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 September 30, ~~2020~~2021


☐			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~~

~~(Address of Principal Executive Offices)~~

~~(Zip Code)~~

~~(713)~~

~~335-5151~~

~~(Registrant's telephone number, including area code)~~

~~3100 Main Street, Suite 900~~

~~Houston~~

~~77002~~

~~(Former address, if changed since last report)~~


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)

		0		0	0	0
(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 ~~43,434,985~~44,392,129 as of October ~~22, 2020.~~26, 2021.

Table of Contents

PROS Holdings, Inc.

Form 10-Q

For the Quarterly Period Ended September 30, ~~2020~~2021

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 Income (Loss)	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Stockholders' Equity	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1817
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2724
Item 4.	Controls and Procedures	2724

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	2825
Item 1A.	Risk Factors	2825
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3025
Item 3.	Defaults Upon Senior Securities	3025
Item 4.	Mine Safety Disclosure	3025
Item 5.	Other Information	3025
Item 6.	Exhibits	3126
Signatures		3227

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.

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)


		September 30, 2020		December 31, 2019			September 30, 2021		December 31, 2020
Assets:	Assets:					Assets:
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	322,352	$	306,077	Cash and cash equivalents	$	308,642	$	329,134

Trade and other receivables, net of allowance of $4,616 and $214, respectively		67,940		65,074
Trade and other receivables, net of allowance of $1,043 and $4,122, respectively						Trade and other receivables, net of allowance of $1,043 and $4,122, respectively	43,125		49,578
Deferred costs, current	Deferred costs, current	5,917		5,756		Deferred costs, current	5,850		5,941
Prepaid and other current assets	Prepaid and other current assets	9,010		9,038		Prepaid and other current assets	10,513		9,647

Total current assets	Total current assets	405,219		385,945		Total current assets	368,130		394,300

Property and equipment, net	Property and equipment, net	35,994		14,794		Property and equipment, net	32,395		36,504
Operating lease right-of-use assets	Operating lease right-of-use assets	31,030		26,550		Operating lease right-of-use assets	25,926		30,689
Deferred costs, noncurrent	Deferred costs, noncurrent	12,974		15,478		Deferred costs, noncurrent	10,339		12,544
Intangibles, net	Intangibles, net	9,869		14,605		Intangibles, net	5,738		8,341
Goodwill	Goodwill	49,560		49,104		Goodwill	49,439		50,044

Other assets, noncurrent	Other assets, noncurrent	6,796		6,831		Other assets, noncurrent	9,053		7,549
Total assets	Total assets	$	551,442	$	513,307	Total assets	$	501,020	$	539,971
Liabilities and Stockholders' Equity:	Liabilities and Stockholders' Equity:					Liabilities and Stockholders' Equity:
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and other liabilities	Accounts payable and other liabilities	$	14,014	$	9,098	Accounts payable and other liabilities	$	4,998	$	4,246
Accrued liabilities	Accrued liabilities	11,906		22,748		Accrued liabilities	12,233		13,065
Accrued payroll and other employee benefits	Accrued payroll and other employee benefits	22,017		32,656		Accrued payroll and other employee benefits	25,741		25,514
Operating lease liabilities, current	Operating lease liabilities, current	5,132		7,173		Operating lease liabilities, current	6,286		5,937
Deferred revenue, current	Deferred revenue, current	106,547		124,459		Deferred revenue, current	99,300		99,156

Total current liabilities	Total current liabilities	159,616		196,134		Total current liabilities	148,558		147,918
Deferred revenue, noncurrent	Deferred revenue, noncurrent	11,493		17,801		Deferred revenue, noncurrent	6,464		11,372
Convertible debt, net	Convertible debt, net	214,751		110,704		Convertible debt, net	287,914		218,028
Operating lease liabilities, noncurrent	Operating lease liabilities, noncurrent	35,218		22,391		Operating lease liabilities, noncurrent	39,000		44,099
Other liabilities, noncurrent	Other liabilities, noncurrent	1,330		1,281		Other liabilities, noncurrent	1,150		1,517
Total liabilities	Total liabilities	422,408		348,311		Total liabilities	483,086		422,934
Commitments and contingencies (see Note 10)
Commitments and contingencies (see Note 9)						Commitments and contingencies (see Note 9)	0
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized; NaN issued		0		0
Common stock, $0.001 par value, 75,000,000 shares authorized; 48,030,340 and 47,310,846 shares issued, respectively; 43,349,617 and 42,630,123 shares outstanding, respectively		48		47
Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued						Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued	—		—
Common stock, $0.001 par value, 75,000,000 shares authorized; 49,072,852 and 48,142,267 shares issued, respectively; 44,392,129 and 43,461,544 shares outstanding, respectively						Common stock, $0.001 par value, 75,000,000 shares authorized; 49,072,852 and 48,142,267 shares issued, respectively; 44,392,129 and 43,461,544 shares outstanding, respectively	49		48
Additional paid-in capital	Additional paid-in capital	583,284		560,496		Additional paid-in capital	537,058		589,040
Treasury stock, 4,680,723 common shares, at cost	Treasury stock, 4,680,723 common shares, at cost	(29,847)		(29,847)		Treasury stock, 4,680,723 common shares, at cost	(29,847)		(29,847)
Accumulated deficit	Accumulated deficit	(420,589)		(361,789)		Accumulated deficit	(485,043)		(438,773)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(3,862)		(3,911)		Accumulated other comprehensive loss	(4,283)		(3,431)

Total stockholders' equity	Total stockholders' equity	129,034		164,996		Total stockholders' equity	17,934		117,037
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	551,442	$	513,307	Total liabilities and stockholders' equity	$	501,020	$	539,971

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

Table of Contents

PROS Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands, except per share data)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenue:	Revenue:									Revenue:
Subscription	Subscription	$	42,029	$	38,592	$	127,576	$	104,621	Subscription	$	44,119	$	42,029	$	130,991	$	127,576
Maintenance and support	Maintenance and support	10,765		14,405		35,029		44,772		Maintenance and support	8,477		10,765		26,721		35,029
Total subscription, maintenance and support	Total subscription, maintenance and support	52,794		52,997		162,605		149,393		Total subscription, maintenance and support	52,596		52,794		157,712		162,605

Services	Services	8,714		11,153		28,961		34,766		Services	10,075		8,714		28,738		28,961
Total revenue	Total revenue	61,508		64,150		191,566		184,159		Total revenue	62,671		61,508		186,450		191,566
Cost of revenue:	Cost of revenue:									Cost of revenue:
Subscription	Subscription	12,897		11,090		38,153		30,695		Subscription	13,122		12,897		40,512		38,153
Maintenance and support	Maintenance and support	2,177		2,632		7,577		8,269		Maintenance and support	2,044		2,177		6,459		7,577
Total cost of subscription, maintenance and support	Total cost of subscription, maintenance and support	15,074		13,722		45,730		38,964		Total cost of subscription, maintenance and support	15,166		15,074		46,971		45,730

Services	Services	9,563		12,661		33,584		31,792		Services	10,886		9,563		31,977		33,584
Total cost of revenue	Total cost of revenue	24,637		26,383		79,314		70,756		Total cost of revenue	26,052		24,637		78,948		79,314
Gross profit	Gross profit	36,871		37,767		112,252		113,403		Gross profit	36,619		36,871		107,502		112,252
Operating expenses:	Operating expenses:									Operating expenses:
Selling and marketing	Selling and marketing	21,951		21,600		67,882		66,030		Selling and marketing	21,025		21,951		63,779		67,882
Research and development										Research and development	19,022		19,135		59,575		56,668
General and administrative	General and administrative	11,948		11,553		40,356		35,260		General and administrative	12,380		11,948		36,852		40,356
Research and development		19,135		16,878		56,668		50,132
Acquisition-related		0		248		0		248

Loss from operations	Loss from operations	(16,163)		(12,512)		(52,654)		(38,267)		Loss from operations	(15,808)		(16,163)		(52,704)		(52,654)
Convertible debt interest and amortization	Convertible debt interest and amortization	(2,498)		(3,717)		(6,645)		(12,347)		Convertible debt interest and amortization	(1,576)		(2,498)		(4,728)		(6,645)
Other income (expense), net		122		(1,010)		1,099		(601)
Other (expense) income, net										Other (expense) income, net	(71)		122		219		1,099
Loss before income tax provision	Loss before income tax provision	(18,539)		(17,239)		(58,200)		(51,215)		Loss before income tax provision	(17,455)		(18,539)		(57,213)		(58,200)
Income tax provision	Income tax provision	318		108		600		566		Income tax provision	70		318		387		600
Net loss	Net loss	$	(18,857)	$	(17,347)	$	(58,800)	$	(51,781)	Net loss	$	(17,525)	$	(18,857)	$	(57,600)	$	(58,800)

Net loss per share:	Net loss per share:									Net loss per share:
Basic and diluted	Basic and diluted	$	(0.44)	$	(0.42)	$	(1.36)	$	(1.31)	Basic and diluted	$	(0.39)	$	(0.44)	$	(1.30)	$	(1.36)

Weighted average number of shares:	Weighted average number of shares:									Weighted average number of shares:

Basic and diluted	Basic and diluted	43,347		41,276		43,251		39,438		Basic and diluted	44,386		43,347		44,318		43,251
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	Foreign currency translation adjustment	$	133	$	(658)	$	49	$	(750)	Foreign currency translation adjustment	$	(401)	$	133	$	(852)	$	49

Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	133		(658)		49		(750)		Other comprehensive income (loss), net of tax	(401)		133		(852)		49
Comprehensive loss	Comprehensive loss	$	(18,724)	$	(18,005)	$	(58,751)	$	(52,531)	Comprehensive loss	$	(17,926)	$	(18,724)	$	(58,452)	$	(58,751)

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

Table of Contents

PROS Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2020		2019			2021		2020
Operating activities:	Operating activities:					Operating activities:
Net loss	Net loss	$	(58,800)	$	(51,781)	Net loss	$	(57,600)	$	(58,800)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	10,584		10,264		Depreciation and amortization	8,828		10,584
Amortization of debt discount and issuance costs	Amortization of debt discount and issuance costs	5,456		9,159		Amortization of debt discount and issuance costs	1,119		5,456
Share-based compensation	Share-based compensation	18,477		18,234		Share-based compensation	25,410		18,477

Provision for doubtful accounts	Provision for doubtful accounts	5,549		0		Provision for doubtful accounts	(2,078)		5,549

Loss on debt extinguishment		0		5,000

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts and unbilled receivables	Accounts and unbilled receivables	(8,584)		(13,888)		Accounts and unbilled receivables	8,521		(8,584)
Deferred costs	Deferred costs	2,343		(3,124)		Deferred costs	2,296		2,343
Prepaid expenses and other assets	Prepaid expenses and other assets	131		(4,582)		Prepaid expenses and other assets	397		131
Operating lease right-of-use assets and liabilities						Operating lease right-of-use assets and liabilities	35		7,169
Accounts payable and other liabilities	Accounts payable and other liabilities	9,344		(492)		Accounts payable and other liabilities	593		2,175
Accrued liabilities	Accrued liabilities	(11,500)		9,877		Accrued liabilities	(539)		(11,500)
Accrued payroll and other employee benefits	Accrued payroll and other employee benefits	(10,601)		2,717		Accrued payroll and other employee benefits	215		(10,601)
Deferred revenue	Deferred revenue	(24,240)		11,009		Deferred revenue	(4,782)		(24,240)
Net cash used in operating activities	Net cash used in operating activities	(61,841)		(7,607)		Net cash used in operating activities	(17,585)		(61,841)
Investing activities:	Investing activities:					Investing activities:
Purchases of property and equipment	Purchases of property and equipment	(23,551)		(3,360)		Purchases of property and equipment	(2,432)		(23,551)

Capitalized internal-use software development costs	Capitalized internal-use software development costs	(1,265)		(1,021)		Capitalized internal-use software development costs	—		(1,265)
Acquisition of Travelaer, net of cash acquired		0		(10,510)

Investment in equity securities	Investment in equity securities	(113)		(180)		Investment in equity securities	(2,670)		(113)
Purchase of intangible assets		0		(50)

Net cash used in investing activities	Net cash used in investing activities	(24,929)		(15,121)		Net cash used in investing activities	(5,102)		(24,929)
Financing activities:	Financing activities:					Financing activities:

Proceeds from employee stock plans	Proceeds from employee stock plans	2,824		1,995		Proceeds from employee stock plans	3,111		2,824
Tax withholding related to net share settlement of stock awards	Tax withholding related to net share settlement of stock awards	(20,334)		(21,598)		Tax withholding related to net share settlement of stock awards	(352)		(20,334)

Payments of notes payable						Payments of notes payable	(288)		—

Proceeds from issuance of convertible debt, net	Proceeds from issuance of convertible debt, net	146,925		140,156		Proceeds from issuance of convertible debt, net	—		146,925
Debt issuance cost related to convertible debt	Debt issuance cost related to convertible debt	(675)		(860)		Debt issuance cost related to convertible debt	—		(675)
Purchase of capped call	Purchase of capped call	(25,335)		(16,445)		Purchase of capped call	—		(25,335)
Settlement of convertible debt		0		(76,018)
Proceeds from termination of bond hedge		0		64,819
Payment for termination of warrant		0		(45,243)

Net cash provided by financing activities	Net cash provided by financing activities	103,405		46,806		Net cash provided by financing activities	2,471		103,405
Effect of foreign currency rates on cash	Effect of foreign currency rates on cash	(360)		(392)		Effect of foreign currency rates on cash	(276)		(360)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	16,275		23,686		Net change in cash and cash equivalents	(20,492)		16,275
Cash and cash equivalents:	Cash and cash equivalents:					Cash and cash equivalents:
Beginning of period	Beginning of period	306,077		295,476		Beginning of period	329,134		306,077
End of period	End of period	$	322,352	$	319,162	End of period	$	308,642	$	322,352

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Noncash investing activities:	Noncash investing activities:					Noncash investing activities:
Purchase of property and equipment accrued but not paid	Purchase of property and equipment accrued but not paid	$	3,040	$	422	Purchase of property and equipment accrued but not paid	$	63	$	3,040

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

Table of Contents

PROS Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)


	Three Months Ended September 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 June 30, 2021	44,339,682	$	49	$	526,926	4,680,723	$	(29,847)	$	(467,518)	$	(3,882)	$	25,728
Stock awards net settlement	13,334	—		—		—	—		—		—		—
Proceeds from employee stock plans	39,113	—		1,515		—	—		—		—		1,515







Noncash share-based compensation	—	—		8,617		—	—		—		—		8,617

Other comprehensive income (loss)	—	—		—		—	—		—		(401)		(401)
Net loss	—	—		—		—	—		(17,525)		—		(17,525)
Balance at September 30, 2021	44,392,129	$	49	$	537,058	4,680,723	$	(29,847)	$	(485,043)	$	(4,283)	$	17,934


	Three Months Ended September 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 June 30, 2020	43,304,461	$	48	$	553,696	4,680,723	$	(29,847)	$	(401,732)	$	(3,995)	$	118,170
Stock awards net settlement	6,473	—		(113)		—	—		—		—		(113)
Proceeds from employee stock plans	38,683	—		1,460		—	—		—		—		1,460



Equity component of the convertible debt issuance, net	—	—		47,215		—	—		—		—		47,215
Purchase of capped call	—	—		(25,335)		—	—		—		—		(25,335)


Noncash share-based compensation	—	—		6,361		—	—		—		—		6,361

Other comprehensive income (loss)	—	—		—		—	—		—		133		133
Net loss	—	—		—		—	—		(18,857)		—		(18,857)
Balance at September 30, 2020	43,349,617	$	48	$	583,284	4,680,723	$	(29,847)	$	(420,589)	$	(3,862)	$	129,034

Three Months Ended September 30, 2019
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 June 30, 2019 40,183,723 $ 45 $ 439,995 4,417,585 $ (13,938) $ (327,142) $ (3,466) $ 95,494
Stock awards net settlement 69,764 0 (2,956) — — — — (2,956)
Proceeds from employee stock plans 39,964 — 1,052 — — — — 1,052
Retirement of convertible debt 1,749,176 2 74,176 — — — — 74,178
Noncash share-based compensation — — 6,189 — — — — 6,189
Other comprehensive income (loss) — — — — — — (658) (658)
Net loss — — — — — (17,347) — (17,347)
Balance at September 30, 2019 42,042,627 $ 47 $ 518,456 4,417,585 $ (13,938) $ (344,489) $ (4,124) $ 155,952

Table of Contents

PROS Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Continued)

(In thousands, except share data)

(Unaudited)

Nine Months Ended September 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 653,874 1 (20,335) — — — — (20,334)
Proceeds from employee stock plans 65,457 — 2,824 — — — — 2,824
Equity component of the convertible debt issuance, net — — 47,215 — — — — 47,215
Purchase of capped call — — (25,335) — — — — (25,335)
Warrant exercise 163 — — — — — — 0
Noncash share-based compensation — — 18,419 — — — — 18,419
Other comprehensive income (loss) — — — — — — 49 49
Net loss — — — — — (58,800) — (58,800)
Balance at September 30, 2020 43,349,617 $ 48 $ 583,284 4,680,723 $ (29,847) $ (420,589) $ (3,862) $ 129,034


	Nine Months Ended September 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	849,502	1		(353)		—	—		—		—		(352)
Proceeds from employee stock plans	81,083	—		3,111		—	—		—		—		3,111



Cumulative effect of adoption of ASU 2020-06	—	—		(80,098)		—	—		11,330		—		(68,768)



Noncash share-based compensation	—	—		25,358		—	—		—		—		25,358

Other comprehensive income (loss)	—	—		—		—	—		—		(852)		(852)
Net loss	—	—		—		—	—		(57,600)		—		(57,600)
Balance at September 30, 2021	44,392,129	$	49	$	537,058	4,680,723	$	(29,847)	$	(485,043)	$	(4,283)	$	17,934


		Nine Months Ended September 30, 2019																								Nine Months Ended September 30, 2020
		Common Stock			Additional Paid-In Capital				Treasury Stock						Accumulated (Deficit) Retained Earnings					Accumulated other comprehensive loss			Total Stockholders’ Equity			Common Stock					Additional Paid-In Capital			Treasury Stock					Accumulated (Deficit) Retained Earnings			Accumulated other comprehensive loss			Total Stockholders’ Equity
		Shares	Amount				Shares			Amount									Shares								Amount			Shares				Amount
Balance at December 31, 2018		37,155,906	$	42			$	364,877		4,417,585			$	(13,938)			$	(292,708)				$	(3,374)			$	54,899
Balance at December 31, 2019																									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	Stock awards net settlement	885,740	1		(21,599)				—		—				—					—			(21,598)		Stock awards net settlement	653,874		1			(20,335)			—		—			—			—			(20,334)
Proceeds from employee stock plans	Proceeds from employee stock plans	75,304	—		1,995				—		—				—					—			1,995		Proceeds from employee stock plans	65,457		—			2,824			—		—			—			—			2,824
Retirement of convertible debt		3,925,677	4		118,985				—		—				—					—			118,989
Termination of bond hedge		—	—		64,819				—		—				—					—			64,819
Termination of warrant		—	—		(45,243)				—		—				—					—			(45,243)

Equity component of the convertible debt issuance, net	Equity component of the convertible debt issuance, net	—	—		32,883				—		—				—					—			32,883		Equity component of the convertible debt issuance, net	—		—			47,215			—		—			—			—			47,215
Purchase of capped call	Purchase of capped call	—	—		(16,445)				—		—				—					—			(16,445)		Purchase of capped call	—		—			(25,335)			—		—			—			—			(25,335)

Warrant exercise																									Warrant exercise	163		—			—			—		—			—			—			—
Noncash share-based compensation	Noncash share-based compensation	—	—		18,184				—		—				—					—			18,184		Noncash share-based compensation	—		—			18,419			—		—			—			—			18,419

Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—				—		—				—					(750)			(750)		Other comprehensive income (loss)	—		—			—			—		—			—			49			49
Net loss	Net loss	—	—		—				—		—				(51,781)					—			(51,781)		Net loss	—		—			—			—		—			(58,800)			—			(58,800)
Balance at September 30, 2019		42,042,627	$	47	$	518,456			4,417,585		$	(13,938)			$	(344,489)				$	(4,124)		$	155,952
Balance at September 30, 2020																									Balance at September 30, 2020	43,349,617		$	48		$	583,284		4,680,723		$	(29,847)		$	(420,589)		$	(3,862)		$	129,034

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

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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") ~~solutions that power commerce in~~, intuitive user experiences and process automation to deliver frictionless, personalized purchasing experiences designed to meet the ~~digital economy by providing fast, frictionless and personalized buying experiences. PROS solutions enable dynamic buying experiences for both~~real-time demands of today’s business-to-business ("B2B") and business-to-consumer ("B2C") ~~companies across industry verticals.~~omnichannel shoppers, regardless of industry. Companies can use ~~the Company's selling, pricing, revenue optimization and eCommerce~~these solutions to assess their market environments in real time to deliver customized prices and offers. The Company's solutions enable its customers to empower their buyers to move fluidly across its customers’ direct sales, partner, online, mobile and ~~partner~~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. The Company provides standard configurations of its software based on the industries it serves and offers professional services to configure these solutions to meet the specific needs of each customer.

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 September 30, ~~2020,~~2021, the results of operations for the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, cash flows for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, and stockholders' equity for the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~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, ~~2019~~2020 ("Annual Report") filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, ~~2019~~2020 was derived from the Company's audited consolidated financial statements but does not include all disclosures required under GAAP.

Certain prior year amounts have been reclassified for consistency with the current year presentation. This insignificant reclassification had no effect on the reported results of operations. License revenue and license cost of revenue are now combined with subscription revenue and subscription cost of revenue, respectively.

Risks and uncertainties

~~Coronavirus~~Since its initial onset in early 2020, the coronavirus ("COVID-19") pandemic has created significant global uncertainty, ~~continues to spread throughout the U.S. and the world~~ 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 ~~this impact could last~~the scope and duration of the outbreak and timeframe for ~~an indefinite period of time.~~economic recovery is uncertain. ~~There~~As there are no comparable recent events that provide guidance as to the long-term effect of the ~~spread of~~ COVID-19 ~~as a global~~ pandemic, ~~and as a result,~~ 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. ~~For a full discussion on the ongoing impact of COVID-19 to the Company's business, please see "We must successfully navigate the demand, supply and operational challenges associated with the ongoing coronavirus (COVID-19) pandemic" under Part II, Item 1A of this Quarterly Report on Form 10-Q~~.

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, ~~2019,~~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.

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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 $~~181.3~~290.8 million and ~~$273.1~~$301.3 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and

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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.

In August 2021, the Company invested $2.0 million in a privately held company. This investment is accounted for at cost, less impairment and adjusted for subsequent observable price changes obtained from orderly transactions for identical or similar investments issued by the same investee. The Company estimates the fair value of its equity investments by considering available information such as pricing in recent rounds of financing and any other readily available market data, which represents level 3 in the fair value hierarchy. An impairment charge to current earnings is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary. As of September 30, 2021 the Company determined there were no other-than-temporary impairments on its equity investments.

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.

There are no comparable recent events that provide guidance as to the effect of the spread of COVID-19 as a global pandemic. As a result, the impact of COVID-19 is highly uncertain and subject to change. The Company does not yet know the full extent of the impact from COVID-19 to the Company's business operations or the global economy as a whole; however, the impact could have an adverse effect on the Company's customers and inherently the related receivables.

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 $~~18.9~~16.2 million and ~~$21.2~~$18.5 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Amortization expense for the deferred costs was$1.6 million and $1.5 ~~million~~ ~~and $1.3~~ million for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$4.3~~$4.6 million and ~~$3.5~~$4.3 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~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 ~~$3.2~~$2.5 million and ~~$4.4~~$2.9 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Amortization expense for the deferred implementation costs was $~~0.4~~0.3 millionand $0.4 million for the three months ended September 30, 2021 and 2020, ~~and 2019~~respectively, and $~~1.4~~0.9 million and ~~$1.0~~$1.4 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~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).

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Recently adopted accounting pronouncements

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("Topic 326")~~, in order to improve financial reporting of expected credit losses on financial instruments and other commitments to extend credit. Topic 326 requires that an entity measure and recognize expected credit losses for financial assets held at amortized cost and replaces the incurred loss impairment methodology in current GAAP with a methodology that requires consideration of a broader range of information to estimate credit losses. The Company adopted Topic 326 as of January 1, 2020~~using the modified retrospective method and there was no material impact on the Company's unaudited condensed consolidated financial statements as of the adoption date. As of~~ September 30, 2020, the Company has recorded allowance for doubtful accounts related to trade receivables of $4.6 million primarily due to increased credit risk from uncertain economic conditions caused by COVID-19.

~~Recently issued accounting pronouncements not yet adopted~~

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 ~~is currently assessing~~early adopted the ~~impact~~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 the three and nine months ended September 30, 2021 and will be lower for the remaining term of the ~~standard~~outstanding convertible notes. The adoption had no impact on ~~its financial statements.~~the condensed consolidated statements of cash flows.

Recently issued accounting pronouncements not yet adopted

With the exception of the new ~~standards~~standard discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the nine months ended September 30, ~~2020,~~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 September 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized approximately ~~$45.3~~$43.3 million and ~~$45.1~~$45.3 million, respectively, and for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized approximately $86.0 million and $107.2 million, ~~and $86.2 million,~~ respectively, ~~in each case~~ 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 September 30, ~~2020,~~2021, the Company expects to recognize approximately $~~366.8~~373.0 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 ~~$175.4~~$180.5 million of 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.

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4. Disaggregation of Revenue

Revenue by Geography

The geographic information in the table below is presented for the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~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 September 30,								Nine Months Ended September 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019					2021				2020				2021				2020
(in thousands)	(in thousands)	Revenue		Percent		Revenue		Percent		Revenue		Percent		Revenue		Percent		(in thousands)	Revenue		Percent		Revenue		Percent		Revenue		Percent		Revenue		Percent
United States of America	United States of America	$	19,960	32	%	$	21,631	34	%	$	62,475	33	%	$	62,273	34	%	United States of America	$	23,275	37	%	$	19,960	32	%	$	66,026	35	%	$	62,475	33	%
Europe	Europe	18,827		31	%	19,279		30	%	56,439		29	%	55,286		30	%	Europe	18,571		30	%	18,827		31	%	55,825		30	%	56,439		29	%
The rest of the world	The rest of the world	22,721		37	%	23,240		36	%	72,652		38	%	66,600		36	%	The rest of the world	20,825		33	%	22,721		37	%	64,599		35	%	72,652		38	%
Total revenue	Total revenue	$	61,508	100	%	$	64,150	100	%	$	191,566	100	%	$	184,159	100	%	Total revenue	$	62,671	100	%	$	61,508	100	%	$	186,450	100	%	$	191,566	100	%

5. ~~Business Combination~~

On August 14, 2019, the Company acquired Travelaer SAS ("Travelaer"), a privately held company based near Nice, France, for a total cash consideration, net of cash acquired, of approximately $10.5 million. Travelaer is a digital innovator for the travel industry with a focus on improving the customer experience across all phases of travel, and brings an Internet booking engine and NDC (New Distribution Capability) platform to the Company's portfolio. The Company has included the financial results of Travelaer in the unaudited condensed consolidated financial statements from the date of the acquisition, which have not been material to date. The transaction cost associated with the acquisition was $0.2 million for the three and nine months ended September 30, 2019.

The Company accounted for the transaction as a business combination and all of the assets acquired and the liabilities assumed in the transaction have been recognized at their acquisition date fair values. The Company recorded approximately $2 million for developed technology and customer relationships with estimated useful lives of 7 years and 5 years, respectively. The Company recorded approximately $11 million of goodwill which is primarily related to the assembled workforce and expanded market opportunities from integrating Travelaer's technology with the Company's solutions. The goodwill balance is not deductible for U.S. income tax purposes.

6. 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 1312 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 September 30, ~~2020,~~2021, the Company did not have any finance leases.

Supplemental cash flow information related to leases was as follows (in thousands):


		Nine Months Ended September 30,			Three Months Ended September 30,						Nine Months Ended September 30,
			2020			2019			2021		2020		2021		2020
Cash paid for operating lease liabilities	Cash paid for operating lease liabilities		$	5,672		$	4,349	Cash paid for operating lease liabilities	$	2,065	$	2,072	$	6,443	$	5,672
Right-of-use asset obtained in exchange for operating lease liability ~~(1)~~	Right-of-use asset obtained in exchange for operating lease liability ~~(1)~~		$	11,544		$	33,108	Right-of-use asset obtained in exchange for operating lease liability ~~(1)~~	$	—	$	9,785	$	291	$	11,544

~~(1) For the nine months ended September 30, 2019, the balance included $26.9 million for operating leases existing on January 1, 2019 upon adoption of ASU 842.~~

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As of September 30, ~~2020,~~2021, maturities of lease liabilities were as follows (in thousands):


Year Ending December 31,	Year Ending December 31,	Amount		Year Ending December 31,	Amount
Remaining 2020		$	1,607
2021		8,663
Remaining 2021				Remaining 2021	$	2,452
2022	2022	10,316		2022	10,427
2023	2023	11,323		2023	11,342
2024	2024	5,365		2024	5,355
2025	2025	4,249		2025	4,245
2026				2026	4,129
Thereafter	Thereafter	31,857		Thereafter	27,727
Total operating lease payments	Total operating lease payments	73,380		Total operating lease payments	65,677
Less: Imputed interest	Less: Imputed interest	(22,804)		Less: Imputed interest	(19,006)
Less: Anticipated lease incentive	Less: Anticipated lease incentive	(10,226)		Less: Anticipated lease incentive	(1,385)
Total operating lease liabilities	Total operating lease liabilities	$	40,350	Total operating lease liabilities	$	45,286

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6. Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)	2020		2019		2020		2019		(in thousands, except per share data)	2021		2020		2021		2020
Numerator:	Numerator:									Numerator:
Net loss	Net loss	$	(18,857)	$	(17,347)	$	(58,800)	$	(51,781)	Net loss	$	(17,525)	$	(18,857)	$	(57,600)	$	(58,800)
Denominator:	Denominator:									Denominator:
Weighted average shares (basic)	Weighted average shares (basic)	43,347		41,276		43,251		39,438		Weighted average shares (basic)	44,386		43,347		44,318		43,251
Dilutive effect of potential common shares	Dilutive effect of potential common shares	0		0		0		0		Dilutive effect of potential common shares	—		—		—		—
Weighted average shares (diluted)	Weighted average shares (diluted)	43,347		41,276		43,251		39,438		Weighted average shares (diluted)	44,386		43,347		44,318		43,251
Basic loss per share	Basic loss per share	$	(0.44)	$	(0.42)	$	(1.36)	$	(1.31)	Basic loss per share	$	(0.39)	$	(0.44)	$	(1.30)	$	(1.36)
Diluted loss per share	Diluted loss per share	$	(0.44)	$	(0.42)	$	(1.36)	$	(1.31)	Diluted loss per share	$	(0.39)	$	(0.44)	$	(1.30)	$	(1.36)

Dilutive potential common shares consist of shares issuable upon the ~~exercise of stock options,~~ 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 ~~1.3~~1.1 million and ~~2.1~~1.3 million for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and 1.3 million ~~and 2.1 million~~ for the nine months ended September 30, ~~2020~~2021 and ~~2019, respectively.~~2020. 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 the three and nine months ended September 30, 2020, and 3.1~~ million for the three and nine months ended September 30, ~~2019, respectively.~~2021, and 2020.

8.7. 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 ~~2017~~2019 and reserved an aggregate amount of ~~2,500,000~~4,550,000 shares available for issuance. In May ~~2019,~~2021, the ~~shareholders~~Company's stockholders approved an amendment to the 2017 Stock Plan ~~which increased~~increasing the aggregate amount of shares available for issuance to ~~a total of 4,550,000.~~7,650,000. As of September 30, ~~2020,~~ ~~1,912,191~~ 2021, 4,080,355 shares remain available for issuance under the 2017 Stock Plan.

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The following table presents the number of shares or units outstanding for each award type as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, (in thousands):


Award type	Award type	September 30, 2020	December 31, 2019	Award type	September 30, 2021	December 31, 2020

Restricted stock units (time-based)	Restricted stock units (time-based)	1,611	1,893	Restricted stock units (time-based)	1,822	1,802
Restricted stock units (performance-based)	Restricted stock units (performance-based)	190	114	Restricted stock units (performance-based)	140	162

Stock appreciation rights	Stock appreciation rights	32	65	Stock appreciation rights	—	28
Market stock units	Market stock units	157	267	Market stock units	126	111

During the three months ended September 30, ~~2020,~~2021, the Company granted ~~22,221~~11,239 RSUs (time-based) with a weighted average grant-date fair value of $44.48 per share.

~~$33.75 per share. The Company granted no stock options, SARs, performance-based RSUs ("PRSUs") or MSUs during this period.~~

During the nine months ended September 30, ~~2020,~~2021, the Company granted ~~654,780~~834,828 RSUs (time-based) with a weighted average grant-date fair value of ~~$55.89~~ $47.54 per share. The Company also granted ~~76,200 PRSUs~~125,541 MSUs with a weighted average grant-date fair value of ~~$54.23~~$56.05 to certain executive employees during the nine months ended September 30, ~~2020.~~2021. These ~~PRSUs~~MSUs vest on January ~~13, 2023~~31, 2024 and the actual number of ~~PRSUs~~MSUs that will be eligible to vest is based ~~upon achievement~~on the total stockholder return of ~~certain internal~~the Company relative to the total stockholder return of the Index over the performance ~~metrics,~~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 ~~PRSUs~~MSUs initially granted. The Company did not grant any stock options, SARs or ~~MSUs~~performance-based RSUs during the nine months ended September 30, ~~2020.~~2021.

The assumptions used to value the MSUs granted during the nine months ended September 30, 2021 were as follows:

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	September 30, 2021
Volatility	53.29	%
Risk-free interest rate	0.22	%
Expected award 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 nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Share-based compensation:	Share-based compensation:									Share-based compensation:
Cost of revenue	Cost of revenue	$	519	$	503	$	1,545	$	1,535	Cost of revenue	$	951	$	519	$	2,753	$	1,545
Operating expenses:	Operating expenses:									Operating expenses:
Selling and marketing	Selling and marketing	1,727		1,515		5,558		4,329		Selling and marketing	2,600		1,727		7,334		5,558
Research and development										Research and development	1,924		1,539		5,867		4,414
General and administrative	General and administrative	2,593		2,901		6,960		8,521		General and administrative	3,159		2,593		9,456		6,960
Research and development		1,539		1,290		4,414		3,849
Total included in operating expenses	Total included in operating expenses	5,859		5,706		16,932		16,699		Total included in operating expenses	7,683		5,859		22,657		16,932
Total share-based compensation expense	Total share-based compensation expense	$	6,378	$	6,209	$	18,477	$	18,234	Total share-based compensation expense	$	8,634	$	6,378	$	25,410	$	18,477

At September 30, ~~2020,~~2021, the Company had an estimated ~~$50.8~~$68.3 million of total unrecognized compensation costs related to share-based compensation arrangements. These costs will be recognized over a weighted average period of ~~2.7 year~~s.2.6 years.

The Company's Employee Stock Purchase Plan ~~("ESPP"~~(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~~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 nine months ended September 30, ~~2020,~~2021, the Company issued ~~38,683 a~~39,113nd and ~~65,457~~81,083 shares ~~respectively,~~ under the ~~ESPP.~~ESPP, respectively. As of September 30, ~~2020,~~2021, ~~74,794~~493,711 shares remain authorized and available for issuance under the ESPP. As of September 30, ~~2020,~~2021, the Company held approximately $~~1.0~~0.9 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.

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9.8. Convertible Senior Notes

The following is a summary of the Company's convertible senior notes as of September 30, ~~2020~~2021 (in thousands):


		Date of Issuance		Unpaid Principal Balance				Net Carrying Amount								Contractual Interest Rates		Date of Issuance				Unpaid Principal Balance		Net Carrying Amount				Contractual Interest Rates
						Current				Noncurrent										Current				Noncurrent

1% Convertible Notes due in 2024 ("2024 Notes")	1% Convertible Notes due in 2024 ("2024 Notes")		May 2019			$	143,750			$	0			$	115,880				1%		1% Convertible Notes due in 2024 ("2024 Notes")	May 2019		$	143,750	$	—	$	141,433	1%
2.25% Convertible Notes due in 2027 ("2027 Notes")	2.25% Convertible Notes due in 2027 ("2027 Notes")	September 2020		$	150,000			$	0			$	98,871			2.25%	2.25% Convertible Notes due in 2027 ("2027 Notes")	September 2020				$	150,000	$	—	$	146,481	2.25%

~~In September 2020,~~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

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structurally subordinated to all indebtedness and other liabilities of the Company's subsidiaries (including trade payables but excluding intercompany obligations owed to the Company issued the 2027 Notes in an aggregate principal amount of $150.0 million and in May 2019, the Company issued the 2024 Notes in an aggregate principal amount of $143.8 million. The interest rate for the 2027 Notes is fixed at 2.25% per year and the effective interest rateor its subsidiaries).

Interest related to the ~~amortization of the liability component is 8.5%, Interest~~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, ~~commencing~~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.

On or after June 15, 2027 to the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2027 Notes regardless of the contingent conversion conditions described herein. Upon conversion, the Company will pay or deliver cash, shares of its common stock or a combination of cash and shares of its common stock, at its election, as described in the indenture governing the 2027 Notes.

~~Holders may convert their 2027 Notes at their option at any time prior to the close of business on the business day immediately preceding June 15, 2027 only under the following circumstances:~~

•during the five consecutive business day period immediately following any five consecutive trading day period (the "Measurement Period") in which the trading price per 2027 Note for each day of that Measurement Period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such day;

•during any calendar quarter commencing after the calendar quarter ending on December 31, 2020, if the last reported sale price of the common stock for 20 or more trading days (whether or not consecutive) in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; or

•~~upon the occurrence of specified corporate events.~~

The 2024 and 2027 Notes, along with the previously issued convertible notes with original due dates in 2019 and 2047 (the "2019 Notes" and "2047 Notes," and together with the 2024 and 2027 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). The 2019 Notes and 2047 Notes were settled as of December 31, 2019 and no longer remain outstanding.

As of September 30, ~~2020,~~2021, the 2027 and 2024 Notes are not yet convertible and their remaining term is approximately 8371 months and 4331 months, respectively.

As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the fair value of the principal amount of the ~~2027 and 2024~~ Notes in the aggregate was $~~276.5~~302.2 million and ~~$163.2~~$363.8 million, respectively. The estimated fair value was determined based on inputs that are

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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.

~~In accounting for the transaction costs for the Notes issuance,~~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 ~~the costs incurred to~~between the liability and the equity ~~components~~component, resulting in ~~proportion~~an increase of $68.8 million to convertible debt, net. In addition, the ~~allocation~~Company recorded a reduction to additional paid-in capital of ~~the proceeds from issuance to the liability and equity components. Issuance costs attributable to the liability component, totaling $2.8~~$80.1 million ~~and $3.4 million for the 2027 and 2024 Notes, respectively, are being amortized to expense over the expected life of the notes using the effective interest method. Issuance costs attributable~~ related to the equity conversion component ~~related~~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 ~~the conversion option, totaling $1.3 million and $1.1 million for the 2027 and 2024 Notes, respectively, were netted with the equity component in stockholders' equity.~~accumulated deficit.

The Notes consist of the following (in thousands):


		September 30, 2020		December 31, 2019			September 30, 2021		December 31, 2020
Liability component:	Liability component:					Liability component:
Principal	Principal	$	293,750	$	143,750	Principal	$	293,750	$	293,750
Less: debt discount and issuance cost, net of amortization	Less: debt discount and issuance cost, net of amortization	(78,999)		(33,046)		Less: debt discount and issuance cost, net of amortization	(5,836)		(75,722)
Net carrying amount	Net carrying amount	$	214,751	$	110,704	Net carrying amount	$	287,914	$	218,028

Equity component(1)	Equity component(1)	$	80,098	$	32,883	Equity component(1)	$	—	$	80,098

(1) Recorded within additional paid-in capital in the unaudited condensed consolidated balance sheet. As of ~~September 30,~~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. ~~As of December 31, 2019, it included $32.9 million related to the 2024 Notes, which was net of $1.1 million issuance cost in equity.~~

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

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Coupon interest $ 500 $ 863 $ 1,219 $ 3,219
Amortization of debt issuance costs 174 286 488 992
Amortization of debt discount 1,824 2,568 4,938 8,136
Total $ 2,498 $ 3,717 $ 6,645 $ 12,347

~~Note Hedge and Warrant Transactions~~

Concurrently with the offering of the 2019 Notes, the Company entered into separate convertible note hedge (the "Note Hedge") and warrant (the "Warrant") transactions. Taken together, the purchase of the Note Hedge and the sale of the Warrant were intended to offset any actual dilution from the conversion of the 2019 Notes and to effectively increase the overall conversion price of the 2019 Notes from $33.79 to $45.48 per share. The Warrant was not part of the 2019 Notes or Note Hedge. Both the Note Hedge and Warrant were recorded as part of additional paid-in capital.

As of December 31, 2019, the Note Hedge was settled through certain note hedge termination agreements and exercise of any remaining Note Hedge. In 2019, the Company entered into certain warrant termination agreements which terminated certain of the Warrants that were entered into by the Company in connection with the offering of the 2019 Notes. The remaining Warrants expired in August 2020.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Coupon interest	$	1,203	$	500	$	3,609	$	1,219
Amortization of debt issuance costs	373		174		1,119		488
Amortization of debt discount	—		1,824		—		4,938
Total	$	1,576	$	2,498	$	4,728	$	6,645

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

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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

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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.

~~10.~~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 July 2021, the Company entered into a noncancelable agreement for data subscription services with a five-year term. The purchase commitment as of September 30, 2021 was $5.0 million and the agreement expires in June 2026.

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 September 30, ~~2020~~2021 was ~~$46.9~~$17.7 million f~~or 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.

~~Overview~~

PROS provides AI solutions that power commerce in the digital economy by providing fast, frictionless and personalized buying experiences. PROS solutions enable dynamic buying experiences for both B2B and B2C companies across industry verticals. Companies can use our selling, pricing, revenue optimization and eCommerce solutions to assess their market environments in real time to deliver customized prices and offers. Our solutions enable buyers to move fluidly across our customers’ direct sales, online, mobile and partner channels with personalized experiences regardless of which channel those buyers choose. Our decades of data science and AI expertise are infused into our solutions and are designed to reduce time and complexity through actionable intelligence. We provide standard configurations of our software based on the industries we serve and offer professional services to configure these solutions to meet the specific needs of each customer.

~~COVID-19 Impact~~

~~In March 2020, the World Health Organization declared the outbreak of~~ ~~the coronavirus ("COVID-19"~~) ~~a pandemic. COVID-19~~ ~~continues to spread throughout the world and has resulted in~~ ~~governmental~~ ~~authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders and business limitations and shutdowns.~~ Compliance with these measures by us and by our customers has impacted our business, as well as the businesses of our customers, suppliers and other counterparties, and this impact could last for an indefinite period of time. In ~~particular, in~~ the travel industry, our airline customers are managing historic declines in demand for travel globally. If a significant number of our customers are unable to continue as a going concern, seek to avoid their contracts with us as part of filing for bankruptcy protection, or reduce their purchasing volumes following expiration of their current contracts, this would have an adverse impact on our business and financial condition. There are no comparable recent events that provide guidance as to the effect of the spread of COVID-19 as a global pandemic, and a~~s a result,~~ we are unable to predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures. ~~For a full discussion on the ongoing impact of COVID-19 to our business, please see "We must successfully navigate the demand, supply and operational challenges associated with the ongoing coronavirus (COVID-19) pandemic" under Part II, Item 1A of this Quarterly Report on Form 10-Q.~~

Q3 ~~2020~~2021 Financial Overview

Uncertainty still surrounds the COVID-19 pandemic, with the Delta variant affecting some of our customers during the three months ended September 30, 2021. We re-structured a few customer contracts and experienced several project delays, which had a small impact on our results for the three months ended September 30, 2021. In addition, based on observations from our sales organization, we also saw the ~~third quarter~~impact of ~~2020,~~COVID-19 lead to increased unpredictability in our prospective customer purchasing decisions.

For the three and nine months ended September 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, ~~increased 9%~~as there is a lag between subscription bookings and ~~22%, respectively~~the revenue recognized on those subscription bookings. These factors contributed to our subscription revenue growth of 5% and 3% for the three and nine months ended September 30, ~~2020~~2021, respectively, as compared to the same periods in ~~2019.~~2020. Total revenue increased 2% and decreased 3% for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020.

Our gross revenue retention rates continued to improve throughout 2021 and were approximately 91% over the trailing twelve months ended ~~Our continuing shift to a subscription-based revenue model also led to a growth of recurring~~September 30, 2021.

Recurring revenue (which consists of subscription revenue and maintenance and support revenue) as a percentage of total revenue ~~as it~~accounted for ~~86%~~84% and 85% of total revenue for the three and nine months ended September 30, ~~2020, respectively,~~2021 as compared to ~~83%~~86% and ~~81%~~85% for the three and nine months ended September 30, ~~2019. Our total revenue decreased 4% for the three months ended September 30,~~ 2020, ~~as compared to the same period~~respectively.

Cash used in ~~2019, and increased 4%~~operating activities was $17.6 million for the nine months ended September 30, ~~2020~~2021, as compared to ~~2019. Revenue in fiscal year 2020 has been impacted by slower customer bookings~~ ~~as a result of decreased demand for new subscriptions and services and delays to projects during the COVID-19 pandemic.~~

~~Cash used in operating activities was~~ $61.8 million for the nine months ended September 30, 2020. The improvement was attributable to lower overall operating expenses as well as the timing of customer collections from several customers deferring payments in 2020 as ~~compared to $7.6 million for the nine months ended September 30, 2019. The increase in net cash used in operating activities was driven mainly by an increase in headcount and higher~~a result of COVID-19. In addition, we had a lower annual incentive payment in 2021 as compared to prior ~~year, deferred payment terms for certain customers impacted by the pandemic,~~ ~~and the impact of lower customer bookings as a result of the pandemic.~~year.

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Free cash flow is ~~another~~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 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 September 30, ~~2020~~2021 was ~~$15.7~~$8.5 million, compared to ~~free cash flow of $3.0~~$15.7 million for the three months ended September 30, ~~2019.~~2020. Free cash flow used during the nine months ended September 30, ~~2020~~2021 was ~~$64.8~~$18.9 million, compared to ~~$11.8~~$64.8 million for the nine months ended September 30, ~~2019.~~2020. This ~~increase~~improvement was primarily ~~attributable~~due to a ~~$54.2~~$44.3 million ~~increase~~decrease in net cash used in operating ~~activities driven mainly by an increase in headcount and higher annual incentive payment as compared to prior year, deferred payment terms for certain customers impacted by the pandemic,~~ ~~and the impact of lower customer bookings as a result of the pandemic.~~activities. 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 September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net cash used in operating activities	Net cash used in operating activities	$	(14,886)	$	4,037	$	(61,841)	$	(7,607)	Net cash used in operating activities	$	(8,171)	$	(14,886)	$	(17,585)	$	(61,841)
Purchase of property and equipment (excluding new headquarters)	Purchase of property and equipment (excluding new headquarters)	(384)		(876)		(1,647)		(3,145)		Purchase of property and equipment (excluding new headquarters)	(347)		(384)		(1,291)		(1,647)
Purchase of intangible assets		—		—		—		(50)

Capitalized internal-use software development costs	Capitalized internal-use software development costs	(459)		(153)		(1,265)		(1,021)		Capitalized internal-use software development costs	—		(459)		—		(1,265)
Free Cash Flow	Free Cash Flow	$	(15,729)	$	3,008	$	(64,753)	$	(11,823)	Free Cash Flow	$	(8,518)	$	(15,729)	$	(18,876)	$	(64,753)

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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 impact of the COVID-19 pandemic on the global economy ~~has been significantly~~ and ~~negatively impacted~~on our business continues to be fluid. While we are encouraged by ~~COVID-19, and~~ the increased availability of vaccines, the d~~the scope and duration~~uration of the ~~outbreak~~COVID-19 pandemic remains uncertain, particularly as the virus continues to evolve and variants such as Delta spread. The pace and timeframe for recovery from the economic ~~recovery is uncertain~~impact of COVID-19 continues to vary across the countries and industries in which we do business, particularly as secondary effects, including supply chain disruptions, labor shortages and widespread job migration, impact economies, industries and regions to different degrees. Th~~. The~~e travel industry, a sector served by our solutions, ~~has been~~was particularly adversely ~~impacted. For example,~~impacted by unprecedented declines in travel demand ~~have forced~~in 2020, forcing airlines ~~including some of our customers,~~ 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, particularly leisure travel, in the United States has shown continued signs of recovery in 2021 as COVID-19 vaccination rates increase, international travel and business travel are lagging due to complex 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 ~~16, 2020.~~2020; although we began to reopen our offices mid-year by allowing employees to return to the office on a voluntary basis with enhanced safety protocols in place. In addition, many of our customers are also ~~working primarily~~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~~While the availability and rollout of COVID-19 vaccines and reopening of markets have begun to moderate the impact of COVID-19, the full duration and extent of the ~~impact~~pandemic remains unknown and will depend on many factors outside of ~~COVID-19 continues to be unknown and~~our control. It could continue to impact the pace and timing of adoption and implementation of our solutions, cash flow from operations and customer ~~churn.~~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~~Impact.. ~~As compared to~~ Given our ~~expectations prior to COVID-19,~~primarily subscription-based revenue model, the global economic impact of COVID-19 adversely impacted our revenue ~~bad debt expense and operating cash flow~~ during the ~~three and~~first nine months ~~ended September 30, 2020. We expect~~of 2021 due to last year's lower customer subscription bookings, customer contract restructuring and project delays and a decrease in revenue retention rates. Our prior year customer subscription bookings impacted this year’s subscription revenue growth given the lag between subscription bookings and the ~~related~~ revenue recognized on those subscription bookings. While our customer base spans a variety of industries and geographies, our customers, particularly travel and travel-related customers, have been and may continue to be negatively impacted by COVID-19. This has resulted in and may continue to result in delayed purchasing decisions from prospective customers, longer sales cycles, reduced customer demand, and delayed payments. 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 ~~flows~~collections during 2021. We expect the ongoing global economic impact of COVID-19 will continue to ~~be lower than anticipated prior to~~affect our revenue in 2021 and 2022, as the pandemic as a result of decreased demand for new subscriptions and services and delays to projects during the COVID-19 pandemic. In addition, certain customers have requested, and we expect will continue to request, relief to existing contracts and thecontinuing impact of ~~those is uncertain. For example, some customers~~COVID-19 and ~~prospective customers are delaying projects while they address immediate financial difficulties in their operations, renegotiating existing contracts,~~rate of economic recovery remains uncertain and ~~in limited cases filing for bankruptcy protection. Based on demand for their own products~~varies across industries and services being down due to COVID-19, some of our customers, particularly those in the travel industry, may renew their subscriptions for our solutions at lower capacity levels for a lower annual fee. The impact on our revenue due to such reduced renewals, combined with other customer actions described in this paragraph, is uncertain.geographies.

•Buying Preferences Driving Technology ~~Adoption~~Adoption.. Corporate buyers are increasingly demanding the same type of digital buying experience that they enjoy as consumers. ~~For example, buyers~~Buyers often prefer not to interact with a sales ~~representative~~representatives as their primary source of research, and increasingly prefer to buy online when they have already decided what to ~~buy, particularly during~~buy. This trend has accelerated as a result of the ~~current pandemic environment.~~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

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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 and have personalized experiences however they choose to buy.~~channels.

•Continued Investments. ~~In light~~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 ~~recurring~~subscription revenues. While we incurred losses in 2020 and in the ~~first~~ nine months of ~~2020,~~2021, we believe our market is large and underpenetrated and ~~therefore we~~ 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

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provide out-of-the-box integration with third-party commerce solutions, and develop new applications and technologies. In reaction to the COVID-19 environment, we have slowed our overall rate of hiring while continuing to hire for certain strategic positions and have transferred personnel within the company and redeployed other resources to focus on current priorities.

•Cloud Migrations. ~~Sales of our cloud-based solutions have, and we~~We expect ~~future~~ sales of our cloud-based solutions will continue to reduce our future maintenance and support revenue as ~~existing~~long-term customers continue to migrate from our legacy licensed solutions to our current cloud solutions.

•~~Sales Mix Impacts Subscription Revenue Recognition Timing~~. The mix of subscription services and professional services can create revenue variability in given periods based on the nature and scope of services sold together. Professional services that are deemed to be distinct from the subscription services are accounted for as a separate performance obligation and revenue is recognized as the services are performed. If determined the professional services are not considered distinct, the professional services and the subscription services are considered to be a single performance obligation and all revenue is recognized over the contractual term of the subscription beginning on the date subscription services are made available to the customer, resulting in a deferral of revenue and revenue recognized over a shorter period of time, which would have a negative near-term financial impact.

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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 nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenue:	Revenue:									Revenue:
Subscription	Subscription	68	%	60	%	67	%	57	%	Subscription	70	%	68	%	70	%	67	%
Maintenance and support	Maintenance and support	18		22		18		24		Maintenance and support	14		18		14		18
Total subscription, maintenance and support	Total subscription, maintenance and support	86		83		85		81		Total subscription, maintenance and support	84		86		85		85

Services	Services	14		17		15		19		Services	16		14		15		15
Total revenue	Total revenue	100		100		100		100		Total revenue	100		100		100		100
Cost of revenue:	Cost of revenue:									Cost of revenue:
Subscription	Subscription	21		17		20		17		Subscription	21		21		22		20
Maintenance and support	Maintenance and support	4		4		4		4		Maintenance and support	3		4		3		4
Total cost of subscription, maintenance and support	Total cost of subscription, maintenance and support	25		21		24		21		Total cost of subscription, maintenance and support	24		25		25		24

Services	Services	16		20		18		17		Services	17		16		17		18
Total cost of revenue	Total cost of revenue	40		41		41		38		Total cost of revenue	42		40		42		41
Gross profit	Gross profit	60		59		59		62		Gross profit	58		60		58		59
Operating Expenses:	Operating Expenses:									Operating Expenses:
Selling and marketing	Selling and marketing	36		34		35		36		Selling and marketing	34		36		34		35
Research and development										Research and development	30		31		32		30
General and administrative	General and administrative	19		18		21		19		General and administrative	20		19		20		21
Research and development		31		26		30		27
Acquisition-related		—		—		—		—
Impairment charge		—		—		—		—

Total operating expenses	Total operating expenses	86		78		86		82		Total operating expenses	84		86		86		86
Convertible debt interest and amortization	Convertible debt interest and amortization	(4)		(6)		(3)		(7)		Convertible debt interest and amortization	(3)		(4)		(3)		(3)
Other income net	Other income net	—		(2)		1		—		Other income net	—		—		—		1
Loss before income tax provision	Loss before income tax provision	(30)		(27)		(30)		(28)		Loss before income tax provision	(28)		(30)		(31)		(30)
Income tax provision	Income tax provision	1		—		—		—		Income tax provision	—		1		—		—
Net loss	Net loss	(31)	%	(27)	%	(31)	%	(28)	%	Net loss	(28)	%	(31)	%	(31)	%	(31)	%

Revenue:


		Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance					Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)	2020		2019		$		%		2020		2019		$		%		(Dollars in thousands)	2021		2020		$		%		2021		2020		$		%
Subscription	Subscription	$	42,029	$	38,592	$	3,437	9	%	$	127,576	$	104,621	$	22,955	22	%	Subscription	$	44,119	$	42,029	$	2,090	5	%	$	130,991	$	127,576	$	3,415	3	%
Maintenance and support	Maintenance and support	10,765		14,405		(3,640)		(25)	%	35,029		44,772		(9,743)		(22)	%	Maintenance and support	8,477		10,765		(2,288)		(21)	%	26,721		35,029		(8,308)		(24)	%
Total subscription, maintenance and support	Total subscription, maintenance and support	52,794		52,997		(203)		—	%	162,605		149,393		13,212		9	%	Total subscription, maintenance and support	52,596		52,794		(198)		—	%	157,712		162,605		(4,893)		(3)	%

Services	Services	8,714		11,153		(2,439)		(22)	%	28,961		34,766		(5,805)		(17)	%	Services	10,075		8,714		1,361		16	%	28,738		28,961		(223)		(1)	%
Total revenue	Total revenue	$	61,508	$	64,150	$	(2,642)	(4)	%	$	191,566	$	184,159	$	7,407	4	%	Total revenue	$	62,671	$	61,508	$	1,163	2	%	$	186,450	$	191,566	$	(5,116)	(3)	%

Subscription revenue. Subscription revenue increased primarily due to an ~~increased number~~increase in the sale of new and existing customer subscription contracts as compared to ~~the~~ prior year. ~~For the three and nine months ended September 30, 2020, our subscription revenue growth was negatively impacted by an increase in customer churn mainly due to the impact of COVID-19.~~ Our ability to ~~maintain consistent~~manage customer attrition rates ~~will~~ directly ~~impact~~impacts our ability to continue to grow our subscription revenue. Due to the ~~uncertain~~uncertainty over how long the economic conditions caused by

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the COVID-19 pandemic will persist, we expect subscription revenue to grow at a slower ~~pace.~~pace than what we have historically experienced.

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Maintenance and support revenue. Maintenance and support revenue decreased primarily as result of ~~migrating~~ existing maintenance customers migrating to our cloud solutions and to a lesser extent customer ~~churn due to the impact of COVID-19.~~maintenance churn. We expect maintenance revenue to continue to decline ~~over time~~ as we continue to migrate ~~existing~~ maintenance customers to our cloud solutions.

Services revenue. Services revenue ~~decreased~~increased for the three months ended September 30, 2021 primarily as a result of ~~performing implementation~~higher sales of professional services related to our subscription contracts. Services revenue remained relatively flat for ~~a reduced number of customers than in~~ the ~~prior year due to the impact of COVID-19.~~nine months ended September 30, 2021. 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~~efficiencies in our solutions implementations requiring less professional services ~~requested by our customers~~ during a particular period. ~~Due to the uncertain economic conditions caused by COVID-19, we expect a decline in services revenue.~~

Cost of revenue and gross profit:


		Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance					Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)	2020		2019		$		%		2020		2019		$		%		(Dollars in thousands)	2021		2020		$		%		2021		2020		$		%
Cost of subscription	Cost of subscription	$	12,897	$	11,090	$	1,807	16	%	$	38,153	$	30,695	$	7,458	24	%	Cost of subscription	$	13,122	$	12,897	$	225	2	%	$	40,512	$	38,153	$	2,359	6	%
Cost of maintenance and support	Cost of maintenance and support	2,177		2,632		(455)		(17)	%	7,577		8,269		(692)		(8)	%	Cost of maintenance and support	2,044		2,177		(133)		(6)	%	6,459		7,577		(1,118)		(15)	%
Total cost of subscription, maintenance and support	Total cost of subscription, maintenance and support	15,074		13,722		1,352		10	%	45,730		38,964		6,766		17	%	Total cost of subscription, maintenance and support	15,166		15,074		92		1	%	46,971		45,730		1,241		3	%

Cost of services	Cost of services	9,563		12,661		(3,098)		(24)	%	33,584		31,792		1,792		6	%	Cost of services	10,886		9,563		1,323		14	%	31,977		33,584		(1,607)		(5)	%
Total cost of revenue	Total cost of revenue	24,637		26,383		(1,746)		(7)	%	79,314		70,756		8,558		12	%	Total cost of revenue	26,052		24,637		1,415		6	%	78,948		79,314		(366)		—	%
Gross profit	Gross profit	$	36,871	$	37,767	$	(896)	(2)	%	$	112,252	$	113,403	$	(1,151)	(1)	%	Gross profit	$	36,619	$	36,871	$	(252)	(1)	%	$	107,502	$	112,252	$	(4,750)	(4)	%

Cost of subscription. Cost of subscription increased primarily due to increased infrastructure costs to support our current subscription customer ~~base and increased employee-related costs driven by higher headcount.~~base. Our subscription gross profit percentages were ~~69%~~70% and ~~71%~~69% for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~70%~~69% and ~~71%~~70% for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Cost of maintenance and support. Cost of maintenance and support decreased primarily due to a decrease in personnel ~~costs.~~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 76% and 80% for the three months ended September 30, 2021 and 2020, respectively, and 76% and 78% for the ~~three and~~ nine months ended September 30, 2021 and 2020, ~~respectively, and 82% for the three and nine months ended September 30, 2019.~~respectively.

Cost of services. Cost of services increased for the three months ended September 30, ~~2020~~2021 primarily due to higher personnel cost to support the increase in our services revenue during the period. Cost of services decreased for the nine months ended September 30, 2021 primarily due to the lower utilization of third-party contractors and reduced travel expenses due to the COVID-19 ~~pandemic. Cost of services~~pandemic.

Services gross profit percentages were (8)% and (10)% for the three months ended September 30, 2021 and 2020, respectively, and (11)% and (16)% for the nine months ended September 30, 2021 and 2020, increased primarily due to increased employee-related costs driven by higher headcount partially offset by the lower utilization of third-party contractors and reduced travel expenses due to the COVID-19 pandemic.respectively. Services gross profit percentages for the three and nine months ended September 30, ~~2020~~2021 improved primarily as a result of ~~decreasing the~~a decrease in utilization of higher cost third-party contractors. ~~Services gross profit percentages decreased for the nine months ended September 30, 2020 primarily due to the decrease in services revenues and the increase in headcount.~~ 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 our utilization of employees or third-party contractors, our effective man-day rates, our utilization of third-party system integrators and~~ the utilization of our ~~professional services personnel.~~

~~Gross profit.~~ ~~Overall gross profit remained relatively consistent for the three~~employees and ~~nine months ended September 30, 2020.~~our effective man-day rates.

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Operating expenses:


		Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance					Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)	2020		2019		$		%		2020		2019		$		%		(Dollars in thousands)	2021		2020		$		%		2021		2020		$		%
Selling and marketing	Selling and marketing	$	21,951	$	21,600	$	351	2	%	$	67,882	$	66,030	$	1,852	3	%	Selling and marketing	$	21,025	$	21,951	$	(926)	(4)	%	$	63,779	$	67,882	$	(4,103)	(6)	%
Research and development																		Research and development	19,022		19,135		(113)		(1)	%	59,575		56,668		2,907		5	%
General and administrative	General and administrative	11,948		11,553		395		3	%	40,356		35,260		5,096		14	%	General and administrative	12,380		11,948		432		4	%	36,852		40,356		(3,504)		(9)	%
Research and development		19,135		16,878		2,257		13	%	56,668		50,132		6,536		13	%
Acquisition-related		—		248		(248)		(100)	%	—		248		(248)		(100)	%

Total operating expenses	Total operating expenses	$	53,034	$	50,279	$	2,755	5	%	$	164,906	$	151,670	$	13,236	9	%	Total operating expenses	$	52,427	$	53,034	$	(607)	(1)	%	$	160,206	$	164,906	$	(4,700)	(3)	%

Selling and marketing expenses. ~~Selling~~Sales and marketing ~~expense increased~~expenses decreased for the three months ended September 30, ~~2020 as compared to the same period in 2019~~2021 primarily due to a ~~$1.8~~decrease of $0.5 million ~~increase~~ in ~~employee-related expenses driven by higher headcount~~sales and ~~$0.6~~marketing events and a decrease of $0.4 million ~~higher digital~~in personnel and other costs. Sales and marketing expenses ~~partially offset by reduced travel expenses of $2.0 million due to~~decreased for the ~~COVID-19 pandemic. The nine-month increase was~~nine months ended September 30, 2021 primarily due to ~~an increase~~a decrease of ~~$5.9~~$2.5 million in ~~employee-related costs driven by higher headcount as we continue to focus on adding new customers~~sales and ~~increasing penetration within our existing customer base,~~marketing events and a ~~$0.4~~decrease of $1.6 million ~~increase~~ in ~~overhead and other non-personnel costs. The increase was partially offset by reduced~~ travel expenses ~~of $4.4 million~~ due to the COVID-19 pandemic.

~~General and administrative expenses.~~ The three and nine-month increase in general and administrative expenses was primarily due to an increase of $0.3 million and $5.5 million, respectively, in bad debt expense recognized as a result of increased credit risk from uncertain economic conditions caused by COVID-19~~and the bankruptcy of several customers.~~

Research and development expenses. ~~The three and nine-month increase in research~~Research and development expenses ~~was~~remained relatively flat for the three months ended September 30, 2021. Research and development expenses increased for the nine months ended September 30, 2021 primarily due to ana $3.5 million increase ~~of $2.2 million and $6.3 million, respectively,~~ in employee-related costs, ~~driven~~including increase of $1.5 million in non-cash share-based compensation, partially offset by ~~higher headcount and~~ a ~~slight increase~~decrease of $0.6 million in ~~facility and~~ other overhead expenses.

~~Acquisition-related~~General and administrative expenses. ~~Acquisition-related~~General and administrative expenses ~~were $0.2 million~~increased for the three months ended September 30, 2021 primarily due to an increase in non-cash share-based compensation. General and administrative expenses decreased during the nine months ended September 30, ~~2019 and consisted~~2021 primarily due to a net decrease of ~~integration~~$7.6 million in bad debt expense year over year, including a reduction of $2.1 million during the nine months ended September 30, 2021, due to improved credit conditions with certain customers partially offset by an increase of $4.1 million in employee-related costs, ~~and professional fees for our acquisition~~including increases of ~~Travelaer.~~$2.5 million in non-cash share-based compensation.

Other (expense) income, ~~(expense),~~ net:


		Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance					Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)	2020		2019		$		%		2020		2019		$		%		(Dollars in thousands)	2021		2020		$		%		2021		2020		$		%
Convertible debt interest and amortization	Convertible debt interest and amortization	$	(2,498)	$	(3,717)	$	1,219	(33)	%	$	(6,645)	$	(12,347)	$	5,702	(46)	%	Convertible debt interest and amortization	$	(1,576)	$	(2,498)	$	922	(37)	%	$	(4,728)	$	(6,645)	$	1,917	(29)	%
Other income (expense), net		$	122	$	(1,010)	$	1,132	(112)	%	$	1,099	$	(601)	$	1,700	(283)	%
Other (expense) income, net																		Other (expense) income, net	$	(71)	$	122	$	(193)	(158)	%	$	219	$	1,099	$	(880)	(80)	%

Convertible debt interest and amortization. Convertible debt expense for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~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 ~~settlement of the 2019 Notes~~outstanding notes and ~~2047 Notes during 2019.~~as a result there was no related amortization cost in 2021.

Other (expense) income, ~~(expense),~~ net. The change in other (expense) income, ~~(expense),~~ net for the three and nine months ended September 30, ~~2020,~~2021, primarily related to ~~a $2.7 million and $5.0 million, respectively, loss on debt extinguishment recognized in the respective periods of 2019 related to our 2019 and 2047 Notes, which was partially offset by~~ a decrease in interest income partially offset by foreign currency impact during the ~~periods.~~period.

Income tax provision:


		Three Months Ended September 30,						Variance				Nine Months Ended September 30,						Variance					Three Months Ended September 30,						Variance				Nine Months Ended September 30,						Variance
(Dollars in thousands)	(Dollars in thousands)	2020			2019			$		%		2020			2019			$		%		(Dollars in thousands)	2021			2020			$		%		2021			2020			$		%
Effective tax rate	Effective tax rate	(1.7)		%	(0.6)		%	n/a		n/a		(1.0)		%	(1.1)		%	n/a		n/a		Effective tax rate	(0.4)		%	(1.7)		%	n/a		n/a		(0.7)		%	(1.0)		%	n/a		n/a
Income tax provision	Income tax provision	$	318		$	108		$	210	194	%	$	600		$	566		$	34	6	%	Income tax provision	$	70		$	318		$	(248)	(78)	%	$	387		$	600		$	(213)	(36)	%

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Income tax provision. The tax provision for the three and nine months ended September 30, ~~2020~~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.

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Our effective tax rate was (0.4)% and (0.7)% for the three and nine months ended September 30, 2021, respectively, and (1.7)% and (1.0)% for the three and nine months ended September 30, 2020, ~~respectively, and (0.6)% and (1.1)% for the three and nine months ended September 30, 2019,~~ 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 ~~the~~our deferred tax assets, the ~~(1.7)%~~income tax provision and ~~(1.0)% for the three and nine months ended September 30, 2020, respectively, and (0.6)% and (1.1)% for the three and nine months ended September 30, 2019, respectively,~~related effective tax rates is due to foreign income ~~taxes~~ and ~~state taxes not based on pre-tax income.~~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.

We continue to monitor for tax developments and new legislation and regulation in each of the jurisdictions we operate in. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in the United States on March 27, 2020. The CARES Act did not have a material impact on our provision for income taxes for the three and nine months ended September 30, 2020.

Liquidity and Capital Resources

At September 30, ~~2020,~~2021, we had ~~$322.4~~$308.6 million of cash and cash equivalents and ~~$245.6~~$219.6 million of working capital as compared to ~~$306.1~~$329.1 million of cash and cash equivalents and ~~$189.8~~$246.4 million of working capital at December 31, ~~2019.~~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 ~~We issued~~could have access to the ~~2027 Notes in September 2020 and the 2024 Notes in May 2019~~overall capital markets 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 ~~related to licenses, subscriptions and support for our software and related services. Our~~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 and customer concessions. We generally pay our vendors and service providers in accordance with the invoice terms and conditions.~~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 ~~relief to existing contracts~~ and customer churn. If such need arises, we may raise additional funds through equity or debt financings. However, the recent COVID-19 pandemic caused some disruption in the capital markets and further disruption could make financing more difficult and/or expensive and we may not be able to obtain such financing on terms acceptable to us or at all. 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 nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:

Nine Months Ended September 30,
(Dollars in thousands) 2020 2019
Net cash used in operating activities $ (61,841) $ (7,607)
Net cash used in investing activities (24,929) (15,121)
Net cash provided by financing activities 103,405 46,806
Cash and cash equivalents (beginning of period) 306,077 295,476
Cash and cash equivalents (end of period) $ 322,352 $ 319,162

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	Nine Months Ended September 30,
(Dollars in thousands)	2021		2020
Net cash used in operating activities	$	(17,585)	$	(61,841)
Net cash used in investing activities	(5,102)		(24,929)
Net cash provided by financing activities	2,471		103,405
Cash and cash equivalents (beginning of period)	329,134		306,077
Cash and cash equivalents (end of period)	$	308,642	$	322,352

Operating Activities

Net cash used in operating activities for the nine months ended September 30, ~~2020~~2021 was ~~$61.8~~$17.6 million. The ~~$54.2~~$44.3 million ~~increase in cash used as compared to 2019~~improvement over last year was ~~primarily~~ attributable to ~~higher cash~~lower overall operating expenses ~~driven mainly by an increase~~as well as the timing of customer collections from several customers deferring payments in ~~headcount and higher~~2020 as a result of COVID-19. In addition, we had a lower annual incentive payment in 2021 as compared to prior ~~year, customer requests to defer payments to~~ ~~the fourth quarter of fiscal year 2020 and early 2021 and the impact of lower customer bookings as a result of the pandemic.~~year.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, ~~2020~~2021 was ~~$24.9~~$5.1 million. We incurred capital expenditures of $2.4 million ~~which~~and investment in equity securities of $2.7 million. The overall improvement was primarily related to ~~capital expenditures of $23.6 million mainly attributable to the build out of~~2020 investments in our new corporate headquarters, which was committed prior to the ~~pandemic, $1.3 million related to capitalized internal-use software development costs on our subscription service solutions and $0.1 million investment in equity securities.~~COVID-19 pandemic.

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Financing Activities

Net cash provided by financing activities for the nine months ended September 30, ~~2020~~2021 was ~~$103.4~~$2.5 million, which was attributable to proceeds from ~~the issuance of the 2027 Notes of $146.9 million and proceeds from~~ employee stock plans of ~~$2.8~~$3.1 million, partially offset by ~~the purchase of a capped call of $25.3 million, $20.3~~$0.4 million paid for tax withholdings on vesting of employee share-based awards and a $0.3 million payment of notes payable. 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 ~~convertible debt~~2021 employee vested share-based awards. The decrease in net cash provided by financing activities for the nine months ended September 30, 2021 as compare to 2020 was primarily due to the proceeds from the issuance ~~cost~~ of ~~$0.7 million.~~the 2027 Notes in September 2020.

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 109 above, there have been no material changes to our contractual obligations and commitments disclosed in our Annual Report.

Credit facility

There were no outstanding borrowings under the Revolver as of September 30, ~~2020.~~2021. As of September 30, ~~2020,~~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 nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, we recorded an immaterial amount of amortization of debt issuance cost which is included in other ~~expense,~~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.

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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 September 30, ~~2020~~2021 would result in a loss of approximately ~~$0.5~~$0.4 million. WeWe 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 nine months ended September 30, ~~2020~~2021 by approximately ~~$0.4~~$0.5 million and ~~$1.2~~$1.4 million, respectively. H~~owever,~~However, due to the relatively low volume of ~~payments~~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 September 30, ~~2020,~~2021, we had no borrowings under the Revolver.

As of September 30, ~~2020,~~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~~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 September 30, ~~2020.~~2021. Based on our evaluation of our disclosure controls and procedures as of September 30, ~~2020,~~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 September 30, ~~2020~~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 primarily remotely due to COVID-19. We are continually monitoring and assessing ~~the~~the impact of COVID-19 ~~situation~~ on our internal controls to minimize the impact on their design and operating effectiveness.

We implemented internal controls to ensure we adequately evaluated our provisions for credit losses in light of the adoption of Topic 326 on January 1, 2020. There were no significant changes to our internal control over financial reporting due to the adoption of Topic 326.

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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~~Except as set forth below, there have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A, of our Annual ~~Report with the exception of the following risk factors:~~Report.

~~We must successfully navigate the demand, supply~~Our IT systems are regularly under attack. If our security measures are breached and ~~operational challenges associated with the ongoing coronavirus (COVID-19) pandemic.~~unauthorized access is obtained to a customer’s data, our data or our IT systems, our and our customers’ operations may be disrupted, our reputation may be harmed, our solutions may be perceived as not being secure, customers may limit or stop using our solutions and we may incur significant legal and financial exposure and liabilities.

~~The ongoing global COVID-19 pandemic has adversely impacted,~~Our solutions involve the storage, and ~~may~~to a more limited extent, the transmission of our customers’ proprietary information, including personal and other sensitive data. We have incurred, and expect to continue to ~~adversely impact, many aspects~~incur, significant costs to maintain security measures designed to prevent, eliminate or alleviate known security vulnerabilities, data theft, data corruption, data loss, computer viruses, ransomware or malicious software programs or code, cyber attacks, including advanced persistent threat intrusions, by third parties and similar disruptive events (each a "Security Incident"). Given the novel and sophisticated ways that hackers and other cyber criminals engage in cyber attacks, it is reasonable to expect that despite the implementation of security measures, our ~~business.~~ ~~As COVID-19 has continued~~security measures and the security measures of third-party providers on which we rely would not be sufficient to spread throughout the world, a number of governmental authorities have implemented or reinstated numerous severe measures in an attempt to contain the spread of COVID-19, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. Compliance withprevent our systems from being compromised. If these measures by us and by our prospects and customers has impacted our business, as well as the businesses of our customers, prospects, suppliers and other counterparties, and this impact could last for an indefinite period of time. For example, in the travel industry, our airline customers are ~~experiencing unprecedented declines in demand for travel globally,~~breached or are insufficient to prevent or mitigate a~~irline travel demand may remain suppressed until a widely accepted treatment and/or vaccine for COVID-19 is available, and recovery in airline travel demand from COVID-19 may not follow a linear path.~~ ~~The economic impact of COVID-19 has also adversely impacted a number of our prospects and customers, who have~~ experienced, and may continue to experience, downturns or uncertainty in their own businesses. In response, some prospects and customers, particularly those in the travel industry, have decreased, and may continue to decrease, spending on technology initiatives, as well as stalled or halted implementation projects ~~while they address their immediate financial difficulties, including in limited cases through filing for bankruptcy protection. In addition, certain customers have requested, and we expect will continue to request, concessions from existing contracts, and the extent and impact of future requests is uncertain.~~ If a significant number of our customers are unable to make their contractually obligated payments to us, elect to file for bankruptcy protection, or otherwise choose to renew their current contracts for our solutions at lower usage levels, this would have an adverse impact on our business and financial condition.~~The impact on our revenue due to such reduced renewals, combined with other customer actions described in this paragraph, is uncertain.~~

~~As compared to our expectations prior to COVID-19, the global economic impact of COVID-19 adversely impacted our revenue, bad debt expense and operating cash flow~~ ~~during the three and nine months ended September 30, 2020. We expect that customer bookings and the related revenue and cash flows will continue to be lower than anticipated prior to the pandemic~~ cyber attack, whether as a result of ~~decreased demand for new subscriptions~~third-party action, employee error or misconduct, design or deployment defects, or otherwise, we could experience a Security Incident. Moreover, because the scale and ~~services and delays to projects during the pandemic. In particular, new demand for our airline solutions has been limited during COVID-19, and we expect that new demand for our airline solutions will~~number of cyber attacks continue to ~~be limited in the near term. In response, we have postponed or canceled,~~grow and because techniques used to compromise systems change frequently and may ~~continue to postpone~~not be recognized until launched or cancel, planned investments in our business, which may impact our product development and rate of innovation, either of which could seriously harm our business. However, as there are no comparable recent events that provide guidance as to the effect of the spread of COVID-19, the resultant personal, economic and governmental reactions, or the extent and duration of the pandemic and containment measures, we are unable to forecast the full impact that COVID-19 will have on our bookings, revenue, results from operations, financial condition, liquidity and cash flows, and may have to take additional actions in the future that could further harm our business and financial performance. Although we expect that current cash and cash equivalent balances and cash flows that are generated from operations will be sufficient to meet our working capital needs and other capital and liquidity requirements for ~~at least the next 12 months, if our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted.~~

To support the health and well-being of our employees, customers, partners and communities, we implemented and expect to continue a work-from-home policy for substantially all our employees and materially limited business travel, and we may take further actions that alter our operations as may be required by federal, state, or local authorities, or which we determine are in our best interests. While almost all of our operations have been performed remotely since March 2020, and we have not experienced any material interruptions to our operations to date, there is no guarantee that we will continue to be as effective while working remotely. The disruptions caused by COVID-19, including the limitations on meeting in-person with existing and potential customers and amongst our teams because our team is dispersed, may result in inefficiencies, delays and additional costs in our product development, sales, marketing, product implementations and customer service efforts that we

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cannot fully mitigate through remote work arrangements. Many employees have additional personal needs to attend to (such as looking after children as a result of school closures or delays to school calendars or family who becomes sick), and employees may continue to become sick themselves and be unable to work. If one or more of our executives or senior leaders were to become sick and/or hospitalized with COVID-19, it could have a significant impact on our operations. In addition, work-from-home and related business practice modifications could present challenges to maintaining our corporate culture, including employee engagement, development and productivity, both during the ongoing pandemic and as we make additional adjustments to transition from it. As local regulations permit, we expect to provide limited access to our offices for our employees, and when appropriate, we anticipate that we will fully reopen our offices. Planning for the re-opening of our offices has required and will likely continue to require non-trivial investments to manage additional risks and operational challenges, including in the design, implementation and enforcement of new workplace safety protocols. These efforts may divert management attention, and the protocols may create logistical challenges for our employees which could adversely impact employee productivity and morale. Even if we follow what we believe to be best practices, there can be no assurance that our measures will prevent the transmission of COVID-19 between employees. Any incidents of actual or perceived transmission may expose us to liability from employee claims, adversely impact employee productivity and morale, and even result in negative publicity and reputational harm.

The impacts of COVID-19 on our business, customers, partners, employees, markets and financial results and condition continue to be uncertain, evolving, dynamic and dependent on numerous unpredictable factors outside of our control, including:

•~~the spread, duration and severity of COVID-19 as a public health matter and its impact on governments, businesses and society generally and our clients, partners and our business;~~

•~~the mitigation, treatment and other related measures being taken by governments, businesses and society in response to COVID-19 and the effectiveness of those measures;~~

•~~the scope and effectiveness of fiscal and monetary stimulus programs and other legislative and regulatory measures being implemented by federal, state and local governments in response to COVID-19;~~

•~~the duration and impact of the numerous~~ ~~measures implemented by governmental authorities~~ ~~throughout the United States and internationally~~ ~~to contain COVID-19, including travel bans and restrictions, quarantines, shelter-in-place orders and business limitations and shutdowns~~;

•~~the impact of COVID-19 on overall long-term demand for air travel, including the impact on overall demand for business travel as a result of increased usage of teleconferencing and other technologies;~~

•the impact of COVID-19 on the financial health and operations of our current and prospective customers and partners, including the increase in business failures among our customers and other businesses;

•~~the pace and extent to which our customers and other businesses reduce their number of employees and other compensated individuals;~~

•~~the possibility of failure of our operating facilities, computer systems or communication systems during a catastrophic event, including COVID-19;~~

•~~the willingness of current and prospective clients to invest in our products and services;~~

•~~the willingness of current and prospective clients to buy and install products and services remotely; and~~

•~~the satisfaction of customers with product and service remote delivery and support.~~

~~If we are not able to respond to and manage the impact of such events effectively, our results of operations, financial performance, and overall business will be harmed.~~

~~More generally, COVID-19 is causing~~ an extended global economic downturn and has caused volatility in financial markets, which has affected, and likely will continue to affect, demand for our products and services and has impacted our results and financial condition. The impactperiod of ~~COVID-19 will likely continue even after the pandemic is contained, vaccines or other widely accepted treatments become available and the~~ ~~containment measures~~ ~~are lifted. For example, airline travel demand may remain suppressed until a widely accepted treatment and/or vaccine for COVID-19 is available, and recovery in airline~~

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~~travel demand from COVID-19 may not follow a linear path. In addition,~~ time thereafter, we may be unable to ~~collect receivables from~~anticipate these techniques or ~~renew subscription agreements with those customers significantly impacted by COVID-19. Similarly, a decrease in bookings~~implement adequate preventative or remediation measures in a timely manner, if at all, even when a vulnerability is known. We and the third-party providers on which we rely may not be able to address such vulnerability prior to experiencing a Security Incident. Our risk is heightened given ~~period could negatively affect our revenues~~the increase in ~~future periods, particularly if experienced on a sustained basis, because our~~ ~~subscription~~ ~~revenue is recognized over time.~~remote work due to the COVID-19 may also have the effect of heightening many of the other risks described in the “Risk Factors” section of our Annual Report on Form 10-K, including risks associated with our customers and supply chain. We will continue to evaluate the nature and extent of the impact of COVID-19 to our business.pandemic.

~~We incurred indebtedness by issuing convertible notes,~~Security Incidents could result in interruptions, delays, cessation of service and loss of existing or potential customers, as well as loss of confidence in the security of our solutions and services, damage to our reputation, negative impact to our future sales, disruption of our business, increases to our information security costs, unauthorized access to, and theft, loss or disclosure of, our and our ~~debt repayment~~customers’ proprietary and confidential information, including personal information, litigation, governmental investigations and enforcement actions, including fines or other actions, increased stock price volatility, significant costs related to indemnity obligations, ~~may adversely affect~~legal liability and other expenses, and material harm to our business, financial condition and ~~cash flows from operations~~results of operations. We cannot ensure that our commercial insurance will be available or sufficient to compensate us for all costs we may incur as a result of a Security Incident, and if we were to incur significant costs, our ability to obtain comparable insurance in the ~~future.~~future may be impaired or only available at significantly increased cost.

In September 2020, we issued $150.0 million principal amount of 2.25% convertible senior notes (“2027 Notes”) due September 15, 2027, unless earlier redeemed, purchased or converted in accordance with their terms prior to such date. Interest is payable semi-annually in arrears on March 15 and September 15 of each year. As of September 30, 2020, the ~~entire $150.0 million of aggregate principal amount of 2027 Notes are outstanding.~~

In May 2019, we issued $143.8 million principal amount of 1.0% convertible senior notes (“2024 Notes”) due May 15, 2024, unless earlier redeemed, purchased or converted in accordance with their terms prior to such date. Interest is payable semi-annually in arrears on May 15 and November 15 of each year. As of September 30, 2020, the entire $143.8 million of aggregate principal amount of 2024 Notes are outstanding.

Our indebtedness could have important consequences because it may impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and general corporate or other purposes. Our ability to meet our debt obligations will depend on our future performance, which will be affected by financial, business, economic, regulatory and other factors. We cannot control many of these factors. Our future operations may not generate sufficient cash to enable us to repay our debt. If we fail to comply with any covenants contained in the agreements governing anynormal course of our ~~debt, or make a payment on any of our debt when due,~~business, we could be in default on such debt, which could, in turn, result in such debt and our other indebtedness becoming immediately payable in full. If we are at any time unable to pay our indebtedness when due, we may be required to renegotiate the terms of the indebtedness, seek to refinance all or a portion of the indebtedness, and/or obtain additional financing.experience Security Incidents. There can be no assurance that ~~in the~~ future weSecurity Incidents will not be ~~able~~material to ~~successfully renegotiate such terms, that any such refinancing would be possible or that any additional financing could be obtained on terms that are favorable or acceptable to us.~~our business operations, financial condition and results of operations.

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 September 30, ~~2020,~~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 September 30, ~~2020.~~2021.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

None.

ITEM 5. OTHER INFORMATION

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None.

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ITEM 6. EXHIBITS

Index to Exhibits

Provided

Incorporated by Reference

Exhibit No.

Description

Herewith

Form

Filing Date

~~4.1~~

~~Indenture, dated September 15, 2020 between~~ ~~Registrant~~ ~~and Wilmington Trust, National Association, as trustee.~~

~~8-K~~

~~9/16/2020~~

~~4.2~~

~~Form of Global Note, between Registrant and Wilmington Trust, National Association, as trustee (included in Exhibit 4.1).~~

~~8-K~~

~~9/16/2020~~

~~10.1~~

~~Form of Base Capped Call Confirmation.~~

~~8-K~~

~~9/16/2020~~

31.1

Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a).

31.2

Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/ 15d-14(a).

32.1*

Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

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.


*			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.
+			~~Indicates a management contract or compensatory plan or arrangement.~~

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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.

~~October 29, 2020~~November 2, 2021	By:	/s/ Andres Reiner
		Andres Reiner
		President and Chief Executive Officer (Principal Executive Officer)

~~October 29, 2020~~November 2, 2021	By:	/s/ Stefan Schulz
		Stefan Schulz
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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	Three Months Ended September 30, 2019
	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 June 30, 2019	40,183,723	$	45	$	439,995	4,417,585	$	(13,938)	$	(327,142)	$	(3,466)	$	95,494
Stock awards net settlement	69,764	0		(2,956)		—	—		—		—		(2,956)
Proceeds from employee stock plans	39,964	—		1,052		—	—		—		—		1,052
Retirement of convertible debt	1,749,176	2		74,176		—	—		—		—		74,178






Noncash share-based compensation	—	—		6,189		—	—		—		—		6,189

Other comprehensive income (loss)	—	—		—		—	—		—		(658)		(658)
Net loss	—	—		—		—	—		(17,347)		—		(17,347)
Balance at September 30, 2019	42,042,627	$	47	$	518,456	4,417,585	$	(13,938)	$	(344,489)	$	(4,124)	$	155,952