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)

3200 Kirby Drive, Suite 600

77098

Houston

(Address of Principal Executive Offices)

(Zip Code)

(713)

335-5151

(Registrant's telephone number, including area code)

(Former address, if changed since last report)

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 ☐

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.


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Assets:	Assets:					Assets:
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	215,178	$	227,553	Cash and cash equivalents	$	206,824	$	227,553

Trade and other receivables, net of allowance of $1,044 and $1,206, respectively		34,415		40,581
Trade and other receivables, net of allowance of $529 and $1,206, respectively						Trade and other receivables, net of allowance of $529 and $1,206, respectively	45,918		40,581
Deferred costs, current	Deferred costs, current	5,961		5,772		Deferred costs, current	5,946		5,772
Prepaid and other current assets	Prepaid and other current assets	11,935		9,623		Prepaid and other current assets	11,706		9,623

Total current assets	Total current assets	267,489		283,529		Total current assets	270,394		283,529

Property and equipment, net	Property and equipment, net	27,341		30,958		Property and equipment, net	26,128		30,958
Operating lease right-of-use assets	Operating lease right-of-use assets	20,195		25,732		Operating lease right-of-use assets	18,096		25,732
Deferred costs, noncurrent	Deferred costs, noncurrent	9,189		9,510		Deferred costs, noncurrent	8,606		9,510
Intangibles, net	Intangibles, net	22,046		27,618		Intangibles, net	19,825		27,618
Goodwill	Goodwill	107,334		108,133		Goodwill	106,751		108,133

Other assets, noncurrent	Other assets, noncurrent	8,156		9,003		Other assets, noncurrent	11,092		9,003
Total assets	Total assets	$	461,750	$	494,483	Total assets	$	460,892	$	494,483
Liabilities and Stockholders' (Deficit) Equity:	Liabilities and Stockholders' (Deficit) Equity:					Liabilities and Stockholders' (Deficit) Equity:
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and other liabilities	Accounts payable and other liabilities	$	5,978	$	4,034	Accounts payable and other liabilities	$	6,926	$	4,034
Accrued liabilities	Accrued liabilities	12,697		12,631		Accrued liabilities	13,389		12,631
Accrued payroll and other employee benefits	Accrued payroll and other employee benefits	22,862		31,994		Accrued payroll and other employee benefits	24,630		31,994
Operating lease liabilities, current	Operating lease liabilities, current	7,393		8,457		Operating lease liabilities, current	7,135		8,457
Deferred revenue, current	Deferred revenue, current	108,207		97,713		Deferred revenue, current	109,262		97,713

Total current liabilities	Total current liabilities	157,137		154,829		Total current liabilities	161,342		154,829
Deferred revenue, noncurrent	Deferred revenue, noncurrent	7,278		8,553		Deferred revenue, noncurrent	6,929		8,553
Convertible debt, net	Convertible debt, net	289,033		288,287		Convertible debt, net	289,406		288,287
Operating lease liabilities, noncurrent	Operating lease liabilities, noncurrent	32,327		38,034		Operating lease liabilities, noncurrent	29,898		38,034
Other liabilities, noncurrent	Other liabilities, noncurrent	1,065		1,196		Other liabilities, noncurrent	999		1,196
Total liabilities	Total liabilities	486,840		490,899		Total liabilities	488,574		490,899
Commitments and contingencies (see Note 10)	Commitments and contingencies (see Note 10)	0				Commitments and contingencies (see Note 10)
Stockholders' (deficit) equity:	Stockholders' (deficit) equity:					Stockholders' (deficit) equity:
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	—		—		Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued	—		—
Common stock, $0.001 par value, 75,000,000 shares authorized; 49,928,002 and 49,201,265 shares issued, respectively; 45,247,279 and 44,520,542 shares outstanding, respectively		50		49
Common stock, $0.001 par value, 75,000,000 shares authorized; 50,002,828 and 49,201,265 shares issued, respectively; 45,322,105 and 44,520,542 shares outstanding, respectively						Common stock, $0.001 par value, 75,000,000 shares authorized; 50,002,828 and 49,201,265 shares issued, respectively; 45,322,105 and 44,520,542 shares outstanding, respectively	50		49
Additional paid-in capital	Additional paid-in capital	569,914		546,693		Additional paid-in capital	581,819		546,693
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	(559,698)		(508,652)		Accumulated deficit	(573,551)		(508,652)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(5,509)		(4,659)		Accumulated other comprehensive loss	(6,153)		(4,659)

Total stockholders' (deficit) equity	Total stockholders' (deficit) equity	(25,090)		3,584		Total stockholders' (deficit) equity	(27,682)		3,584
Total liabilities and stockholders' (deficit) equity	Total liabilities and stockholders' (deficit) equity	$	461,750	$	494,483	Total liabilities and stockholders' (deficit) equity	$	460,892	$	494,483


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Revenue:	Revenue:									Revenue:
Subscription	Subscription	$	50,386	$	44,224	$	99,151	$	86,872	Subscription	$	51,763	$	44,119	$	150,914	$	130,991
Maintenance and support	Maintenance and support	7,249		8,570		15,104		18,244		Maintenance and support	7,071		8,477		22,175		26,721
Total subscription, maintenance and support	Total subscription, maintenance and support	57,635		52,794		114,255		105,116		Total subscription, maintenance and support	58,834		52,596		173,089		157,712

Services	Services	10,727		9,607		20,599		18,663		Services	11,514		10,075		32,113		28,738
Total revenue	Total revenue	68,362		62,401		134,854		123,779		Total revenue	70,348		62,671		205,202		186,450
Cost of revenue:	Cost of revenue:									Cost of revenue:
Subscription	Subscription	13,746		13,589		27,525		27,390		Subscription	13,829		13,122		41,354		40,512
Maintenance and support	Maintenance and support	1,988		2,157		4,155		4,415		Maintenance and support	1,952		2,044		6,107		6,459
Total cost of subscription, maintenance and support	Total cost of subscription, maintenance and support	15,734		15,746		31,680		31,805		Total cost of subscription, maintenance and support	15,781		15,166		47,461		46,971

Services	Services	11,907		10,658		23,322		21,091		Services	11,829		10,886		35,151		31,977
Total cost of revenue	Total cost of revenue	27,641		26,404		55,002		52,896		Total cost of revenue	27,610		26,052		82,612		78,948
Gross profit	Gross profit	40,721		35,997		79,852		70,883		Gross profit	42,738		36,619		122,590		107,502
Operating expenses:	Operating expenses:									Operating expenses:
Selling and marketing	Selling and marketing	24,020		21,190		49,307		42,754		Selling and marketing	22,221		21,025		71,528		63,779
Research and development	Research and development	23,401		20,454		47,868		41,379		Research and development	23,303		19,467		71,171		60,846
General and administrative	General and administrative	13,837		10,659		28,166		23,646		General and administrative	13,395		11,935		41,561		35,581

Impairment of fixed assets	Impairment of fixed assets	—		—		1,551		—		Impairment of fixed assets	—		—		1,551		—
Loss from operations	Loss from operations	(20,537)		(16,306)		(47,040)		(36,896)		Loss from operations	(16,181)		(15,808)		(63,221)		(52,704)
Convertible debt interest and amortization	Convertible debt interest and amortization	(1,576)		(1,576)		(3,152)		(3,152)		Convertible debt interest and amortization	(1,576)		(1,576)		(4,728)		(4,728)
Other (expense) income, net		(2)		4		(420)		290
Other income (expense), net										Other income (expense), net	4,158		(71)		3,738		219
Loss before income tax provision	Loss before income tax provision	(22,115)		(17,878)		(50,612)		(39,758)		Loss before income tax provision	(13,599)		(17,455)		(64,211)		(57,213)
Income tax provision	Income tax provision	291		168		434		317		Income tax provision	254		70		688		387
Net loss	Net loss	$	(22,406)	$	(18,046)	$	(51,046)	$	(40,075)	Net loss	$	(13,853)	$	(17,525)	$	(64,899)	$	(57,600)

Net loss per share:	Net loss per share:									Net loss per share:
Basic and diluted	Basic and diluted	$	(0.50)	$	(0.41)	$	(1.13)	$	(0.90)	Basic and diluted	$	(0.31)	$	(0.39)	$	(1.44)	$	(1.30)

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

Basic and diluted	Basic and diluted	45,222		44,321		45,154		44,283		Basic and diluted	45,314		44,386		45,207		44,318
Other comprehensive loss, net of tax:	Other comprehensive loss, net of tax:									Other comprehensive loss, net of tax:
Foreign currency translation adjustment	Foreign currency translation adjustment	$	(628)	$	157	$	(850)	$	(451)	Foreign currency translation adjustment	$	(644)	$	(401)	$	(1,494)	$	(852)

Other comprehensive (loss) income, net of tax		(628)		157		(850)		(451)
Other comprehensive loss, net of tax										Other comprehensive loss, net of tax	(644)		(401)		(1,494)		(852)
Comprehensive loss	Comprehensive loss	$	(23,034)	$	(17,889)	$	(51,896)	$	(40,526)	Comprehensive loss	$	(14,497)	$	(17,926)	$	(66,393)	$	(58,452)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2022		2021			2022		2021
Operating activities:	Operating activities:					Operating activities:
Net loss	Net loss	$	(51,046)	$	(40,075)	Net loss	$	(64,899)	$	(57,600)
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	8,448		6,092		Depreciation and amortization	11,843		8,828
Amortization of debt issuance costs	Amortization of debt issuance costs	746		746		Amortization of debt issuance costs	1,119		1,119
Share-based compensation	Share-based compensation	21,991		16,776		Share-based compensation	32,617		25,410

Provision for doubtful accounts	Provision for doubtful accounts	(300)		(1,690)		Provision for doubtful accounts	(371)		(2,078)

Impairment of fixed assets	Impairment of fixed assets	1,551		—		Impairment of fixed assets	1,551		—
Gain on equity investment						Gain on equity investment	(3,308)		—

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	6,441		9,919		Accounts and unbilled receivables	(4,900)		8,521
Deferred costs	Deferred costs	132		1,409		Deferred costs	730		2,296
Prepaid expenses and other assets	Prepaid expenses and other assets	(1,395)		1,095		Prepaid expenses and other assets	(571)		397
Operating lease right-of-use assets and liabilities	Operating lease right-of-use assets and liabilities	(1,117)		26		Operating lease right-of-use assets and liabilities	(1,925)		35
Accounts payable and other liabilities	Accounts payable and other liabilities	1,629		899		Accounts payable and other liabilities	2,911		593
Accrued liabilities	Accrued liabilities	(68)		(201)		Accrued liabilities	817		(539)
Accrued payroll and other employee benefits	Accrued payroll and other employee benefits	(9,144)		(2,975)		Accrued payroll and other employee benefits	(7,388)		215
Deferred revenue	Deferred revenue	9,187		(1,435)		Deferred revenue	9,838		(4,782)
Net cash used in operating activities	Net cash used in operating activities	(12,945)		(9,414)		Net cash used in operating activities	(21,936)		(17,585)
Investing activities:	Investing activities:					Investing activities:
Purchases of property and equipment	Purchases of property and equipment	(769)		(2,085)		Purchases of property and equipment	(845)		(2,432)

Investment in equity securities	Investment in equity securities	(169)		(501)		Investment in equity securities	(169)		(2,670)

Net cash used in investing activities	Net cash used in investing activities	(938)		(2,586)		Net cash used in investing activities	(1,014)		(5,102)
Financing activities:	Financing activities:					Financing activities:

Proceeds from employee stock plans	Proceeds from employee stock plans	1,443		1,596		Proceeds from employee stock plans	2,722		3,111
Tax withholding related to net share settlement of stock awards	Tax withholding related to net share settlement of stock awards	(212)		(352)		Tax withholding related to net share settlement of stock awards	(212)		(352)

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

Net cash provided by financing activities	Net cash provided by financing activities	1,231		1,244		Net cash provided by financing activities	2,510		2,471
Effect of foreign currency rates on cash	Effect of foreign currency rates on cash	277		(52)		Effect of foreign currency rates on cash	(289)		(276)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(12,375)		(10,808)		Net change in cash and cash equivalents	(20,729)		(20,492)
Cash and cash equivalents:	Cash and cash equivalents:					Cash and cash equivalents:
Beginning of period	Beginning of period	227,553		329,134		Beginning of period	227,553		329,134
End of period	End of period	$	215,178	$	318,326	End of period	$	206,824	$	308,642

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	$	140	$	335	Purchase of property and equipment accrued but not paid	$	14	$	63


		Three Months Ended June 30, 2022																								Three Months Ended September 30, 2022

		Common Stock			Additional Paid-In Capital				Treasury Stock						Accumulated Deficit			Accumulated other comprehensive loss				Total Stockholders’ (Deficit) Equity				Common Stock					Additional Paid-In Capital				Treasury Stock					Accumulated Deficit			Accumulated other comprehensive loss			Total Stockholders’ (Deficit) Equity
		Shares	Amount				Shares			Amount							Shares								Amount					Shares				Amount
Balance at March 31, 2022		45,179,184	$	50			$	559,148		4,680,723			$	(29,847)						$	(537,292)			$	(4,881)		$	(12,822)
Balance at June 30, 2022																									Balance at June 30, 2022	45,247,279			$	50		$	569,914			4,680,723		$	(29,847)		$	(559,698)		$	(5,509)		$	(25,090)

Stock awards net settlement	Stock awards net settlement	68,095	—		—				—		—				—			—				—			Stock awards net settlement	17,485			—		—				—		—			—			—			—
Proceeds from employee stock plans	Proceeds from employee stock plans	—	—		—				—		—				—			—				—			Proceeds from employee stock plans	57,341			—		1,279				—		—			—			—			1,279

Noncash share-based compensation	Noncash share-based compensation	—	—		10,766				—		—				—			—				10,766			Noncash share-based compensation	—			—		10,626				—		—			—			—			10,626

Other comprehensive loss	Other comprehensive loss	—	—		—				—		—				—			(628)				(628)			Other comprehensive loss	—			—		—				—		—			—			(644)			(644)
Net loss	Net loss	—	—		—				—		—				(22,406)			—				(22,406)			Net loss	—			—		—				—		—			(13,853)			—			(13,853)
Balance at June 30, 2022		45,247,279	$	50	$	569,914			4,680,723		$	(29,847)			$	(559,698)		$	(5,509)			$	(25,090)
Balance at September 30, 2022																									Balance at September 30, 2022	45,322,105			$	50	$	581,819			4,680,723		$	(29,847)		$	(573,551)		$	(6,153)		$	(27,682)


		Three Months Ended June 30, 2021																								Three Months Ended September 30, 2021
		Common Stock			Additional Paid-In Capital				Treasury Stock						Accumulated Deficit					Accumulated other comprehensive loss			Total Stockholders’ (Deficit) Equity			Common Stock					Additional Paid-In Capital			Treasury Stock					Accumulated Deficit			Accumulated other comprehensive loss			Total Stockholders’ (Deficit) Equity
		Shares	Amount				Shares			Amount									Shares								Amount			Shares				Amount
Balance at March 31, 2021		44,252,765	$	49			$	518,338		4,680,723			$	(29,847)			$	(449,472)				$	(4,039)			$	35,029
Balance at June 30, 2021																									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	Stock awards net settlement	86,917	—		—				—		—				—					—			—		Stock awards net settlement	13,334		—			—			—		—			—			—			—

Proceeds from employee stock plans																									Proceeds from employee stock plans	39,113		—			1,515			—		—			—			—			1,515

Noncash share-based compensation	Noncash share-based compensation	—	—		8,588				—		—				—					—			8,588		Noncash share-based compensation	—		—			8,617			—		—			—			—			8,617
Other comprehensive loss	Other comprehensive loss	—	—		—				—		—				—					157			157		Other comprehensive loss	—		—			—			—		—			—			(401)			(401)
Net loss	Net loss	—	—		—				—		—				(18,046)					—			(18,046)		Net loss	—		—			—			—		—			(17,525)			—			(17,525)
Balance at June 30, 2021		44,339,682	$	49	$	526,926			4,680,723		$	(29,847)			$	(467,518)				$	(3,882)		$	25,728
Balance at September 30, 2021																									Balance at September 30, 2021	44,392,129		$	49		$	537,058		4,680,723		$	(29,847)		$	(485,043)		$	(4,283)		$	17,934


		Six Months Ended June 30, 2022																								Nine Months Ended September 30, 2022

		Common Stock			Additional Paid-In Capital				Treasury Stock						Accumulated Deficit			Accumulated other comprehensive loss				Total Stockholders’ (Deficit) Equity				Common Stock						Additional Paid-In Capital				Treasury Stock							Accumulated Deficit				Accumulated other comprehensive loss				Total Stockholders’ (Deficit) Equity
		Shares	Amount				Shares			Amount							Shares								Amount					Shares					Amount
Balance at December 31, 2021	Balance at December 31, 2021	44,520,542	$	49			$	546,693		4,680,723			$	(29,847)						$	(508,652)			$	(4,659)		$	3,584	Balance at December 31, 2021		44,520,542			$	49			$	546,693			4,680,723			$	(29,847)			$	(508,652)			$	(4,659)	$	3,584

Stock awards net settlement	Stock awards net settlement	677,492	1		(213)				—		—				—			—				(212)			Stock awards net settlement	694,977			1				(213)				—				—			—				—				(212)
Proceeds from employee stock plans	Proceeds from employee stock plans	49,245	—		1,443				—		—				—			—				1,443			Proceeds from employee stock plans	106,586			—			2,722				—				—			—				—				2,722

Noncash share-based compensation	Noncash share-based compensation	—	—		21,991				—		—				—			—				21,991			Noncash share-based compensation	—			—			32,617				—				—			—				—				32,617

Other comprehensive loss	Other comprehensive loss	—	—		—				—		—				—			(850)				(850)			Other comprehensive loss	—			—			—				—				—			—				(1,494)				(1,494)
Net loss	Net loss	—	—		—				—		—				(51,046)			—				(51,046)			Net loss	—			—			—				—				—			(64,899)				—				(64,899)
Balance at June 30, 2022		45,247,279	$	50	$	569,914			4,680,723		$	(29,847)			$	(559,698)		$	(5,509)			$	(25,090)
Balance at September 30, 2022																									Balance at September 30, 2022	45,322,105			$	50		$	581,819			4,680,723				$	(29,847)		$	(573,551)			$	(6,153)			$	(27,682)


		Six Months Ended June 30, 2021																								Nine Months Ended September 30, 2021
		Common Stock			Additional Paid-In Capital				Treasury Stock						Accumulated Deficit					Accumulated other comprehensive loss			Total Stockholders’ (Deficit) Equity			Common Stock								Additional Paid-In Capital		Treasury Stock				Accumulated Deficit		Accumulated other comprehensive loss		Total Stockholders’ (Deficit) Equity
		Shares	Amount				Shares			Amount									Shares								Amount					Shares				Amount
Balance at December 31, 2020	Balance at December 31, 2020	43,461,544	$	48			$	589,040		4,680,723			$	(29,847)			$	(438,773)				$	(3,431)			$	117,037	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	Stock awards net settlement	836,168	1		(353)				—		—				—					—			(352)		Stock awards net settlement	849,502				1				(353)		—		—		—		—		(352)
Proceeds from employee stock plans	Proceeds from employee stock plans	41,970	—		1,596				—		—				—					—			1,596		Proceeds from employee stock plans	81,083				—				3,111		—		—		—		—		3,111

Cumulative effect of adoption of ASU 2020-06	Cumulative effect of adoption of ASU 2020-06	—	—		(80,098)				—		—				11,330					—			(68,768)		Cumulative effect of adoption of ASU 2020-06	—				—				(80,098)		—		—		11,330		—		(68,768)
Noncash share-based compensation	Noncash share-based compensation	—	—		16,741				—		—				—					—			16,741		Noncash share-based compensation	—				—				25,358		—		—		—		—		25,358
Other comprehensive loss	Other comprehensive loss	—	—		—				—		—				—					(451)			(451)		Other comprehensive loss	—				—				—		—		—		—		(852)		(852)
Net loss	Net loss	—	—		—				—		—				(40,075)					—			(40,075)		Net loss	—				—				—		—		—		(57,600)		—		(57,600)
Balance at June 30, 2021		44,339,682	$	49	$	526,926			4,680,723		$	(29,847)			$	(467,518)				$	(3,882)		$	25,728
Balance at September 30, 2021																									Balance at September 30, 2021	44,392,129				$	49			$	537,058	4,680,723		$	(29,847)	$	(485,043)	$	(4,283)	$	17,934

PROS Holdings, Inc., a Delaware corporation, through its operating subsidiaries (collectively, the "Company"), provides solutions that optimize shopping and selling experiences. PROS solutions leverage artificial intelligence ("AI"), self-learning and automation to ensure that every transactional experience is fast, frictionless and personalized for every shopper, supporting both business-to-business ("B2B") and business-to-consumer ("B2C") companies across industry verticals. Companies can use these selling, pricing, revenue optimization, distribution and retail, and digital offer marketing solutions to assess their market environments in real time to deliver customized prices and offers. The Company's solutions enable their customers to provide the buyers of their products the ability to move fluidly ~~across its customers’~~from one sales channel to another, whether direct, ~~sales,~~ partner, online, mobile ~~and~~or other emerging channels, each with a personalized ~~experiences~~experience regardless of which channel ~~buyers choose.~~is used. The Company's decades of data science and AI expertise are infused into its solutions and are designed to reduce time and complexity through actionable intelligence.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission ("SEC"). In management's opinion, the accompanying interim unaudited condensed consolidated financial statements include all adjustments necessary for a fair statement of the financial position of the Company as of ~~June~~September 30, 2022, the results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, cash flows for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, and stockholders' (deficit) equity for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021.

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, 2021 ("Annual Report") filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, 2021 was derived from the Company's audited consolidated financial statements but does not include all disclosures required under GAAP.

Since its initial onset in early 2020, the coronavirus ("COVID-19") pandemic has created significant global uncertainty, and compliance with the various containment measures implemented by governmental authorities has impacted the Company's business, as well as the businesses of its customers, suppliers and other counterparties, and the scope and duration of the outbreak and timeframe for economic recovery is uncertain. As there are no comparable recent events that provide guidance as to the long-term effect of the COVID-19 pandemic, the Company is unable to predict the full impact that COVID-19 will have on its results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures.

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, 2021, except for the Company's adoption of certain accounting standards described in more detail under "Recently adopted accounting pronouncements" in this Note 2 below.

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 $~~179.0~~172.8 million and $203.3 million at ~~June~~September 30, 2022 and December 31, 2021, respectively, and were invested in treasury money market funds. The fair value of the treasury money market funds is determined based on quoted market prices, which represents level 1 in the fair value hierarchy as defined by ASC 820.

Investments in equity securities of privately held companies or venture funds without readily determinable fair value, where the Company does not exercise significant influence over the investee, are recorded 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. During the quarter ended September 30, 2022, the Company identified an observable price change related to an equity investment without a readily determinable fair value and recorded a non-cash gain of $3.3 million in other income (expense), net in the unaudited condensed consolidated statements of comprehensive loss. As of September 30, 2022 and December 31, 2021, the carrying value of the equity securities without readily determinable fair value was $9.0 million and $5.5 million, respectively. Equity investments are included in other assets, noncurrent in the accompanying unaudited condensed consolidated balance sheet. As of September 30, 2022 and December 31, 2021, the Company determined there were no other-than-temporary impairments on its equity investments.

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.

Sales commissions earned by the Company's sales representatives are considered incremental and recoverable costs of obtaining a customer contract. Sales commissions are deferred and amortized on a straight-line basis over the period of benefit, which the Company has determined to be five to eight years. The Company determined the period of benefit by taking into consideration its customer contracts, expected renewals of those customer contracts (as the Company currently does not pay an incremental sales commission for renewals), the Company's technology and other factors. The Company also defers amounts earned by employees other than sales representatives who earn incentive payments under compensation plans also tied to the value of customer contracts acquired. Deferred costs were $~~15.2~~14.6 million and $15.3 million as of ~~June~~September 30, 2022 and December 31, 2021, respectively. Amortization expense for the deferred costs was $~~1.4~~1.5 million and ~~$1.5~~$1.6 million for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and $~~2.9~~4.3 million and ~~$3.1~~$4.6 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. Amortization of deferred costs is included in selling and marketing expense in the accompanying unaudited condensed consolidated statements of comprehensive loss.

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 performance obligations in its customer contracts. The Company analyzes implementation costs and capitalizes those costs that are directly related to customer contracts expected to be recoverable to satisfy the undelivered performance obligations in those contracts. Deferred implementation costs are amortized ratably over the remaining contract term once the revenue recognition criteria for the respective performance obligation has been met and revenue recognition commences. Deferred implementation costs were ~~$2.0~~$1.8 million and $2.4 million as of ~~June~~September 30, 2022 and December 31,

2021, respectively. Amortization expense for the deferred implementation costs was $0.3 million for both the three months ended ~~June~~September 30, 2022 and 2021, and $~~0.6~~0.9 million for both the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021. 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 loss.

Long-lived assets are reviewed for impairment whenever an event or change in circumstances indicates that the carrying amount of an asset or group of assets may not be recoverable. The impairment review includes comparison of future cash flows expected to be generated by the asset or group of assets with the associated assets’ carrying value. If the carrying value of the asset or group of assets exceeds its expected future cash flows (undiscounted and without interest charges), an impairment loss is recognized to the extent that the carrying amount of the asset exceeds its fair value. During the three and ~~six~~nine months ended ~~June~~September 30, 2022, the Company recorded zero and $1.6 million, respectively, of impairment charge related to fixed assets. The impairment resulted from the Company's changed intentions for these assets in connection with a new agreement with a software vendor. The Company did not record any impairment charges during the three and ~~six~~nine months ended ~~June~~September 30, 2021.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options ("Subtopic 470-20") and Derivatives and Hedging - Contracts in an Entity's Own Equity ("Subtopic 815-40"), which simplifies the accounting for certain convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity's own equity, and modifies the guidance on diluted earnings per share calculations as a result of these changes. This new standard is effective for the Company's interim and annual periods beginning January 1, 2022, and earlier adoption is permitted on January 1, 2021. The Company may elect to apply the amendments on a retrospective or modified retrospective basis. The Company early adopted the new standard effective January 1, 2021 on the modified retrospective basis. The adoption decreased additional paid-in capital by $80.1 million related to the equity conversion component of the outstanding convertible notes which was previously separated and recorded in equity, and increased convertible debt, net by $68.8 million related to the removal of the debt discounts and adjustment of debt issuance cost recorded under the previous standard. The net cumulative effect of the adjustments of $11.3 million was recorded as a decrease to the opening balance of the accumulated deficit as of January 1, 2021. The adoption had no impact on the condensed consolidated statements of cash flows.

For the three months ended ~~June~~September 30, 2022 and 2021, the Company recognized approximately ~~$48.6~~$46.0 million and ~~$45.3~~$43.3 million, respectively, and for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the Company recognized approximately ~~$71.2~~$86.4 million and ~~$70.3~~$86.0 million, respectively, of revenue that was included in the deferred revenue balances at the beginning of the respective periods and primarily related to subscription, maintenance and support, and services.

As of ~~June~~September 30, 2022, the Company expects to recognize approximately $~~434.9~~442.3 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 ~~$197.4~~$199.3 million of these performance obligations over the next 12 months, with the balance recognized thereafter.

The geographic information in the table below is presented for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021. The Company categorizes geographic revenues based on the location of the customer's headquarters. Because the Company's contracts are predominately denominated in U.S. dollars, it has limited exposure to foreign currency exchange risk as discussed under "Foreign Currency Exchange Risk" of Part I, Item 3 below.


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021					2022				2021				2022				2021
(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	$	23,908	35	%	$	21,875	35	%	$	47,102	35	%	$	42,751	35	%	United States of America	$	24,952	35	%	$	23,275	37	%	$	72,054	35	%	$	66,026	35	%
Europe	Europe	20,865		30	%	18,562		30	%	41,688		31	%	37,254		30	%	Europe	20,816		30	%	18,571		30	%	62,504		31	%	55,825		30	%
The rest of the world	The rest of the world	23,589		35	%	21,964		35	%	46,064		34	%	43,774		35	%	The rest of the world	24,580		35	%	20,825		33	%	70,644		34	%	64,599		35	%
Total revenue	Total revenue	$	68,362	100	%	$	62,401	100	%	$	134,854	100	%	$	123,779	100	%	Total revenue	$	70,348	100	%	$	62,671	100	%	$	205,202	100	%	$	186,450	100	%

On November 30, 2021, the Company acquired EveryMundo LLC ("EveryMundo"), a privately held company based in Miami, Florida, for cash consideration, net of cash acquired, of approximately $79.5 million and an equity consideration of approximately $10.0 million. Since the equity consideration is contingent on certain ~~employee'~~employees' continued employment with the Company for a two-year period, it was determined, based on accounting guidance, the related amounts should be treated as post-combination compensation and accordingly are not included as part of the purchase price allocation. EveryMundo is a digital offer marketing pioneer that enables brands to broaden their digital reach and deepen customer engagement, providing greater control over direct and indirect channels they participate in to help create superior brand experiences and foster brand loyalty over time.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Cash paid for operating lease liabilities	Cash paid for operating lease liabilities	$	2,353	$	1,917	$	4,195	$	4,378	Cash paid for operating lease liabilities	$	2,175	$	2,065	$	6,370	$	6,443
Right-of-use asset obtained in exchange for operating lease liability	Right-of-use asset obtained in exchange for operating lease liability	$	243	$	194	$	243	$	291	Right-of-use asset obtained in exchange for operating lease liability	$	—	$	—	$	243	$	291


Year Ending December 31,	Year Ending December 31,	Amount		Year Ending December 31,	Amount
Remaining 2022	Remaining 2022	$	5,168	Remaining 2022	$	2,595
2023	2023	9,618		2023	9,469
2024	2024	5,260		2024	5,119
2025	2025	4,211		2025	4,115
2026	2026	4,109		2026	4,020
2027	2027	4,043		2027	3,965
Thereafter	Thereafter	23,685		Thereafter	23,251
Total operating lease payments	Total operating lease payments	56,094		Total operating lease payments	52,534
Less: Imputed interest	Less: Imputed interest	(16,374)		Less: Imputed interest	(15,501)

Total operating lease liabilities	Total operating lease liabilities	$	39,720	Total operating lease liabilities	$	37,033


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021		2022		2021		(in thousands, except per share data)	2022		2021		2022		2021
Numerator:	Numerator:									Numerator:
Net loss	Net loss	$	(22,406)	$	(18,046)	$	(51,046)	$	(40,075)	Net loss	$	(13,853)	$	(17,525)	$	(64,899)	$	(57,600)
Denominator:	Denominator:									Denominator:
Weighted average shares (basic)	Weighted average shares (basic)	45,222		44,321		45,154		44,283		Weighted average shares (basic)	45,314		44,386		45,207		44,318
Dilutive effect of potential common shares	Dilutive effect of potential common shares	—		—		—		—		Dilutive effect of potential common shares	—		—		—		—
Weighted average shares (diluted)	Weighted average shares (diluted)	45,222		44,321		45,154		44,283		Weighted average shares (diluted)	45,314		44,386		45,207		44,318
Basic loss per share	Basic loss per share	$	(0.50)	$	(0.41)	$	(1.13)	$	(0.90)	Basic loss per share	$	(0.31)	$	(0.39)	$	(1.44)	$	(1.30)
Diluted loss per share	Diluted loss per share	$	(0.50)	$	(0.41)	$	(1.13)	$	(0.90)	Diluted loss per share	$	(0.31)	$	(0.39)	$	(1.44)	$	(1.30)

Dilutive potential common shares consist of shares issuable upon the settlement of stock appreciation rights ("SARs"), and the vesting of restricted stock units ("RSUs"), market stock units ("MSUs") and equity consideration related to the EveryMundo LLC acquisition. Potential common shares determined to be antidilutive and excluded from diluted weighted average shares outstanding were approximately ~~2.4~~2.3 million and ~~1.2~~1.1 million, for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and ~~2.6~~2.4 million and 1.3 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. In addition, potential common shares related to the convertible notes determined to be antidilutive and excluded from diluted weighted average shares outstanding were 5.8 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021.


Award type	Award type	June 30, 2022	December 31, 2021	Award type	September 30, 2022	December 31, 2021

Restricted stock units (time-based)	Restricted stock units (time-based)	2,624	2,145	Restricted stock units (time-based)	2,554	2,145
Restricted stock units (performance-based)	Restricted stock units (performance-based)	—	140	Restricted stock units (performance-based)	—	140

Market stock units	Market stock units	216	126	Market stock units	216	126
EveryMundo Equity consideration	EveryMundo Equity consideration	273	273	EveryMundo Equity consideration	273	273

During the ~~six~~nine months ended ~~June~~September 30, 2022, the Company granted ~~1,353,221~~1,410,309 RSUs (time-based) with a weighted average grant-date fair value of ~~$30.23~~$30.09 per share. The Company also granted 116,640 MSUs with a weighted average grant-date fair value of $37.65 to certain executive employees during the ~~six~~nine months ended ~~June~~September 30, 2022. These MSUs vest on January 31, 2025 and the actual number of MSUs that will be eligible to vest is based on the total stockholder return of the Company relative to the total stockholder return of the Index over the performance period, as defined by each award's plan documents or individual award agreements. The maximum number of shares issuable upon vesting is 200% of the MSUs initially granted.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Share-based compensation:	Share-based compensation:									Share-based compensation:
Cost of revenue	Cost of revenue	$	1,006	$	976	$	1,831	$	1,802	Cost of revenue	$	1,050	$	951	$	2,881	$	2,753
Operating expenses:	Operating expenses:									Operating expenses:
Selling and marketing	Selling and marketing	3,276		2,510		6,516		4,734		Selling and marketing	2,897		2,600		9,413		7,334
Research and development	Research and development	2,899		2,117		6,612		3,943		Research and development	2,995		1,924		9,607		5,867
General and administrative	General and administrative	3,585		3,003		7,032		6,297		General and administrative	3,684		3,159		10,716		9,456
Total included in operating expenses	Total included in operating expenses	9,760		7,630		20,160		14,974		Total included in operating expenses	9,576		7,683		29,736		22,657
Total share-based compensation expense	Total share-based compensation expense	$	10,766	$	8,606	$	21,991	$	16,776	Total share-based compensation expense	$	10,626	$	8,634	$	32,617	$	25,410

The Company's Employee Stock Purchase Plan (as amended, the "ESPP") provides for eligible employees to purchase shares on an after-tax basis in an amount between 1% and 10% of their annual pay: (i) on June 30 of each year at a 15% discount of the fair market value of the Company's common stock on January 1 or June 30, whichever is lower, and (ii) on December 31 of each year at a 15% discount of the fair market value of the Company's common stock on July 1 or December 31, whichever is lower. An employee may not purchase more than $5,000 in either of the six-month measurement periods described above or more than $10,000 annually. In May 2021, the Company's stockholders approved an amendment to the ESPP Plan increasing the aggregate amount of shares available for issuance under the ESPP to 1,000,000. During the three and ~~six~~nine months ended ~~June~~September 30, 2022, the Company issued ~~zero~~57,341 and ~~49,245~~106,586 shares under the ESPP, respectively. As of ~~June~~September 30, 2022, ~~444,466~~387,125 shares remain authorized and available for issuance under the ESPP. As of ~~June~~September 30, 2022, the Company held approximately $~~1.3~~0.7 million on behalf of employees for future purchases under the ESPP, and this amount was recorded in accrued payroll and other employee benefits in the Company's unaudited condensed consolidated balance sheet.


		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			$	—			$	142,106				1%		1% Convertible Notes due in 2024 ("2024 Notes")	May 2019		$	143,750	$	—	$	142,330	1%
2.25% Convertible Notes due in 2027 ("2027 Notes")	2.25% Convertible Notes due in 2027 ("2027 Notes")	September 2020		$	150,000			$	—			$	146,927			2.25%	2.25% Convertible Notes due in 2027 ("2027 Notes")	September 2020				$	150,000	$	—	$	147,076	2.25%

The 2027 and 2024 Notes (collectively, the "Notes") are general unsecured obligations and rank senior in right of payment to all of the Company's indebtedness that is expressly subordinated in right of payment to the Notes, rank equally in right of payment with all of the Company's existing and future liabilities that are not so subordinated, are effectively junior to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness and are structurally subordinated to all indebtedness and other liabilities of the Company's subsidiaries (including trade payables but excluding intercompany obligations owed to the Company or its subsidiaries).

Interest related to the 2027 Notes is payable semiannually in arrears in cash on March 15 and September 15 of each year, beginning on March 15, 2021. Interest related to the 2024 Notes is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2019. The 2027 Notes mature on September 15, 2027 and the 2024 Notes mature on May 15, 2024, unless redeemed or converted in accordance with their terms prior to such date.

Each $1,000 of principal of the 2027 Notes will initially be convertible into 23.9137 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $41.82 per share. Each $1,000 of principal of the 2024 Notes will initially be convertible into 15.1394 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $66.05 per share. The initial conversion price for the 2027 and the 2024 Notes is subject to adjustment upon the occurrence of certain specified events.

As of ~~June~~September 30, 2022 and December 31, 2021, the fair value of the principal amount of the Notes in the aggregate was $~~266.7~~263.0 million and $299.4 million, respectively. The estimated fair value was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including the Company's stock price and interest rates, which represents level 2 in the fair value hierarchy.

Effective January 1, 2021, the Company early adopted ASU 2020-06, Debt - Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in an Entity's Own Equity. Upon adoption of the new standard, the Company removed the debt discount and adjusted the debt issuance cost which was previously allocated between the liability and the equity component, resulting in an increase of $68.8 million to convertible debt, net. In addition, the Company recorded a reduction to additional paid-in capital of $80.1 million related to the equity conversion component of the outstanding convertible notes which was previously separated and recorded in equity. The net cumulative impact of the adoption of the standard was recorded as a decrease to accumulated deficit.


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021

Principal	Principal	$	293,750	$	293,750	Principal	$	293,750	$	293,750
Less: debt issuance cost, net of amortization	Less: debt issuance cost, net of amortization	(4,717)		(5,463)		Less: debt issuance cost, net of amortization	(4,344)		(5,463)
Net carrying amount	Net carrying amount	$	289,033	$	288,287	Net carrying amount	$	289,406	$	288,287


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Coupon interest	Coupon interest	$	1,203	$	1,203	$	2,406	$	2,406	Coupon interest	$	1,203	$	1,203	$	3,609	$	3,609
Amortization of debt issuance costs	Amortization of debt issuance costs	373		373		746		746		Amortization of debt issuance costs	373		373		1,119		1,119

Total	Total	$	1,576	$	1,576	$	3,152	$	3,152	Total	$	1,576	$	1,576	$	4,728	$	4,728

In September 2020 and in May 2019, in connection with the offering of the 2027 and 2024 Notes, respectively, the Company entered into privately negotiated capped call transactions (collectively, the "Capped Call") with certain option counterparties. The Capped Call transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock initially underlying the Notes, at a strike price that corresponds to the initial conversion price of the Notes, also subject to adjustment, and are exercisable upon conversion of the Notes. The Capped Call transactions are intended to reduce potential dilution to the Company’s common stock and/or offset any cash payments the Company will be required to make in excess of the principal amounts upon any conversion of Notes, and to effectively increase the overall conversion price of the 2027 Notes from $41.82 to $78.90 per share, and for the 2024 Notes from $66.05 to $101.62 per share. As the Capped Call transactions meet certain accounting criteria, they are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of the Capped Call was $25.3 million and $16.4 million for the 2027 and 2024 Notes, respectively, and was recorded as part of additional paid-in capital.

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.

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.

In the ~~second~~third quarter of 2022, we continued to grow our subscription revenue. For the three and ~~six~~nine months ended ~~June~~September 30, 2022, our subscription revenue increased ~~14%~~17% and 15%, respectively, as compared to the same periods in 2021. Total revenue increased ~~10%~~12% and 9%10% for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, as compared to the same periods in 2021. Recurring revenue (which consists of subscription revenue and maintenance and support revenue) as a percentage of total revenue accounted for 84% of total revenue for both the three and nine months ended September 30, 2022, and 84% and 85% of total revenue for the three and ~~six~~nine months ended ~~June~~September 30, ~~2022, respectively, and 85% of total revenue for the three and six months ended June 30, 2021.~~2021, respectively.

Cash used in operating activities was ~~$12.9~~$21.9 million for the ~~six~~nine months ended ~~June~~September 30, 2022, as compared to ~~$9.4~~$17.6 million for the ~~six~~nine months ended ~~June~~September 30, 2021. The increase was primarily attributable to a higher annual incentive payment in 2022 as compared to prior year, partially offset by ~~strong~~increased cash collections during the period.

Free cash flow is a key metric to assess the strength of our business. We define free cash flow, a non-GAAP financial measure, as net cash provided by (used in) operating activities minus capital expenditures (excluding expenditures for our new headquarters), purchases of other (non-acquisition-related) intangible assets and capitalized internal-use software development costs. We believe free cash flow may be useful to investors and other users of our financial information in evaluating the amount of cash generated by our business operations. Free cash flow used during the three months ended ~~June~~September 30, 2022 was ~~$2.2~~$9.1 million, compared to ~~$5.7~~$8.5 million for the three months ended ~~June~~September 30, 2021. ~~This decrease was primarily due to strong collections during the period.~~ Free cash flow used during the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$13.7~~$22.8 million, compared to ~~$10.4~~$18.9 million for the ~~six~~nine months ended ~~June~~September 30, 2021. This increase was primarily due to a higher annual incentive payment in 2022 as compared to prior year,partially offset by ~~strong~~increased cash collections during the ~~period~~. period. The following is a reconciliation of free cash flow to the most comparable GAAP measure, net cash used in operating activities (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Net cash used in operating activities	Net cash used in operating activities	$	(1,931)	$	(4,985)	$	(12,945)	$	(9,414)	Net cash used in operating activities	$	(8,991)	$	(8,171)	$	(21,936)	$	(17,585)
Purchase of property and equipment (excluding new headquarters)	Purchase of property and equipment (excluding new headquarters)	(308)		(741)		(769)		(944)		Purchase of property and equipment (excluding new headquarters)	(76)		(347)		(845)		(1,291)

Free Cash Flow	Free Cash Flow	$	(2,239)	$	(5,726)	$	(13,714)	$	(10,358)	Free Cash Flow	$	(9,067)	$	(8,518)	$	(22,781)	$	(18,876)

•Macroeconomic Environment. We believe ~~that~~ the combination of inflation, rising interest rates, supply chain disruptions, ~~from the pandemic,~~ tight labor markets, pricing volatility, ~~inflation,~~ the Russia-Ukraine conflict, ~~rising interest rates,~~ and other macroeconomic conditions ~~will put~~puts pressure on corporate growth initiatives and ~~increase near term~~increases focus on ~~profitability. Despite~~profitability across industries. Despite this challenging macro environment, we remain confident in our ability to continue to help optimize shopping and selling experiences for our customers across a wide variety of industries. For example, pricing volatility and inflation are catalysts for demand for our price management and optimization solutions, while concurrently uncertain macroeconomic and industry conditions in countries and regions in which we operate create a challenging selling environment for large enterprise technology deployment. COVID-19 impacted and is anticipated to continue impacting our subscription revenue growth rates adversely due to lower subscription bookings during the pandemic and the lag between subscription

~~between subscription~~ bookings and the revenue recognized on those subscription bookings. Although the pandemic reduced our revenue growth rates compared to pre-pandemic growth rates and is affecting our 2022 revenue, we continue to grow our subscription revenue and expect total revenue growth in 2022. However, the continuing impact of COVID-19 ~~and rate of economic recovery~~ remains uncertain and varies across industries and geographies. While our revenue and earnings are relatively predictable as a result of our subscription-based business model, the broader implications of these macroeconomic events on our business, results of operations, cash flows and overall financial position, particularly in the long term, remain uncertain. For a full discussion on the risks and uncertainties to our business, please see the "Risk Factors" section in our Annual Report on Form 10-K.

•Travel Industry Recovery. Early in the pandemic, the travel industry was materially adversely impacted by unprecedented declines in travel demand, forcing airlines to focus on their core operations, significantly reduce costs, de-prioritize new technology investments, and in certain cases, file for bankruptcy protection. Certain airlines responded by increasing their air cargo operations as a result of increased global e-commerce during the pandemic which helped offset losses from traveler demand. In turn, we have seen an increase in airline interest in our price optimization and CPQ solutions. As travel restrictions have lifted, airlines have experienced strong pent-up demand from leisure travelers, which in turn has led airlines to begin to reprioritize technology investments as their businesses recover, while still addressing ongoing operational challenges, such as staffing shortages. This pent-up demand may decline if inflation impacts consumer disposable income. While there remains significant geographic variation based on ongoing travel restrictions in certain regions, we expect airlines to increasingly prioritize technology investments as travel returns to pre-COVID levels. The pandemic also accelerated a long-term trend towards direct booking channels, in part due to a significant reduction in business travel, and we anticipate airlines continuing to invest in technology, including mobile device-enabled solutions, to enhance their ability to capture a greater percentage of bookings through their own channels such as their websites.

•Digital Purchasing Driving Technology Adoption. The pandemic accelerated long-term trends toward digital purchasing by both consumers and corporate buyers. Buyers often prefer not to interact with sales representatives as their primary source of research, and increasingly prefer to buy online when they have already decided what to buy. Across industries and geographies, companies are increasingly modernizing their sales process to compete in digital commerce by adopting technologies which provide fast, frictionless and personalized buying experiences across sales channels. Our AI-powered solutions enable buyers to move fluidly and with personalized experiences across our customers’ direct sales, partner, online, mobile and emerging channels and our digital offer marketing solutions to help drive their customers directly into their direct selling channels.

•Investing in Growth and Scaling our Business. We believe that our market opportunity is large and underpenetrated, and intend to continue investing in our business while focusing on cash flow and profitability, to create awareness for our solutions, acquire new customers, and expand within our existing customer base globally. We plan to continue investing in product development to enhance our existing technologies, including initiatives to accelerate customer time-to-value, improve efficiency, and provide out-of-the-box integration with third-party commerce solutions, and develop new applications and technologies. We have also increased our investments in our people to continue to attract, develop, retain and reward our employees in light of highly competitive labor markets.

•Cloud Migrations. As we migrate more ~~and more~~ of our historical on premises customers from our legacy licensed solutions to our current cloud solutions, we expect our future maintenance and support revenue to continue to decline and subscription revenue to correspondingly increase. We ~~are encouraging these migrations and~~continue to encourage our customers to migrate to our cloud solutions as we have announced ~~to our customers~~ end of support dates for certain of our on premises solutions.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Revenue:	Revenue:									Revenue:
Subscription	Subscription	74	%	71	%	74	%	70	%	Subscription	74	%	70	%	74	%	70	%
Maintenance and support	Maintenance and support	11		14		11		15		Maintenance and support	10		14		11		14
Total subscription, maintenance and support	Total subscription, maintenance and support	84		85		85		85		Total subscription, maintenance and support	84		84		84		85

Services	Services	16		15		15		15		Services	16		16		16		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	20		22		20		22		Subscription	20		21		20		22
Maintenance and support	Maintenance and support	3		3		3		4		Maintenance and support	3		3		3		3
Total cost of subscription, maintenance and support	Total cost of subscription, maintenance and support	23		25		23		26		Total cost of subscription, maintenance and support	22		24		23		25

Services	Services	17		17		17		17		Services	17		17		17		17
Total cost of revenue	Total cost of revenue	40		42		41		43		Total cost of revenue	39		42		40		42
Gross profit	Gross profit	60		58		59		57		Gross profit	61		58		60		58
Operating Expenses:	Operating Expenses:									Operating Expenses:
Selling and marketing	Selling and marketing	35		34		37		35		Selling and marketing	32		34		35		34
Research and development	Research and development	34		33		35		33		Research and development	33		31		35		33
General and administrative	General and administrative	20		17		21		19		General and administrative	19		19		20		19

Impairment of fixed assets	Impairment of fixed assets	—		—		1		—		Impairment of fixed assets	—		—		1		—
Total operating expenses	Total operating expenses	90		84		94		87		Total operating expenses	84		84		91		86
Convertible debt interest and amortization	Convertible debt interest and amortization	(2)		(3)		(2)		(3)		Convertible debt interest and amortization	(2)		(3)		(2)		(3)
Other (expense) income net		—		—		—		—
Other income (expense), net										Other income (expense), net	6		—		2		—
Loss before income tax provision	Loss before income tax provision	(32)		(29)		(38)		(32)		Loss before income tax provision	(19)		(28)		(31)		(31)
Income tax provision	Income tax provision	—		—		—		—		Income tax provision	—		—		—		—
Net loss	Net loss	(33)	%	(29)	%	(38)	%	(32)	%	Net loss	(20)	%	(28)	%	(32)	%	(31)	%

Revenue:


		Three Months Ended June 30,				Variance				Six Months Ended June 30,				Variance					Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)	2022		2021		$		%		2022		2021		$		%		(Dollars in thousands)	2022		2021		$		%		2022		2021		$		%
Subscription	Subscription	$	50,386	$	44,224	$	6,162	14	%	$	99,151	$	86,872	$	12,279	14	%	Subscription	$	51,763	$	44,119	$	7,644	17	%	$	150,914	$	130,991	$	19,923	15	%
Maintenance and support	Maintenance and support	7,249		8,570		(1,321)		(15)	%	15,104		18,244		(3,140)		(17)	%	Maintenance and support	7,071		8,477		(1,406)		(17)	%	22,175		26,721		(4,546)		(17)	%
Total subscription, maintenance and support	Total subscription, maintenance and support	57,635		52,794		4,841		9	%	114,255		105,116		9,139		9	%	Total subscription, maintenance and support	58,834		52,596		6,238		12	%	173,089		157,712		15,377		10	%

Services	Services	10,727		9,607		1,120		12	%	20,599		18,663		1,936		10	%	Services	11,514		10,075		1,439		14	%	32,113		28,738		3,375		12	%
Total revenue	Total revenue	$	68,362	$	62,401	$	5,961	10	%	$	134,854	$	123,779	$	11,075	9	%	Total revenue	$	70,348	$	62,671	$	7,677	12	%	$	205,202	$	186,450	$	18,752	10	%

Cost of revenue and gross profit:


		Three Months Ended June 30,				Variance				Six Months Ended June 30,				Variance					Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)	2022		2021		$		%		2022		2021		$		%		(Dollars in thousands)	2022		2021		$		%		2022		2021		$		%
Cost of subscription	Cost of subscription	$	13,746	$	13,589	$	157	1	%	$	27,525	$	27,390	$	135	—	%	Cost of subscription	$	13,829	$	13,122	$	707	5	%	$	41,354	$	40,512	$	842	2	%
Cost of maintenance and support	Cost of maintenance and support	1,988		2,157		(169)		(8)	%	4,155		4,415		(260)		(6)	%	Cost of maintenance and support	1,952		2,044		(92)		(5)	%	6,107		6,459		(352)		(5)	%
Total cost of subscription, maintenance and support	Total cost of subscription, maintenance and support	15,734		15,746		(12)		—	%	31,680		31,805		(125)		—	%	Total cost of subscription, maintenance and support	15,781		15,166		615		4	%	47,461		46,971		490		1	%

Cost of services	Cost of services	11,907		10,658		1,249		12	%	23,322		21,091		2,231		11	%	Cost of services	11,829		10,886		943		9	%	35,151		31,977		3,174		10	%
Total cost of revenue	Total cost of revenue	27,641		26,404		1,237		5	%	55,002		52,896		2,106		4	%	Total cost of revenue	27,610		26,052		1,558		6	%	82,612		78,948		3,664		5	%
Gross profit	Gross profit	$	40,721	$	35,997	$	4,724	13	%	$	79,852	$	70,883	$	8,969	13	%	Gross profit	$	42,738	$	36,619	$	6,119	17	%	$	122,590	$	107,502	$	15,088	14	%

Cost of subscription. ~~Cost of subscription overall remained relatively unchanged year over year.~~ Cost of subscription increased primarily due to an increase in intangibles amortization ~~and personnel costs~~ associated with the acquisition of EveryMundo and an increase in personnel costs to support our increased subscription customer base, including EveryMundo. The increase was partially offset by lower infrastructure costs driven by ~~infrastructure~~ cost efficiencies and lower amortization expense for capitalized internal-use software. Our subscription gross profit percentages were 73% and ~~69%~~70% for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and ~~72%~~73% and ~~68%~~69% for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

Cost of maintenance and support. Cost of maintenance and support decreased primarily due to a decrease in personnel costs as a result of the need to support a declining maintenance customer base as we migrate customers to our subscription solutions. Maintenance and support gross profit percentages were ~~73% and 75% for the three months ended June 30, 2022 and 2021, respectively, and~~ 72% and 76% for the ~~six~~three and nine months ended ~~June~~September 30, 2022 and 2021, respectively.

Cost of services. Cost of services increased primarily due to higher personnel costs to support the increase in our services revenue during the periods. Services gross profit percentages were ~~(11)~~(3)% and (8)% for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and ~~(13)~~(9)% and (11)% for the ~~six~~nine months ended ~~June~~September 30, 2022 and ~~2021.~~2021, respectively. Services gross profit percentages vary period to period depending on different factors, including the level of professional services required to implement our solutions, the utilization of our employees and our effective man-day rates.

Operating expenses:


		Three Months Ended June 30,				Variance				Six Months Ended June 30,				Variance					Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)	2022		2021		$		%		2022		2021		$		%		(Dollars in thousands)	2022		2021		$		%		2022		2021		$		%
Selling and marketing	Selling and marketing	$	24,020	$	21,190	$	2,830	13	%	$	49,307	$	42,754	$	6,553	15	%	Selling and marketing	$	22,221	$	21,025	$	1,196	6	%	$	71,528	$	63,779	$	7,749	12	%
Research and development	Research and development	23,401		20,454		2,947		14	%	47,868		41,379		6,489		16	%	Research and development	23,303		19,467		3,836		20	%	71,171		60,846		10,325		17	%
General and administrative	General and administrative	13,837		10,659		3,178		30	%	28,166		23,646		4,520		19	%	General and administrative	13,395		11,935		1,460		12	%	41,561		35,581		5,980		17	%

Impairment of fixed assets	Impairment of fixed assets	—		—		—		—	%	1,551		—		1,551		—	%	Impairment of fixed assets	—		—		—		—	%	1,551		—		1,551		—	%
Total operating expenses	Total operating expenses	$	61,258	$	52,303	$	8,955	17	%	$	126,892	$	107,779	$	19,113	18	%	Total operating expenses	$	58,919	$	52,427	$	6,492	12	%	$	185,811	$	160,206	$	25,605	16	%

Selling and marketing expenses. During the three months ended ~~June~~September 30, 2022, selling and marketing expenses increased primarily due to ~~higher employee-related costs and intangibles amortization related to the EveryMundo acquisition as well as~~ an increase in travel expenses. During the ~~six~~nine months ended ~~June~~September 30, 2022, selling and marketing expenses increased primarily as a result of an increase in employee-related costs primarily due to higher headcount related to our EveryMundo acquisition and higher severance cost primarily related to the separation of our Chief Operations Officer in the first quarter of 2022. In addition, there was an increase in travel related expenses and an increase in intangibles amortization related to the EveryMundo ~~acquisition and higher travel related expenses.~~acquisition.

General and administrative expenses. General and administrative expenses increased primarily due to an increase in employee-related costs and ~~a change~~an increase in bad debt expense as we had aan expense recovery during 2021 as a result of improved credit conditions with certain customers. The bad debt expense recovery was ~~$1.1~~$0.4 million and ~~$1.7~~$2.1 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively. In addition, our acquisition of EveryMundo also contributed to overall higher general and administrative expenses as compared to ~~the~~ prior year.

Non-operating expenses:


		Three Months Ended June 30,				Variance				Six Months Ended June 30,				Variance					Three Months Ended September 30,				Variance				Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)	2022		2021		$		%		2022		2021		$		%		(Dollars in thousands)	2022		2021		$		%		2022		2021		$		%
Convertible debt interest and amortization	Convertible debt interest and amortization	$	(1,576)	$	(1,576)	$	—	—	%	$	(3,152)	$	(3,152)	$	—	—	%	Convertible debt interest and amortization	$	(1,576)	$	(1,576)	$	—	—	%	$	(4,728)	$	(4,728)	$	—	—	%
Other (expense) income, net		$	(2)	$	4	$	(6)	(150)	%	$	(420)	$	290	$	(710)	(245)	%
Other income (expense), net																		Other income (expense), net	$	4,158	$	(71)	$	4,229	(5,956)	%	$	3,738	$	219	$	3,519	1,607	%

Other income (expense) ~~income,~~, net. The change in other income (expense) ~~income,~~, net for the three and ~~six~~nine months ended ~~June~~September 30, 2022, primarily related to a $3.3 million gain on equity investment recognized in the quarter ended September 30, 2022, and also due to higher interest income partially offset by the impact of foreign currency ~~impact during the periods.~~fluctuations.

Income tax provision:


		Three Months Ended June 30,						Variance				Six Months Ended June 30,						Variance					Three Months Ended September 30,						Variance				Nine Months Ended September 30,						Variance
(Dollars in thousands)	(Dollars in thousands)	2022			2021			$		%		2022			2021			$		%		(Dollars in thousands)	2022			2021			$		%		2022			2021			$		%
Effective tax rate	Effective tax rate	(1.3)		%	(0.9)		%	n/a		n/a		(0.9)		%	(0.8)		%	n/a		n/a		Effective tax rate	(1.9)		%	(0.4)		%	n/a		n/a		(1.1)		%	(0.7)		%	n/a		n/a
Income tax provision	Income tax provision	$	291		$	168		$	123	73	%	$	434		$	317		$	117	37	%	Income tax provision	$	254		$	70		$	184	263	%	$	688		$	387		$	301	78	%

Our effective tax rate was ~~(1.3)~~(1.9)% and ~~(0.9)~~(1.1)% for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and ~~(0.9)~~(0.4)% and ~~(0.8)~~(0.7)% for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively. The income tax rate varies from the 21% federal statutory rate primarily due to the valuation allowances on our deferred tax assets. While our expected tax rate would be 0% due to the full valuation allowance on our deferred tax assets, the income tax provision and related effective tax rates is due to foreign income and withholding taxes.

Jurisdictions with a projected loss for the year where no tax benefit can be recognized due to the valuation allowances on our deferred tax assets are excluded from the estimated annual federal effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter depending on the mix and timing of actual earnings versus annual projections.

We believe our existing cash and cash equivalents 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 depend on many factors, including the operations of our existing business, growth of our customer subscription services, future acquisitions we might undertake, expansion into complementary businesses, timing of adoption and implementation of our solutions and customer churn. Capital markets have tightened recently in response to the macroeconomic environment making new financing more difficult and/or expensive and we may not be able to obtain such financing on terms acceptable to us or at all.


		Six Months Ended June 30,					Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2022		2021		(Dollars in thousands)	2022		2021
Net cash used in operating activities	Net cash used in operating activities	$	(12,945)	$	(9,414)	Net cash used in operating activities	$	(21,936)	$	(17,585)
Net cash used in investing activities	Net cash used in investing activities	(938)		(2,586)		Net cash used in investing activities	(1,014)		(5,102)
Net cash provided by financing activities	Net cash provided by financing activities	1,231		1,244		Net cash provided by financing activities	2,510		2,471
Cash and cash equivalents (beginning of period)	Cash and cash equivalents (beginning of period)	227,553		329,134		Cash and cash equivalents (beginning of period)	227,553		329,134
Cash and cash equivalents (end of period) (1)	Cash and cash equivalents (end of period) (1)	$	215,178	$	318,326	Cash and cash equivalents (end of period) (1)	$	206,824	$	308,642

Net cash used in investing activities for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$0.9~~$1.0 million. The decrease from prior year was primarily related to higher capital expenditures in 2021 mainly attributable to the build out of our ~~new~~ headquarters which was committed prior to the ~~pandemic.~~pandemic and higher investments in equity securities in 2021.

Net cash provided by financing activities for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$1.2~~$2.5 million and remained consistent with prior year. ItThe cash provided was attributable to proceeds from employee stock plans, partially offset by ~~payment~~tax withholding payments on the vesting of ~~tax withholdings on vesting of~~certain employee share-based awards.

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.

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 awards, other current liabilities and accrued liabilities. Numerous internal and external factors can affect estimates. Our critical accounting policies related to the estimates and judgments are discussed in our Annual Report under management's discussion and analysis of financial condition and results of operations.

Although our contracts are predominately denominated in U.S. dollars, we are exposed to foreign currency exchange risk because we also have some contracts denominated in foreign currencies. The effect of a hypothetical 10% adverse change in exchange rates on our foreign denominated receivables as of ~~June~~September 30, 2022 would result in a loss of approximately ~~$0.6~~$0.7 million. We are also exposed to foreign currency risk due to our operating subsidiaries in France, United Kingdom, Canada, Germany, Ireland, Australia, Bulgaria, Ecuador and United Arab Emirates. A hypothetical 10% adverse change in the value of the U.S. dollar in relation to the euro, which is our single most significant foreign currency exposure, would have decreased revenue for the three and ~~six~~nine months ended ~~June~~September 30, 2022 by approximately $0.9 million and ~~$1.9~~$2.8 million, respectively. However, due to the relatively low volume of payments made and received through our foreign subsidiaries, we do not believe that we have significant exposure to foreign currency exchange risks. Fluctuations in foreign currency exchange rates could harm our financial results in the future.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of ~~June~~September 30, 2022. Based on our evaluation of our disclosure controls and procedures as of ~~June~~September 30, 2022, 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.

The majority of our revenues is derived from our customers outside the U.S. To date, the majority of our sales has been denominated in U.S. dollars, although the majority of our expenses that we incur in our international operations is denominated in local currencies. To date, we have not used risk management techniques or "hedged" the risks associated with fluctuations in foreign currency exchange rates. Consequently, our results of operations, cash flows, and financial condition, including our revenue and operating margins, ~~can~~have in the past and may again in the future, be subject to losses from fluctuations in foreign currency exchange rates, as well as regulatory, political, social and economic developments or instability in the foreign jurisdictions in which we operate. For additional financial information about geographic areas, see Note 19 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K.

Our operations outside the U.S. are subject to risks inherent in doing business internationally, requiring resources and management attention, and may subject us to new or larger levels of regulatory, economic, foreign currency exchange, tax and political risks. We have customers in over 60 countries internationally, which we service through our operations in the U.S., Australia, Bulgaria, Canada, Ecuador, France, Germany, Ireland, United Arab Emirates, United Kingdom and Singapore. We expect our international operations to continue to grow. In addition to navigating the challenges related to the ongoing COVID-19 pandemic in foreign jurisdictions, we face other risks with respect to our international operations, including:

In addition, while there has been no material impact on our business to date, we are subject to risks from the direct and indirect impacts from the Russian invasion of Ukraine and the ensuing sanctions. These risks include general geopolitical unrest, broader economic uncertainty, turmoil in certain financial markets, instability in the financial system, disruption to domestic and international travel, displacement of persons, disruption of supply chains and routes, including energy supplies, commodity and other price inflation, increased cybersecurity threats and attacks, the possibility of military activity or risk of wider war in countries near or adjacent to Ukraine. For example, in Sofia, Bulgaria, we have marketing, research and development, professional services, customer success, maintenance and support and general and administrative staff, representing approximately 14% of our personnel.

If we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations. Our failure to manage any of these risks successfully could harm our international operations and reduce our international sales, adversely affecting our business, operating results and financial condition.

We have an ongoing authorization from our board of directors to repurchase up to $15.0 million in shares of our common stock in the open market or through privately negotiated transactions. As of ~~June~~September 30, 2022, $10.0 million remained available for repurchase under the existing repurchase authorization. We did not make any purchases of our common stock under this program for the three months ended ~~June~~September 30, 2022.

Index to Exhibits

Provided

Incorporated by Reference

Exhibit No.

Description

Herewith

Form

Filing Date

31.1

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

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.


Delaware						76-0168604
(State of Incorporation)						(I.R.S. Employer Identification No.)


Large accelerated filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐ (do not check if a smaller reporting company)	Smaller Reporting Company	☐
Emerging Growth Company	☐


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Interim Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Stockholders' (Deficit) Equity	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.	Controls and Procedures	25

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosure	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
Signatures		29


Current assets	$	2,193
Noncurrent assets	736
Intangibles	23,300
Goodwill	58,915

Current liabilities	(4,972)


Noncurrent liabilities	(542)
Purchase consideration	$	79,630


			Weighted Average Useful Life
	Amount		(years)
Developed technology	$	15,700	5
Customer relationships	5,500		4
Trade name	2,100		8
Total	$	23,300


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	~~June~~September 30, 2022
Volatility	54.50	%
Risk-free interest rate	1.20	%
Expected award life in years	2.97
Dividend yield	—


*			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.


		PROS HOLDINGS, INC.

~~July 28,~~November 1, 2022	By:	/s/ Andres Reiner
		Andres Reiner
		President and Chief Executive Officer (Principal Executive Officer)

~~July 28,~~November 1, 2022	By:	/s/ Stefan Schulz
		Stefan Schulz
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)