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.


		March 31, 2023		December 31, 2022			September 30, 2023		December 31, 2022
Assets:	Assets:					Assets:
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	192,376	$	203,627	Cash and cash equivalents	$	159,080	$	203,627

Trade and other receivables, net of allowance of $722 and $609, respectively		45,787		48,178
Trade and other receivables, net of allowance of $681 and $609, respectively						Trade and other receivables, net of allowance of $681 and $609, respectively	49,688		48,178
Deferred costs, current	Deferred costs, current	6,433		6,032		Deferred costs, current	6,306		6,032
Prepaid and other current assets	Prepaid and other current assets	12,149		9,441		Prepaid and other current assets	10,449		9,441

Total current assets	Total current assets	256,745		267,278		Total current assets	225,523		267,278

Restricted cash						Restricted cash	10,000		—
Property and equipment, net	Property and equipment, net	25,442		25,012		Property and equipment, net	23,922		25,012
Operating lease right-of-use assets	Operating lease right-of-use assets	14,797		17,474		Operating lease right-of-use assets	13,076		17,474
Deferred costs, noncurrent	Deferred costs, noncurrent	7,938		8,764		Deferred costs, noncurrent	7,786		8,764
Intangibles, net	Intangibles, net	16,046		17,851		Intangibles, net	12,979		17,851
Goodwill	Goodwill	107,717		107,561		Goodwill	107,445		107,561

Derivative asset, noncurrent						Derivative asset, noncurrent	22,260		—
Other assets, noncurrent	Other assets, noncurrent	8,872		9,012		Other assets, noncurrent	8,863		9,012
Total assets	Total assets	$	437,557	$	452,952	Total assets	$	431,854	$	452,952
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	$	4,197	$	7,964	Accounts payable and other liabilities	$	4,741	$	7,964
Accrued liabilities	Accrued liabilities	13,356		12,854		Accrued liabilities	16,755		12,854
Accrued payroll and other employee benefits	Accrued payroll and other employee benefits	15,624		23,797		Accrued payroll and other employee benefits	23,555		23,797
Operating lease liabilities, current	Operating lease liabilities, current	5,461		7,662		Operating lease liabilities, current	3,998		7,662
Deferred revenue, current	Deferred revenue, current	122,192		108,659		Deferred revenue, current	112,311		108,659

Current portion of convertible debt, net						Current portion of convertible debt, net	21,635		—
Total current liabilities	Total current liabilities	160,830		160,936		Total current liabilities	182,995		160,936
Deferred revenue, noncurrent	Deferred revenue, noncurrent	6,161		8,298		Deferred revenue, noncurrent	4,211		8,298
Convertible debt, net	Convertible debt, net	290,152		289,779		Convertible debt, net	272,542		289,779
Operating lease liabilities, noncurrent	Operating lease liabilities, noncurrent	27,135		28,184		Operating lease liabilities, noncurrent	25,794		28,184
Other liabilities, noncurrent	Other liabilities, noncurrent	1,247		1,228		Other liabilities, noncurrent	1,190		1,228
Total liabilities	Total liabilities	485,525		488,425		Total liabilities	486,732		488,425
Commitments and contingencies (see Note 9)
Commitments and contingencies (see Note 10)						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; 50,711,964 and 50,318,726 shares issued, respectively; 46,031,241 and 45,638,003 shares outstanding, respectively		51		50
Common stock, $0.001 par value, 75,000,000 shares authorized; 50,929,132 and 50,318,726 shares issued, respectively; 46,248,409 and 45,638,003 shares outstanding, respectively						Common stock, $0.001 par value, 75,000,000 shares authorized; 50,929,132 and 50,318,726 shares issued, respectively; 46,248,409 and 45,638,003 shares outstanding, respectively	51		50
Additional paid-in capital	Additional paid-in capital	596,805		590,475		Additional paid-in capital	617,402		590,475
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	(609,900)		(590,898)		Accumulated deficit	(637,057)		(590,898)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(5,077)		(5,253)		Accumulated other comprehensive loss	(5,427)		(5,253)

Total stockholders' (deficit) equity	Total stockholders' (deficit) equity	(47,968)		(35,473)		Total stockholders' (deficit) equity	(54,878)		(35,473)
Total liabilities and stockholders' (deficit) equity	Total liabilities and stockholders' (deficit) equity	$	437,557	$	452,952	Total liabilities and stockholders' (deficit) equity	$	431,854	$	452,952


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2023			2022			2023		2022		2023		2022
Revenue:	Revenue:							Revenue:
Subscription	Subscription		$	55,969		$	48,765	Subscription	$	59,987	$	51,763	$	173,260	$	150,914
Maintenance and support	Maintenance and support		5,712			7,855		Maintenance and support	4,693		7,071		15,498		22,175
Total subscription, maintenance and support	Total subscription, maintenance and support		61,681			56,620		Total subscription, maintenance and support	64,680		58,834		188,758		173,089

Services	Services		11,501			9,872		Services	12,570		11,514		37,466		32,113
Total revenue	Total revenue		73,182			66,492		Total revenue	77,250		70,348		226,224		205,202
Cost of revenue:	Cost of revenue:							Cost of revenue:
Subscription	Subscription		14,093			13,779		Subscription	14,510		13,829		42,662		41,354
Maintenance and support	Maintenance and support		2,282			2,167		Maintenance and support	1,769		1,952		5,927		6,107
Total cost of subscription, maintenance and support	Total cost of subscription, maintenance and support		16,375			15,946		Total cost of subscription, maintenance and support	16,279		15,781		48,589		47,461

Services	Services		13,167			11,415		Services	12,185		11,829		37,988		35,151
Total cost of revenue	Total cost of revenue		29,542			27,361		Total cost of revenue	28,464		27,610		86,577		82,612
Gross profit	Gross profit		43,640			39,131		Gross profit	48,786		42,738		139,647		122,590
Operating expenses:	Operating expenses:							Operating expenses:
Selling and marketing	Selling and marketing		26,010			25,287		Selling and marketing	20,324		22,221		71,214		71,528
Research and development	Research and development		22,291			24,467		Research and development	22,205		23,303		66,343		71,171
General and administrative	General and administrative		14,135			14,329		General and administrative	14,099		13,395		42,083		41,561

Impairment of fixed assets	Impairment of fixed assets		—			1,551		Impairment of fixed assets	—		—		—		1,551
Loss from operations	Loss from operations		(18,796)			(26,503)		Loss from operations	(7,842)		(16,181)		(39,993)		(63,221)
Convertible debt interest and amortization	Convertible debt interest and amortization		(1,576)			(1,576)		Convertible debt interest and amortization	(1,497)		(1,576)		(4,649)		(4,728)
Other income (expense), net			1,451			(418)
Other (expense) income, net								Other (expense) income, net	(4,288)		4,158		(1,046)		3,738
Loss before income tax provision	Loss before income tax provision		(18,921)			(28,497)		Loss before income tax provision	(13,627)		(13,599)		(45,688)		(64,211)
Income tax provision	Income tax provision		81			143		Income tax provision	241		254		471		688
Net loss	Net loss		$	(19,002)		$	(28,640)	Net loss	$	(13,868)	$	(13,853)	$	(46,159)	$	(64,899)

Net loss per share:	Net loss per share:							Net loss per share:
Basic and diluted	Basic and diluted		$	(0.41)		$	(0.64)	Basic and diluted	$	(0.30)	$	(0.31)	$	(1.00)	$	(1.44)

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

Basic and diluted	Basic and diluted		45,926			45,085		Basic and diluted	46,225		45,314		46,084		45,207
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		$	176		$	(222)	Foreign currency translation adjustment	$	(359)	$	(644)	$	(174)	$	(1,494)

Other comprehensive income (loss), net of tax			176			(222)
Other comprehensive loss, net of tax								Other comprehensive loss, net of tax	(359)		(644)		(174)		(1,494)
Comprehensive loss	Comprehensive loss		$	(18,826)		$	(28,862)	Comprehensive loss	$	(14,227)	$	(14,497)	$	(46,333)	$	(66,393)


		Three Months Ended March 31,					Nine Months Ended September 30,
		2023		2022			2023		2022
Operating activities:	Operating activities:					Operating activities:
Net loss	Net loss	$	(19,002)	$	(28,640)	Net loss	$	(46,159)	$	(64,899)
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	3,001		4,647		Depreciation and amortization	8,301		11,843
Amortization of debt issuance costs	Amortization of debt issuance costs	373		373		Amortization of debt issuance costs	1,094		1,119
Share-based compensation	Share-based compensation	9,904		11,225		Share-based compensation	31,589		32,617

Provision for credit losses	Provision for credit losses	108		(91)		Provision for credit losses	88		(371)
Loss on disposal of assets	Loss on disposal of assets	35		—		Loss on disposal of assets	51		—
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)
Loss on derivatives						Loss on derivatives	4,343		—
Loss on debt extinguishment						Loss on debt extinguishment	1,779		—
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	2,239		(12,130)		Accounts and unbilled receivables	(1,573)		(4,900)
Deferred costs	Deferred costs	425		(48)		Deferred costs	704		730
Prepaid expenses and other assets	Prepaid expenses and other assets	(2,505)		(262)		Prepaid expenses and other assets	31		(571)
Operating lease right-of-use assets and liabilities	Operating lease right-of-use assets and liabilities	(591)		(739)		Operating lease right-of-use assets and liabilities	(1,686)		(1,925)
Accounts payable and other liabilities	Accounts payable and other liabilities	(3,793)		3,903		Accounts payable and other liabilities	(3,375)		2,911
Accrued liabilities	Accrued liabilities	504		(109)		Accrued liabilities	1,489		817
Accrued payroll and other employee benefits	Accrued payroll and other employee benefits	(8,174)		(13,246)		Accrued payroll and other employee benefits	(242)		(7,388)
Deferred revenue	Deferred revenue	11,333		22,552		Deferred revenue	(401)		9,838
Net cash used in operating activities	Net cash used in operating activities	(6,143)		(11,014)		Net cash used in operating activities	(3,967)		(21,936)
Investing activities:	Investing activities:					Investing activities:
Purchases of property and equipment	Purchases of property and equipment	(1,546)		(461)		Purchases of property and equipment	(2,168)		(845)

Investment in equity securities						Investment in equity securities	(113)		(169)

Net cash used in investing activities	Net cash used in investing activities	(1,546)		(461)		Net cash used in investing activities	(2,281)		(1,014)
Financing activities:	Financing activities:					Financing activities:

Proceeds from employee stock plans	Proceeds from employee stock plans	1,137		1,443		Proceeds from employee stock plans	2,170		2,722
Tax withholding related to net share settlement of stock awards	Tax withholding related to net share settlement of stock awards	(4,710)		(212)		Tax withholding related to net share settlement of stock awards	(6,831)		(212)

Debt issuance cost related to Credit Agreement						Debt issuance cost related to Credit Agreement	(837)		—

Purchase of capped call						Purchase of capped call	(22,771)		—

Net cash (used in) provided by financing activities	Net cash (used in) provided by financing activities	(3,573)		1,231		Net cash (used in) provided by financing activities	(28,269)		2,510
Effect of foreign currency rates on cash	Effect of foreign currency rates on cash	11		84		Effect of foreign currency rates on cash	(30)		(289)
Net change in cash and cash equivalents		(11,251)		(10,160)
Cash and cash equivalents:
Net change in cash, cash equivalents and restricted cash						Net change in cash, cash equivalents and restricted cash	(34,547)		(20,729)
Cash, cash equivalents and restricted cash:						Cash, cash equivalents and restricted cash:
Beginning of period	Beginning of period	203,627		227,553		Beginning of period	203,627		227,553
End of period	End of period	$	192,376	$	217,393	End of period	$	169,080	$	206,824

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets						Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents						Cash and cash equivalents	$	159,080	$	206,824
Restricted cash						Restricted cash	10,000		—
Total cash, cash equivalents and restricted cash						Total cash, cash equivalents and restricted cash	$	169,080	$	206,824

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	$	136	$	45	Purchase of property and equipment accrued but not paid	$	236	$	14


		Three Months Ended March 31, 2023																								Three Months Ended September 30, 2023

		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, 2022		45,638,003	$	50			$	590,475		4,680,723			$	(29,847)						$	(590,898)			$	(5,253)		$	(35,473)
Balance at June 30, 2023																									Balance at June 30, 2023	46,140,736			$	51		$	606,599			4,680,723		$	(29,847)		$	(623,189)		$	(5,068)		$	(51,454)

Stock awards net settlement	Stock awards net settlement	338,089	1		(4,711)				—		—				—			—				(4,710)			Stock awards net settlement	58,814			—		(1,163)				—		—			—			—			(1,163)
Proceeds from employee stock plans	Proceeds from employee stock plans	55,149	—		1,137				—		—				—			—				1,137			Proceeds from employee stock plans	48,859			—		1,033				—		—			—			—			1,033

Noncash share-based compensation	Noncash share-based compensation	—	—		9,904				—		—				—			—				9,904			Noncash share-based compensation	—			—		10,933				—		—			—			—			10,933

Other comprehensive loss	Other comprehensive loss	—	—		—				—		—				—			176				176			Other comprehensive loss	—			—		—				—		—			—			(359)			(359)
Net loss	Net loss	—	—		—				—		—				(19,002)			—				(19,002)			Net loss	—			—		—				—		—			(13,868)			—			(13,868)
Balance at March 31, 2023		46,031,241	$	51	$	596,805			4,680,723		$	(29,847)			$	(609,900)		$	(5,077)			$	(47,968)
Balance at September 30, 2023																									Balance at September 30, 2023	46,248,409			$	51	$	617,402			4,680,723		$	(29,847)		$	(637,057)		$	(5,427)		$	(54,878)


		Three Months Ended March 31, 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 December 31, 2021		44,520,542	$	49			$	546,693		4,680,723			$	(29,847)			$	(508,652)				$	(4,659)			$	3,584
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	609,397	1		(213)				—		—				—					—			(212)		Stock awards net settlement	17,485		—			—			—		—			—			—			—
Proceeds from employee stock plans	Proceeds from employee stock plans	49,245	—		1,443				—		—				—					—			1,443		Proceeds from employee stock plans	57,341		—			1,279			—		—			—			—			1,279

Noncash share-based compensation	Noncash share-based compensation	—	—		11,225				—		—				—					—			11,225		Noncash share-based compensation	—		—			10,626			—		—			—			—			10,626
Other comprehensive loss	Other comprehensive loss	—	—		—				—		—				—					(222)			(222)		Other comprehensive loss	—		—			—			—		—			—			(644)			(644)
Net loss	Net loss	—	—		—				—		—				(28,640)					—			(28,640)		Net loss	—		—			—			—		—			(13,853)			—			(13,853)
Balance at March 31, 2022		45,179,184	$	50	$	559,148			4,680,723		$	(29,847)			$	(537,292)				$	(4,881)		$	(12,822)
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)


	Nine Months Ended September 30, 2023
















	Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Deficit		Accumulated other comprehensive loss		Total Stockholders’ (Deficit) Equity
	Shares	Amount				Shares	Amount
Balance at December 31, 2022	45,638,003	$	50	$	590,475	4,680,723	$	(29,847)	$	(590,898)	$	(5,253)	$	(35,473)

Stock awards net settlement	506,398	1		(6,832)		—	—		—		—		(6,831)
Proceeds from employee stock plans	104,008	—		2,170		—	—		—		—		2,170







Noncash share-based compensation	—	—		31,589		—	—		—		—		31,589

Other comprehensive loss	—	—		—		—	—		—		(174)		(174)
Net loss	—	—		—		—	—		(46,159)		—		(46,159)
Balance at September 30, 2023	46,248,409	$	51	$	617,402	4,680,723	$	(29,847)	$	(637,057)	$	(5,427)	$	(54,878)


	Nine Months Ended September 30, 2022
	Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Deficit		Accumulated other comprehensive loss		Total Stockholders’ (Deficit) Equity
	Shares	Amount				Shares	Amount
Balance at December 31, 2021	44,520,542	$	49	$	546,693	4,680,723	$	(29,847)	$	(508,652)	$	(4,659)	$	3,584
Stock awards net settlement	694,977	1		(213)		—	—		—		—		(212)
Proceeds from employee stock plans	106,586	—		2,722		—	—		—		—		2,722








Noncash share-based compensation	—	—		32,617		—	—		—		—		32,617
Other comprehensive loss	—	—		—		—	—		—		(1,494)		(1,494)
Net loss	—	—		—		—	—		(64,899)		—		(64,899)
Balance at September 30, 2022	45,322,105	$	50	$	581,819	4,680,723	$	(29,847)	$	(573,551)	$	(6,153)	$	(27,682)

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

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission ("SEC"). In management's opinion, the accompanying interim unaudited condensed consolidated financial statements include all adjustments necessary for a fair statement of the financial position of the Company as of ~~March 31,~~September 30, 2023, the results of operations for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022, cash flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, and stockholders' (deficit) equity for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022.

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, 2022 ("Annual Report") filed with the SEC. The unaudited condensed consolidated balance sheet as of December 31, 2022 was derived from the Company's audited consolidated financial statements but does not include all disclosures required under GAAP.

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 ~~$176.5~~$149.7 million and $168.1 million at ~~March 31,~~September 30, 2023 and December 31, 2022, 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. See Note 8 for the fair value measurement of convertible notes and related derivatives.

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 (expense)

income, net in the unaudited condensed consolidated statements of comprehensive loss. As of September 30, 2023 and December 31, 2022, the carrying value of the equity securities without readily determinable fair value was $7.2 million and $7.1 million, respectively. Equity investments are included in other assets, noncurrent in the accompanying unaudited condensed consolidated balance sheet. As of September 30, 2023 and December 31, 2022, the Company determined there were no impairments on its equity investments.

Trade and other receivables are primarily comprised of trade receivables, net of allowance for credit losses, 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 credit losses, 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

Sales commissions earned by the Company's sales representatives are considered incremental and recoverable costs of obtaining a customer contract. Sales commissions are deferred and amortized on a straight-line basis over the period of benefit, which the Company has determined to be five to eight years. The Company determined the period of benefit by taking into consideration its customer contracts, expected renewals of those customer contracts (as the Company currently does not pay an incremental sales commission for renewals), the Company's technology and other factors. The Company also defers amounts earned by employees other than sales representatives who earn incentive payments under compensation plans also tied to the value of customer contracts acquired. Deferred costs were ~~$14.4~~$14.1 million and $14.8 million as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively. Amortization expense for the deferred costs was $1.4 million and $1.5 ~~million~~ ~~and $1.4~~ million for the three months ended ~~March 31,~~ September 30, 2023 and 2022, respectively, and $4.4 million and $4.3 million for the nine months ended September 30, 2023 and 2022, 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 ~~$1.5~~$1.1 million and $1.6 million as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively. Amortization expense for the deferred implementation costs was ~~$0.2~~$0.2 million and ~~$0.3~~$0.3 million for the three months ended September 30, 2023 and 2022, respectively, and $0.6 million and $0.9 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, 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 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 nine months ended ~~March 31,~~September 30, 2023, the Company recorded zero impairment charge. During the three and nine months ended September 30, 2022, the Company recorded zero and $1.6 million, respectively, of impairment charge related to fixed assets. The 2022 impairment resulted from the Company's changed intentions for these assets in connection with a new agreement with a software vendor.

For the three months ended ~~March 31,~~September 30, 2023 and 2022, the Company recognized approximately ~~$49.4~~$52.5 million and ~~$44.3~~$46.0 million, respectively, and for the nine months ended September 30, 2023 and 2022, the Company recognized approximately $100.7 million and $86.4 million, respectively, of revenue that was included in the deferred revenue balances at the beginning of the respective periods and primarily related to subscription, maintenance and support, and services.

As of ~~March 31,~~September 30, 2023, the Company expects to recognize approximately ~~$430.6~~$403.9 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 ~~$210.0~~$199.0 million of these performance obligations over the next 12 months, with the balance recognized thereafter. Remaining performance obligations represent contractually committed revenue that has not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue in future periods.

The geographic information in the table below is presented for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022. 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 March 31,				Three Months Ended September 30,											Nine Months Ended September 30,
			2023	2022					2023						2022				2023				2022
(in thousands)	(in thousands)			Revenue			Percent			Revenue		Percent		(in thousands)	Revenue		Percent		Revenue		Percent		Revenue		Percent		Revenue		Percent
United States of America	United States of America			$	26,232		36	%		$	23,194	35	%	United States of America	$	26,925	35	%	$	24,952	35	%	$	80,381	36	%	$	72,054	35	%
Europe	Europe			22,949			31	%		20,823		31	%	Europe	25,691		33	%	20,816		30	%	73,388		32	%	62,504		31	%
The rest of the world	The rest of the world			24,001			33	%		22,475		34	%	The rest of the world	24,634		32	%	24,580		35	%	72,455		32	%	70,644		34	%
Total revenue	Total revenue			$	73,182		100	%		$	66,492	100	%	Total revenue	$	77,250	100	%	$	70,348	100	%	$	226,224	100	%	$	205,202	100	%


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2023			2022			2023		2022		2023		2022
Cash paid for operating lease liabilities	Cash paid for operating lease liabilities		$	2,251		$	1,842	Cash paid for operating lease liabilities	$	1,859	$	2,175	$	5,767	$	6,370
Right-of-use asset obtained in exchange for operating lease liability	Right-of-use asset obtained in exchange for operating lease liability		$	—		$	—	Right-of-use asset obtained in exchange for operating lease liability	$	86	$	—	$	365	$	243


Year Ending December 31,	Year Ending December 31,	Amount		Year Ending December 31,	Amount
Remaining 2023	Remaining 2023	$	6,649	Remaining 2023	$	2,410
2024	2024	4,869		2024	5,029
2025	2025	4,057		2025	4,080
2026	2026	4,039		2026	4,055
2027	2027	3,965		2027	3,965
2028	2028	4,029		2028	4,029
Thereafter	Thereafter	19,223		Thereafter	19,223
Total operating lease payments	Total operating lease payments	46,831		Total operating lease payments	42,791
Less: Imputed interest	Less: Imputed interest	(14,235)		Less: Imputed interest	(12,999)

Total operating lease liabilities	Total operating lease liabilities	$	32,596	Total operating lease liabilities	$	29,792


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)		2023			2022		(in thousands, except per share data)	2023		2022		2023		2022
Numerator:	Numerator:							Numerator:
Net loss	Net loss		$	(19,002)		$	(28,640)	Net loss	$	(13,868)	$	(13,853)	$	(46,159)	$	(64,899)
Denominator:	Denominator:							Denominator:
Weighted average shares (basic)	Weighted average shares (basic)		45,926			45,085		Weighted average shares (basic)	46,225		45,314		46,084		45,207
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)		45,926			45,085		Weighted average shares (diluted)	46,225		45,314		46,084		45,207
Basic loss per share	Basic loss per share		$	(0.41)		$	(0.64)	Basic loss per share	$	(0.30)	$	(0.31)	$	(1.00)	$	(1.44)
Diluted loss per share	Diluted loss per share		$	(0.41)		$	(0.64)	Diluted loss per share	$	(0.30)	$	(0.31)	$	(1.00)	$	(1.44)

Dilutive potential common shares consist of shares issuable upon 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~~1.4 million and ~~2.2~~2.3 million, for the three months ended September 30, 2023 and 2022, respectively, and 1.9 million and 2.4 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, 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 ~~both~~ the three and nine months ended ~~March 31,~~September 30, 2023 and 2022.

The Company's 2017 Equity Incentive Plan (as amended and restated, the "2017 Stock Plan") has an aggregate authorized limit of 7,650,000 shares for issuance. In May 2023, the Company's stockholders approved an amendment to the 2017 Stock Plan increasing the aggregate amount of shares available for issuance to 10,550,000. As of ~~March 31,~~September 30, 2023, ~~1,344,949~~4,281,409 shares remain available for issuance under the 2017 Stock Plan.


Award type	Award type	March 31, 2023	December 31, 2022	Award type	September 30, 2023	December 31, 2022

Restricted stock units (time-based)	Restricted stock units (time-based)	3,209	2,235	Restricted stock units (time-based)	2,986	2,235

Market stock units	Market stock units	358	216	Market stock units	358	216
EveryMundo equity consideration	EveryMundo equity consideration	137	137	EveryMundo equity consideration	137	137

During the nine months ended September 30, 2023, the Company granted 1,633,253 RSUs (time-based) with a weighted average grant-date fair value of $25.71 per share. The Company also granted 142,386 MSUs with a weighted average grant-date fair value of $30.42 to certain executive employees during the ~~three~~nine months ended ~~March 31,~~September 30, 2023. These MSUs vest on January 31, 2026 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 March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2023			2022			2023		2022		2023		2022
Share-based compensation:	Share-based compensation:							Share-based compensation:
Cost of revenue	Cost of revenue		$	832		$	825	Cost of revenue	$	1,033	$	1,050	$	2,850	$	2,881
Operating expenses:	Operating expenses:							Operating expenses:
Selling and marketing	Selling and marketing		2,928			3,240		Selling and marketing	2,992		2,897		9,023		9,413
Research and development	Research and development		2,350			3,713		Research and development	2,817		2,995		7,840		9,607
General and administrative	General and administrative		3,794			3,447		General and administrative	4,091		3,684		11,876		10,716
Total included in operating expenses	Total included in operating expenses		9,072			10,400		Total included in operating expenses	9,900		9,576		28,739		29,736
Total share-based compensation expense	Total share-based compensation expense		$	9,904		$	11,225	Total share-based compensation expense	$	10,933	$	10,626	$	31,589	$	32,617

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 nine months ended ~~March 31,~~September 30, 2023, the Company issued ~~55,149~~48,859 and 104,008 shares under the ~~ESPP.~~ESPP, respectively. As of ~~March 31,~~September 30, 2023, ~~331,976~~283,117 shares remain authorized and available for issuance under the ESPP. As of ~~March 31,~~September 30, 2023, the Company held approximately~~$0.7~~ $0.6 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					Contractual Interest Rates
						Current				Noncurrent

1% Convertible Notes due in 2024 ("2024 Notes")	1% Convertible Notes due in 2024 ("2024 Notes")		May 2019			$	143,750			$	—			$	142,779				1%	1% Convertible Notes due in 2024 ("2024 Notes")			May 2019	$	21,713			1%
1% Convertible Notes due in 2024 ("2024 Notes") - subject to the exchange agreements																	1% Convertible Notes due in 2024 ("2024 Notes") - subject to the exchange agreements	May 2019			122,037						1%
2.25% Convertible Notes due in 2027 ("2027 Notes")	2.25% Convertible Notes due in 2027 ("2027 Notes")	September 2020		$	150,000			$	—			$	147,373			2.25%	2.25% Convertible Notes due in 2027 ("2027 Notes")	September 2020			150,000						2.25%
Total Notes																	Total Notes				$	293,750

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).

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.At March 31, 2023, the Company had $192.4 million of cash and cash equivalents. The Company believes its existing cash and cash equivalents will provide adequate liquidity and capital resources to meet its operational requirements, anticipated capital expenditures and coupon interest payments for the Notes for the next twelve months. Capital markets have tightened recently in response to the macroeconomic environment making new financing more difficult and/or expensive and the Company may not be able to obtain such financing on terms acceptable to it or at all.

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 August 23, 2023, the Company entered into legally binding exchange agreements with a limited number of existing holders of the 2024 Notes to exchange approximately $122.0 million aggregate principal amount of the existing 2024 Notes for a principal amount of 2027 Notes at an exchange ratio to be determined based on the daily volume-weighted average trading price of the Company’s common stock over a thirty-day trading period beginning August 24, 2023 (such exchange transactions, the “Exchange”). The Exchange will reduce near-term cash required to settle debt obligations.

Although the Exchange was not completed as of September 30, 2023, the Company determined that, from an accounting perspective, the Exchange was a legally binding restructuring of the debt that represented a substantial modification of the terms of the 2024 Notes subject to the Exchange, and therefore is required to be accounted for as an extinguishment transaction. The Company derecognized the portion of the carrying value of the 2024 Notes to be exchanged and recorded the new debt resulting from the substantial modification of terms at fair value as of August 23, 2023, which was approximately $123.3 million, and recorded a $1.8 million loss on debt extinguishment during the quarter ended September 30, 2023. The loss on debt extinguishment is included in other (expense) income, net in the unaudited condensed consolidated statements of comprehensive loss. The Company incurred debt issuance cost of $2.3 million related to the Exchange which is recorded in convertible debt, net and was not paid as of September 30, 2023.

The Company concluded that the variability in the principal amount of the 2027 Notes to be issued in connection with the Exchange due to changes in stock price is a feature embedded in the restructured debt that is required to be accounted for as an embedded derivative and remeasured to fair value until settlement. This feature is recorded in convertible debt, net, with an initial value at the time of the transaction equal to zero, and subsequently remeasured as of September 30, 2023 with a fair value of $3.8 million. During the three months ended September 30, 2023, the Company recorded a derivative loss of $3.8 millionwhich is included in other (expense) income, net in the unaudited condensed consolidated statements of comprehensive loss. 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, interest rates and the value of the 2027 Notes, which represent level 2 in the fair value hierarchy.

As of ~~March 31,~~September 30, 2023 and December 31, 2022, the fair value of the principal amount of the Notes in the aggregate was $~~277.3~~296.3 million and $263.7 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.


		March 31, 2023		December 31, 2022			September 30, 2023		December 31, 2022

Principal	Principal	$	293,750	$	293,750	Principal	$	293,750	$	293,750
Less: debt issuance cost, net of amortization		(3,598)		(3,971)
Debt premium, embedded derivative and debt issuance cost, net of amortization						Debt premium, embedded derivative and debt issuance cost, net of amortization	427		(3,971)
Net carrying amount	Net carrying amount	$	290,152	$	289,779	Net carrying amount	$	294,177	$	289,779

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 August 2023, in connection with the Exchange, the Company entered into additional capped call transactions (the “Additional Capped Call”) with certain option counterparties. The Company will pay a premium to the option counterparties for the Additional Capped Call in an amount to be determined based on the volume-weighted average trading price of the Company’s common stock over a thirty-day reference period beginning August 24, 2023. The conversion price of the Additional Capped Call is the same as the 2027 Notes Capped Call above. Initial funding of the Additional Capped Call occurred in the quarter ended September 30, 2023. The Additional Capped Call has a deferred premium component indexed to the Company's stock price and required to be settled in cash, and therefore, the Additional Capped Call is a derivative instrument that, at inception, does not meet the qualifications for equity classification. As such, the Company recorded the initial value of the Additional Capped Call of $22.8 million as a derivative asset, noncurrent. As of September 30, 2023, the fair

value of the Additional Capped Call derivative asset was remeasured at $22.3 million and the Company recorded a derivative loss of $0.5 million for the three months ended September 30, 2023, which is included in other (expense) income, net in the unaudited condensed consolidated statements of comprehensive loss. The estimated fair value was determined based on valuation methods using 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, and other unobservable inputs such as volatility which represent level 3 in the fair value hierarchy. The Company expects the Additional Capped Call to be reclassified to equity when the deferred premium is settled, and the instrument meets the requirements for equity classification. The final value of the Additional Capped Call upon settlement of the Exchange was $22.2 million, see Note 13 for additional details on the subsequent event.

On July 21, 2023, the Company, through its wholly owned subsidiary PROS, Inc., entered into a three-year secured credit agreement ("Credit Agreement") with the lenders from time to time party thereto and Texas Capital Bank as administrative agent for the lenders party thereto. The Credit Agreement provides for a revolving line of credit of up to $50.0 million, with interest paid monthly, at a rate per annum equal to the 30-day secured overnight financing rate ("SOFR") plus a 0.10% per annum SOFR adjustment plus an applicable margin of 4.25%. Borrowings under the Credit Agreement are collateralized by a first priority interest in and lien on all of the Company's material assets.

The Credit Agreement contains affirmative and negative covenants, including covenants which restrict the ability of the Company to, among other things, create liens, incur additional indebtedness and engage in certain other transactions, in each case subject to certain exclusions. In addition, the Credit Agreement contains certain financial covenants which become effective in the event the Company's liquidity (as defined in the Credit Agreement) falls below a certain level. The Credit Agreement also has a depository condition which requires the Company to maintain a cash balance of at least $10.0 million with the administrative agent throughout the term of the Credit Agreement. This amount has been included in restricted cash in the unaudited condensed consolidated balance sheets. As of September 30, 2023, the Company was in compliance with all financial covenants and the depository condition in the Credit Agreement.

As of September 30, 2023, $0.8 million of unamortized debt issuance cost related to the Credit Agreement is included in prepaid and other current assets and other assets, noncurrent in the unaudited condensed consolidated balance sheets. For the three and nine months ended September 30, 2023, the Company 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 loss. As of September 30, 2023, the Company had no outstanding borrowings under the Credit Agreement.

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.

In the ordinary course of business, the Company enters into various purchase commitments for goods and services, mainly related to infrastructure platforms, business technology software and support, and other services. In January 2023, the Company entered into a noncancelable agreement for software support services with a four-year term. The remaining purchase commitment as of ~~March 31,~~September 30, 2023 was $3.5 million and the agreement expires in March 2027. There were no other material changes outside the ordinary course of business to the noncancellable purchase commitments disclosed in the Annual Report.

In the first quarter ~~ended March 31,~~of 2023, the Company made ~~additional~~certain organizational changes and incurred approximately zero and $3.6 million of severance, employee benefits, outplacement and related costs during the ~~period.~~ three and nine months ended September 30, 2023, respectively. These costs were recorded primarily as operating expenses in the unaudited condensed consolidated statements of comprehensive loss, mainly research and development, and sales and marketing. During the ~~quarter~~three and nine months ended ~~March 31,~~September 30, 2023, cash payments of $~~3.2~~0.1 million and $3.9 million, respectively, were recorded for

On October 10, 2023, the Company settled the exchange agreements for the exchange of $122.0 million aggregate principal amount of its outstanding 2024 Notes for newly issued $116.8 million aggregate principal amount of its outstanding 2027 Notes. Following the settlement of the Exchange, $21.7 million in aggregate principal amount of the 2024 Notes and $266.8 million in aggregate principal amount of the 2027 Notes remain outstanding with terms unchanged. The 2027 Notes issued in the Exchange constitute a further issuance of, and form a single series and will be fungible with, the existing 2027 Notes. As part of the Exchange, the Company settled the deferred premium on the Additional Capped Call resulting in a total final value of $22.2 million.

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 ~~first~~third quarter of 2023, we continued to grow our subscription revenue,~~. For the three months ended March 31, 2023,~~ ~~our~~ increasing subscription revenue ~~increased~~by 16% and 15% ~~and total revenue increased 10%~~ for the three and nine months ended ~~March 31,~~September 30, 2023, respectively, as compared to the same periods in 2022. Total revenue increased 10% for both the three and nine months ended September 30, 2023 each as compared to the same period in 2022. ~~Recurring~~

For the three and nine months ended September 30, 2023, recurring revenue (which consists of subscription revenue and maintenance and support revenue) ~~as a percentage~~accounted for 84% and 83% of total revenue, respectively. Recurring revenue accounted for 84% ~~and 85%~~ of total revenue for both the three and nine months ended ~~March 31, 2023 and 2022, respectively.~~September 30, 2022. Our gross revenue retention rates remained above 93%during the ~~trailing~~ twelve months ended ~~March 31,~~September 30, 2023.

Cash used in operating activities was ~~$6.1~~$4.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 as compared to ~~$11.0~~$21.9 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. The improvement was primarily ~~attributable~~due to ~~increased~~increases in sales, the related cash collections, ~~during the period~~interest income and a ~~lower annual incentive payment~~reduction in ~~2023 as compared to prior year.~~cash operating expenses.

Free cash flow is a key metric to assess the strength of our business. We define free cash flow, a non-GAAP financial measure, as net cash provided by (used in) operating activities, excluding severance payments, less capital expenditures, 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 ~~March 31,~~September 30, 2023 was ~~$4.5~~$8.5 million, compared to ~~$11.5~~a free cash flow use of $9.1 million for the three months ended ~~March 31,~~September 30, 2022, an improvement of $17.6 million.Free cash flow used during the ninemonths ended September 30, 2023 was $2.3 million, compared to $22.8 million for the nine months ended September 30, 2022. The improvement in both periods was primarily ~~attributable~~due to ~~increased~~increases in sales, the related cash collections, ~~during the period~~interest income and a ~~lower annual incentive payment~~reduction in ~~2023 as compared to prior year.~~ cash operating expenses.


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2023			2022			2023		2022		2023		2022
Net cash used in operating activities			$	(6,143)		$	(11,014)
Net cash provided by (used in) operating activities								Net cash provided by (used in) operating activities	$	8,718	$	(8,991)	$	(3,967)	$	(21,936)
Severance	Severance		3,170			—		Severance	121		—		3,870		—
Purchase of property and equipment	Purchase of property and equipment		(1,546)			(461)		Purchase of property and equipment	(345)		(76)		(2,168)		(845)

Free Cash Flow	Free Cash Flow		$	(4,519)		$	(11,475)	Free Cash Flow	$	8,494	$	(9,067)	$	(2,265)	$	(22,781)

•Macroeconomic Environment. ~~We believe the combination of increased~~The industries and companies we serve are navigating a complex macroeconomic environment impacted by inflation, ~~rising~~higher interest rates, volatile capital and financial markets, supply chain disruptions, tight labor markets, pricing volatility, geopolitical conflicts, including the Russia-Ukraine ~~conflict,~~and Middle East conflicts, and other local and regional macroeconomic conditions. Uncertain macroeconomic and industry conditions ~~increases corporate focus on profitable growth. Des~~p~~ite~~in countries and regions in which we operate create a continued challenging selling environment for large enterprise technology deployments. In this ~~challenging~~ environment, we remain confident in our ability to help optimize shopping and selling

experiences for our customers. For example, pricing volatility and inflation are catalysts for demand for our price optimization and management solutions. Partly, as a result, we grew both subscription revenue and ~~optimization solutions. Uncertain macroeconomic and industry conditions~~total revenue by double digits in ~~countries and regions in which we operate create a challenging selling environment for large enterprise technology deployment and we~~the first nine months of 2023. We believe in the near term ~~will lead~~that new customers ~~to increasingly~~will emphasize smaller scope initial ~~purchases with faster implementations.~~purchase, fast implementations, and return on their investment. We believe this emphasis will require solid execution by our teams to capitalize on these demand drivers. While our recurring revenue and earnings are relatively predictable as a result of our subscription-based business model, the broader implications of ~~these~~the macroeconomic ~~events~~environment on our business, results of operations, cash flows and overall financial position, ~~particularly in the long term,~~ remain uncertain. ~~Under this model,~~For example, our lower subscription bookings during the pandemic ~~has~~ adversely impacted our subscription revenue growth rates in subsequent periods due to the timing lag between subscription

•Profitable Growth as a Priority. We ~~believe our market opportunity is large and underpenetrated and intend~~continue to ~~continue~~focus on profitability by investing in ~~our business~~a disciplined manner to ~~create awareness for our solutions, acquire new customers, and expand within our existing customer base globally, while focusing on cash flow and profitability. We intend to continue investing for~~drive revenue growth and ~~also seek opportunities to mitigate the growth in~~support our ~~costs and reduce our existing cost structure. We also plan to continue investing in product development to enhance our existing technologies, including~~long-term initiatives. This includes initiatives to accelerate customer time-to-value, improve efficiency, provide out-of-the-box integration with third-party commerce solutions and develop new applications and technologies. We expect our product development, sales and marketing, and general and administrative expenses as a percentage of total revenues will decrease over the longer term as we grow our revenues and focus on profitability.

•Travel Industry Recovering. Despite operational headwinds and regional variances in the timing of travel restrictions being lifted, the travel industry, particularly the airline industry, continues to recover from the unprecedented disruption caused by the pandemic. While global capacity has not fully returned to pre-pandemic levels, demand for air travel continues to ~~increase as restrictions have been lifted. Travel in North America~~show strong year over year growth. Domestic U.S. travel has led this recovery, with ~~Asia Pacific lagging, particularly as China has only recently lifted~~ international travel ~~restrictions. The~~recovery staggered due to differences in timing of lifting of travel restrictions and other regional challenges. International Air Transport Association ~~is forecasting~~forecasts airline industry profitability in 2023 with certain U.S.-based airlines ~~already~~ publicly reporting profitable ~~quarters. Still,~~quarters this year. However, the rate of airline industry recovery and profitability could be impacted negatively if inflation further impacts consumer disposable income or ~~limits~~if business ~~travel. Despite geographic variation,~~travel does not recover to pre-pandemic levels. While we expect ~~airlines~~the travel industry to increasingly prioritize technology investments as travel returns to ~~pre-COVID levels.~~pre-pandemic levels, most of our airline customers are based outside the U.S. and there is significant geographic and individual airline variation in pace of recovery and capacity for technology projects.

•Digital Purchasing Driving Technology Adoption. We believe the long-term trends toward digital purchasing by both consumers and corporate buyers ~~will increasingly drive~~drives demand for technology that provides fast, frictionless and personalized buying experiences across direct sales, partner, online, mobile and emerging channels. Buyers often prefer not to interact with sales representatives as their primary source of research, and ~~increasingly prefer~~ to buy online when they have already decided what to buy. For example, in the airline industry, the pandemic accelerated a long-term trend towards direct booking channels, and we anticipate airlines continuing to invest in technology, including mobile device-enabled solutions, to enhance their ability to capture a greater percentage of bookings through their own channels such as their websites. We believe companies must adopt technologies which power these types of experiences across sales channels as they modernize their sales process to compete in digital commerce. ~~Increasingly,~~

•Artificial Intelligence Becoming Mainstream. Recent mainstream interest in generative AI and associated media attention on AI are driving increased focus and conversations by companies around business applications leveraging AI. For example, companies are looking to AI to ~~deliver~~quickly extract actionable insights from their data, improve and customize their offerings, and drive process and operating efficiencies. Our AI-powered solutions enable buyers to move fluidly and with personalized experiences across our customers’ sales channels, and our digital offer marketing solutions help our customers drive their buyers directly into their direct selling channels. The pace of change across industries helps fuel demand for our configure price quote solutions as businesses look to use AI to replace manual selling processes. Our solutions have utilized AI for years, and our legacy of AI development continues to influence our category-leading solutions. For example, our platform is now powered by our 4th generation AI, using a deep neural network that leverages all available data and attributes to improve prediction accuracy. In addition, we are utilizing, and will continue to look for ways to incorporate, AI in our business across a variety of operations to drive efficiencies, gain valuable insights and increase productivity.

•Cloud Migrations. We continue to encourage our customers to migrate to our current cloud solutions as we discontinue support for certain of our on-premises solutions. As weour on-premises customers continue to migrate ~~our on-premises customers~~ from our legacy ~~licensed~~ solutions to our current cloud solutions, we expect our future maintenance and support revenue towill continue to decline and our subscription revenue to increase. ~~We continue to encourage our customers to migrate to our cloud solutions as we have announced end of support dates for certain of our on-premises solutions.~~


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2023			2022			2023		2022		2023		2022
Revenue:	Revenue:							Revenue:
Subscription	Subscription		76	%		73	%	Subscription	78	%	74	%	77	%	74	%
Maintenance and support	Maintenance and support		8			12		Maintenance and support	6		10		7		11
Total subscription, maintenance and support	Total subscription, maintenance and support		84			85		Total subscription, maintenance and support	84		84		83		84

Services	Services		16			15		Services	16		16		17		16
Total revenue	Total revenue		100			100		Total revenue	100		100		100		100
Cost of revenue:	Cost of revenue:							Cost of revenue:
Subscription	Subscription		19			21		Subscription	19		20		19		20
Maintenance and support	Maintenance and support		3			3		Maintenance and support	2		3		3		3
Total cost of subscription, maintenance and support	Total cost of subscription, maintenance and support		22			24		Total cost of subscription, maintenance and support	21		22		21		23

Services	Services		18			17		Services	16		17		17		17
Total cost of revenue	Total cost of revenue		40			41		Total cost of revenue	37		39		38		40
Gross profit	Gross profit		60			59		Gross profit	63		61		62		60
Operating Expenses:	Operating Expenses:							Operating Expenses:
Selling and marketing	Selling and marketing		36			38		Selling and marketing	26		32		31		35
Research and development	Research and development		30			37		Research and development	29		33		29		35
General and administrative	General and administrative		19			22		General and administrative	18		19		19		20

Impairment of fixed assets	Impairment of fixed assets		—			2		Impairment of fixed assets	—		—		—		1
Total operating expenses	Total operating expenses		85			99		Total operating expenses	73		84		79		91
Convertible debt interest and amortization	Convertible debt interest and amortization		(2)			(2)		Convertible debt interest and amortization	(2)		(2)		(2)		(2)
Other income (expense), net			2			(1)
Other (expense) income, net								Other (expense) income, net	(6)		6		—		2
Loss before income tax provision	Loss before income tax provision		(26)			(43)		Loss before income tax provision	(18)		(19)		(20)		(31)
Income tax provision	Income tax provision		—			—		Income tax provision	—		—		—		—
Net loss	Net loss		(26)	%		(43)	%	Net loss	(18)	%	(20)	%	(20)	%	(32)	%

Revenue:


		Three Months Ended March 31,	Variance				Three Months Ended September 30,						Variance				Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)		2023		2022			$		%		(Dollars in thousands)	2023		2022		$		%		2023		2022		$		%
Subscription	Subscription		$	55,969	$	48,765		$	7,204	15	%	Subscription	$	59,987	$	51,763	$	8,224	16	%	$	173,260	$	150,914	$	22,346	15	%
Maintenance and support	Maintenance and support		5,712		7,855			(2,143)		(27)	%	Maintenance and support	4,693		7,071		(2,378)		(34)	%	15,498		22,175		(6,677)		(30)	%
Total subscription, maintenance and support	Total subscription, maintenance and support		61,681		56,620			5,061		9	%	Total subscription, maintenance and support	64,680		58,834		5,846		10	%	188,758		173,089		15,669		9	%
Services	Services		11,501		9,872			1,629		17	%	Services	12,570		11,514		1,056		9	%	37,466		32,113		5,353		17	%
Total revenue	Total revenue		$	73,182	$	66,492		$	6,690	10	%	Total revenue	$	77,250	$	70,348	$	6,902	10	%	$	226,224	$	205,202	$	21,022	10	%

Cost of revenue and gross profit:


		Three Months Ended March 31,	Variance				Three Months Ended September 30,						Variance				Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)		2023		2022			$		%		(Dollars in thousands)	2023		2022		$		%		2023		2022		$		%
Cost of subscription	Cost of subscription		$	14,093	$	13,779		$	314	2	%	Cost of subscription	$	14,510	$	13,829	$	681	5	%	$	42,662	$	41,354	$	1,308	3	%
Cost of maintenance and support	Cost of maintenance and support		2,282		2,167			115		5	%	Cost of maintenance and support	1,769		1,952		(183)		(9)	%	5,927		6,107		(180)		(3)	%
Total cost of subscription, maintenance and support	Total cost of subscription, maintenance and support		16,375		15,946			429		3	%	Total cost of subscription, maintenance and support	16,279		15,781		498		3	%	48,589		47,461		1,128		2	%

Cost of services	Cost of services		13,167		11,415			1,752		15	%	Cost of services	12,185		11,829		356		3	%	37,988		35,151		2,837		8	%
Total cost of revenue	Total cost of revenue		29,542		27,361			2,181		8	%	Total cost of revenue	28,464		27,610		854		3	%	86,577		82,612		3,965		5	%
Gross profit	Gross profit		$	43,640	$	39,131		$	4,509	12	%	Gross profit	$	48,786	$	42,738	$	6,048	14	%	$	139,647	$	122,590	$	17,057	14	%

Cost of ~~subscription~~subscription.. Cost of subscription increased ~~slightly~~ primarily due to ~~increased~~higher infrastructure cost to support the growth in our current subscription customer base and higher employee-related costs mainly due to an increase in headcount. ~~The increase was~~These increases were partially offset by a decrease in amortization expense for intangible assets for the three and nine months ended September 30, 2023, and internal-use ~~software.~~software expense for the nine months ended September 30, 2023. Our subscription gross profit percentages were ~~75%~~76% and ~~72%~~73% for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively, and 75% and 73% for the nine months ended September 30, 2023 and 2022, respectively.

Cost of maintenance and support. Cost of maintenance and support ~~remained relatively unchanged.~~decreased due to lower personnel costs as our maintenance customer base declined primarily with migrations to our subscription solutions. Maintenance and support gross profit percentages were ~~60%~~62% for both the three and nine months ended September 30, 2023, and 72% for both the three and nine months ended ~~March 31, 2023 and 2022, respectively. The decrease in gross~~September 30, 2022. Gross profit percentages ~~was~~decreased in 2023 as compared to prior year primarily due to lower maintenance and support revenue ~~as we continue to migrate customers to our subscription solutions~~ and the cost of maintenance and support being relatively fixed.

Cost of services. Cost of services increased primarily due to higher personnel costs to support the increase in our services revenue during the period. Services gross profit percentages were ~~(14)%~~3% and ~~(16)~~(3)% for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively, and (1)% and (9)% for the nine months ended September 30, 2023 and 2022, respectively. Services gross profit percentages improved in 2023 compared to 2022 primarily due to an increase in services revenue and a lesser increase in cost of services due to greater efficiencies. Services gross profit percentages vary period to period depending on different factors, including the level of professional services required to implement our solutions, the utilization of our employees and our effective man-day rates.

Operating expenses:


		Three Months Ended March 31,	Variance				Three Months Ended September 30,						Variance				Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)		2023		2022			$		%		(Dollars in thousands)	2023		2022		$		%		2023		2022		$		%
Selling and marketing	Selling and marketing		$	26,010	$	25,287		$	723	3	%	Selling and marketing	$	20,324	$	22,221	$	(1,897)	(9)	%	$	71,214	$	71,528	$	(314)	—	%
Research and development	Research and development		22,291		24,467			(2,176)		(9)	%	Research and development	22,205		23,303		(1,098)		(5)	%	66,343		71,171		(4,828)		(7)	%
General and administrative	General and administrative		14,135		14,329			(194)		(1)	%	General and administrative	14,099		13,395		704		5	%	42,083		41,561		522		1	%

Impairment of fixed assets	Impairment of fixed assets		—		1,551			(1,551)		(100)	%	Impairment of fixed assets	—		—		—		—	%	—		1,551		(1,551)		(100)	%
Total operating expenses	Total operating expenses		$	62,436	$	65,634		$	(3,198)	(5)	%	Total operating expenses	$	56,628	$	58,919	$	(2,291)	(4)	%	$	179,640	$	185,811	$	(6,171)	(3)	%

Selling and marketing expenses. During the three months ended ~~March 31,~~September 30, 2023, selling and marketing expenses ~~increased~~decreased primarily due to ~~an increase~~a decrease in events and initiatives for sales and marketing, ~~initiatives~~employee-related costs and ~~travel expenses. The increase was partially offset by~~intangible asset amortization expense.During the nine months ended September 30, 2023, selling and marketing expenses slightly decreased primarily due to a decrease in employee-related costs mainly due to prior organizational ~~changes.~~changes and intangible asset amortization expense. The decrease was partially offset by an increase in events and initiatives for sales and marketing, and travel expenses.

Research and development expenses. ~~Research~~During the three and nine months ended September 30, 2023, research and development expenses decreased primarily due to prior organizational changes and a decreased use of contracted resources. During the nine months ended September 30, 2023, the decrease in research and development expenses also included lowernoncash share-based compensatio~~n and contractors expense.~~n. The noncash share-based compensation was higher in prior year mainly due to the acceleration of equity awards related to the retirement of a senior officer in the first quarter of 2022.

General and administrative expenses. ~~General~~During the three months ended September 30, 2023, general and administrative expenses ~~remained relatively consistent with prior year.~~increased primarily due to employee-related expenses, including share-based compensation and higher professional fees. During the nine months ended September 30, 2023, general and administrative expenses grew modestly, primarily due to increases in professional fees and consulting services.

Non-operating expenses:


		Three Months Ended March 31,	Variance				Three Months Ended September 30,						Variance				Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)		2023		2022			$		%		(Dollars in thousands)	2023		2022		$		%		2023		2022		$		%
Convertible debt interest and amortization	Convertible debt interest and amortization		$	(1,576)	$	(1,576)		$	—	—	%	Convertible debt interest and amortization	$	(1,497)	$	(1,576)	$	79	(5)	%	$	(4,649)	$	(4,728)	$	79	(2)	%
Other income (expense), net			$	1,451	$	(418)		$	1,869	(447)	%
Other (expense) income, net												Other (expense) income, net	$	(4,288)	$	4,158	$	(8,446)	(203)	%	$	(1,046)	$	3,738	$	(4,784)	(128)	%

Other (expense) income, ~~(expense),~~ net. The change in other (expense) income, ~~(expense),~~ net for the three and nine months ended ~~March 31,~~September 30, 2023 was primarily related to a $4.3 million derivative loss and a $1.8 million loss on debt extinguishment related to the convertible notes exchange. These items were partially offset by higher interest income ~~and~~resulting from an increase in interest rates in 2023 as compared to prior year. In addition, we realized a ~~smaller extent due to~~$3.3 million gain on equity investment recognized in the ~~impact of foreign currency fluctuations.~~quarter ended September 30, 2022.

Income tax provision:


		Three Months Ended March 31,	Variance						Three Months Ended September 30,						Variance						Nine Months Ended September 30,				Variance
(Dollars in thousands)	(Dollars in thousands)		2023			2022				$		%		(Dollars in thousands)	2023			2022			$		%		2023			2022			$		%
Effective tax rate	Effective tax rate		(0.4)		%	(0.5)		%		n/a		n/a		Effective tax rate	(1.8)		%	(1.9)		%	n/a		n/a		(1.0)		%	(1.1)		%	n/a		n/a
Income tax provision	Income tax provision		$	81		$	143			$	(62)	(43)	%	Income tax provision	$	241		$	254		$	(13)	(5)	%	$	471		$	688		$	(217)	(32)	%

Our effective tax rate was ~~(0.4)~~(1.8)% and ~~(0.5)~~(1.9)% for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively, and (1.0)% and (1.1)% for the nine months ended September 30, 2023 and 2022, 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 iswas due to foreign income and withholding taxes.

Our principal sources of liquidity are our cash and cash ~~equivalents.~~ equivalents, cash flows generated from operations and potential borrowings under our Credit Agreement. In addition, we could access capital markets to supplement our liquidity position. Our material drivers or variants of operating cash flow are net income (loss)~~, noncash expenses (principally share-based compensation, intangible amortization and amortization of debt issuance costs)~~ and the timing of invoicing and cash collections from our ~~customers. O~~urcustomers. Our operating cash flows are also impacted by the timing of payments to our vendors and the payments of other liabilities.

We believe our existing cash and cash equivalents, including current estimates of future operating cash flows and funds available under our Credit Agreement, will provide adequate liquidity and capital resources to meet our operational requirements, anticipated capital expenditures, ~~and~~ coupon interest and principal payments for our remaining 2024 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.~~us. During the ~~first quarter~~nine months of 2023, the financial markets experienced some disruption due to certain regional bank failures. We have not experienced any material impact from ~~the~~this disruption but will continue to monitor the situation and take action accordingly.


		Three Months Ended March 31,					Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2023		2022		(Dollars in thousands)	2023		2022
Net cash used in operating activities	Net cash used in operating activities	$	(6,143)	$	(11,014)	Net cash used in operating activities	$	(3,967)	$	(21,936)
Net cash used in investing activities	Net cash used in investing activities	(1,546)		(461)		Net cash used in investing activities	(2,281)		(1,014)
Net cash (used in) provided by financing activities	Net cash (used in) provided by financing activities	(3,573)		1,231		Net cash (used in) provided by financing activities	(28,269)		2,510
Cash and cash equivalents (beginning of period)		203,627		227,553
Cash and cash equivalents (end of period)		$	192,376	$	217,393
Effect of foreign currency rates on cash						Effect of foreign currency rates on cash	(30)		(289)
Net change in cash, cash equivalents and restricted cash						Net change in cash, cash equivalents and restricted cash	$	(34,547)	$	(20,729)

There were no outstanding borrowings under the Credit Agreement as of September 30, 2023. Our Credit Agreement contains affirmative and negative covenants, including covenants which restrict our ability to, among other things, create liens, incur additional indebtedness and engage in certain other transactions, in each case subject to certain exclusions. In addition, our Credit Agreement contains certain financial covenants which become effective in the event our liquidity (as defined in the Credit Agreement) falls below a certain level. See Note 9 for details on the Credit Agreement.

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 credit losses, operating lease right-of-use assets and operating lease liabilities, useful lives of assets, depreciation, income taxes and deferred tax asset valuation, valuation of stock awards, other current liabilities and accrued liabilities. Numerous internal and external factors can affect estimates. Our critical accounting policies related to the estimates and judgments are discussed in our Annual Report under management's discussion and analysis of financial condition and results of operations.

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 ~~March 31,~~September 30, 2023 would result in a loss of approximately ~~$0.9~~$0.8 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 nine months ended ~~March 31,~~September 30, 2023 by approximately ~~$1.1 million.~~$1.3 million and $3.6 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.

As of September 30, 2023, 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~~However, the fair values of the Notes are exposed to interest rate risk. Generally, the fair value of ~~the~~our fixed interest rate Notes ~~may change when the market price of our stock fluctuates.~~will increase as interest rates fall and decrease as interest rates rise.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of ~~March 31,~~September 30, 2023. Based on our evaluation of our disclosure controls and procedures as of ~~March 31,~~September 30, 2023, 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.

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, 2023, $150.0 million of aggregate principal amount of the 2027 Notes were outstanding. Following the completion of the Exchange on October 10, 2023, $266.8 million of aggregate principal amount of the 2027 Notes are outstanding.

In May 2019, we issued $143.8 million principal amount of 1.0% convertible senior notes ("2024 Notes" and together with the 2027 Notes, the "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, 2023, $143.8 million of aggregate principal amount of the 2024 Notes were outstanding. Following the completion of the Exchange on October 10, 2023, $21.7 million of aggregate principal amount of the 2024 Notes are outstanding.

Our Credit Agreement provides for a $50.0 million revolving line of credit, none of which was drawn as of September 30, 2023. The Credit Agreement contains affirmative and negative covenants, including covenants which restrict our ability to, among other things, create liens, incur additional indebtedness and engage in certain other transactions, in each case subject to certain exclusions. In addition, the Credit Agreement contains certain financial covenants which become effective in the event our liquidity (as defined in the Credit Agreement) falls below a certain level. The Credit Agreement contains customary events of default relating to, among other things, payment defaults, breach of covenants, cross acceleration to material indebtedness, bankruptcy-related defaults, judgment defaults, and the occurrence of certain change of control events. The occurrence of an event of default may result in the termination of the Credit Agreement and acceleration of repayment obligations with respect to any outstanding principal amounts.

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 any of our debt, or make a payment on any of our debt when due, 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. There can be no assurance that, in the future, we will be able 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.

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 ~~March 31,~~September 30, 2023, $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 ~~March 31,~~September 30, 2023.

On August 1, 2023 Leland Jourdan, one of our Directors, adopted a Rule 10b5-1 trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The plan provides for the sale of up to 2,162 shares of our common stock to satisfy tax obligations related to vesting of RSUs. The plan will terminate on June 7, 2024, subject to early termination for certain specified events set forth in the plan, including if all transactions under the trading plan are completed.

On August 10, 2023, Scott Cook, our Chief Accounting Officer, adopted a Rule 10b5-1 trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The plan provides for the sale, from time to time, of up to 12,000 shares of our common stock. The plan will terminate on November 29, 2024, subject to early termination for certain specified events set forth in the plan, including if all transactions under the trading plan are completed.

On August 11, 2023, Stefan Schulz, our Chief Financial Officer, adopted a Rule 10b5-1 trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The plan provides for the sale, from time to time, of up to 64,000 shares of our common stock. The plan will terminate on December 9, 2024, subject to early termination for certain specified events set forth in the plan, including if all transactions under the trading plan are completed.

On August 30, 2023, Andres Reiner, our Chief Executive Officer, adopted a Rule 10b5-1 trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The plan provides for the sale, from time to time, of up to 200,000 shares of our common stock. The plan will terminate on September 9, 2024, subject to early termination for certain specified events set forth in the plan, including if all transactions under the trading plan are completed.

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	☐	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	89
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1518
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2225
Item 4.	Controls and Procedures	2225

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	2326
Item 1A.	Risk Factors	2326
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2326
Item 3.	Defaults Upon Senior Securities	2326
Item 4.	Mine Safety Disclosure	2327
Item 5.	Other Information	2327
Item 6.	Exhibits	2328
Signatures		2529


	~~Three~~Nine Months Ended ~~March 31,~~September 30, 2023
Volatility	63.26	%
Risk-free interest rate	3.76	%
Expected award life in years	2.97
Dividend yield	—	%


		PROS HOLDINGS, INC.

~~May 2,~~October 31, 2023	By:	/s/ Andres Reiner
		Andres Reiner
		President and Chief Executive Officer (Principal Executive Officer)

~~May 2,~~October 31, 2023	By:	/s/ Stefan Schulz
		Stefan Schulz
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)


☒			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


*			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.