 |  |  | $ | 230 |  |  | 284 | %

Income tax provision. The tax provision for the three months ended March 31, 2024 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 (2.8)% and (0.4)% for the three months ended March 31, 2024 and 2023, 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 was 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 March 31, 2024, we had $156.4 million of cash and cash equivalents and $34.0 million of working capital as compared to $168.7 million of cash and cash equivalents and $37.3 million of working capital at December 31, 2023.
Our principal sources of liquidity are our cash and cash equivalents, cash flows generated from operations and potential borrowings under our $50 million credit agreement (the "Credit Agreement"). In addition, we could access capital markets to supplement our liquidity position. Our material drivers or variants of operating cash flow are net income (loss) and the timing of invoicing and cash collections from our customers. Our operating cash flows are also impacted by the timing of payments to our vendors and the payments of other liabilities.
We believe we will have adequate liquidity and capital resources to meet our operational requirements, anticipated capital expenditures, and coupon interest of our Notes for the next twelve months, as well as for principal payments for our remaining 2024 Notes due May 2024. Our future working capital requirements depend on many factors, including the operations of our existing business, growth of our customer subscription services, future acquisitions we might undertake, expansion into complementary businesses, timing of adoption and implementation of our solutions and customer churn. Capital markets have tightened in response to the macroeconomic environment making new financing more difficult and/or expensive and we may not be able to obtain such financing on terms acceptable to us or at all.
The following table presents key components of our unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023:
19

Table of Contents

| Three Months Ended March 31,
(Dollars in thousands) | 2024 |  | 2023
Net cash used in operating activities | $ | (4,644) |  |  | $ | (6,143) |
Net cash used in investing activities | (353) |  |  | (1,546) |
Net cash used in financing activities | (7,314) |  |  | (3,573) |
Effect of foreign currency rates on cash | (13) |  |  | 11 |
Net change in cash, cash equivalents and restricted cash | $ | (12,324) |  |  | $ | (11,251) |

Operating activities
Net cash used in operating activities for the three months ended March 31, 2024 was $4.6 million. The improvement year over year was primarily due to an increase in cash collections, partially offset by a higher annual incentive payment in 2024 as compared to prior year. In addition, there was a severance payment of $3.2 million in the first quarter of 2023.
Investing activities
Net cash used in investing activities for the three months ended March 31, 2024 was $0.4 million. The decrease was mainly due to higher capital expenditures in 2023, primarily related to a third-party software license renewal.
Financing activities
Net cash used in financing activities for the three months ended March 31, 2024 was $7.3 million. The increase year over year was primarily due to higher tax withholding payments of $3.6 million related to the vesting of employee 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 and noted below, there have been no material changes to our contractual obligations and commitments disclosed in our Annual Report.
Credit facility
As of March 31, 2024, there were no outstanding borrowings under our Credit Agreement. As of March 31, 2024, $0.6 million of unamortized debt issuance costs related to the Credit Agreement is included in prepaid and other current assets and other assets, noncurrent in the unaudited condensed consolidated balance sheets. For the three months ended March 31, 2024, we recorded an immaterial amount of amortization of debt issuance costs which is included in other income, net in the unaudited condensed consolidated statements of comprehensive loss.
The Credit Agreement also has a depository condition which requires us to maintain a cash balance of at least $10.0 million with the administrative agent throughout the term of the Credit Agreement. This amount has been included in restricted cash in the unaudited condensed consolidated balance sheets.
Recent Accounting Pronouncements
See "Recently issued accounting pronouncements not yet adopted" in Note 2 above for discussion of recent accounting pronouncements including the respective expected dates of adoption, if any.
20

Table of Contents
Critical accounting policies and estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed 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 credit losses, 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 awards, 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.
21

Table of Contents
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risks from those disclosed in Part II, Item 7A, of our Annual Report.
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 March 31, 2024. Based on our evaluation of our disclosure controls and procedures as of March 31, 2024, 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
There have been no changes in our internal control over financial reporting during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
22

Table of Contents
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
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
None.
ITEM 5. OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
None of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K during the three months ended March 31, 2024.
ITEM 6. EXHIBITS

Index to Exhibits
|  |  |  | Provided |  | Incorporated by Reference
Exhibit No. |  | Description |  | Herewith |  | Form |  | Filing Date
31.1 |  | Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a). |  | X |  |  |  |
31.2 |  | Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/ 15d-14(a). |  | X |  |  |  |
32.1* |  | Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350. |  | 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. |  |  |  |  |  |

23

Table of Contents

* | 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.

24

Table of Contents
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.
May 7, 2024 | By: |  | /s/ Andres Reiner
|  |  | Andres Reiner
|  |  | President and Chief Executive Officer (Principal Executive Officer)
May 7, 2024 | By: |  | /s/ Stefan Schulz
|  |  | Stefan Schulz
|  |  | Executive Vice President and Chief Financial Officer (Principal Financial Officer)

25