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PROS Holdings (PROS), a provider of AI-powered pricing, selling, and revenue management solutions, is selling off again today, continuing a dive that has seen shares plunge by 16% this week. A key driver of the weakness today is the company’s announcement of a debt restructuring agreement, exchanging approximately $186.9 mln of its 2027 Convertible Senior Notes for $185 mln in new 2030 Convertible Senior Notes, plus cash for accrued interest. This maneuver has amplified investor concerns about the company’s financial strength and growth prospects.

• Despite PROS also reaffirming its Q2 EPS and revenue guidance, this has done little to assuage market concerns. The debt restructuring extends the maturity of its convertible notes from 2027 to 2030, which could be interpreted as a proactive balance sheet management strategy to align with long-term growth plans. However, investors appear to view it as a signal of potential cash flow or liquidity challenges, particularly given the company’s modest cash generation relative to its debt obligations.
• Moreover, the convertible nature of these notes introduces the risk of future equity dilution, as they can be converted into shares, potentially reducing existing shareholders’ ownership. This dilution risk, combined with broader market volatility impacting small-cap technology stocks, has further eroded investor confidence, overshadowing the reaffirmed guidance.
• The company’s financial position provides additional context for the market’s reaction. In Q1, PROS generated only $1.2 mln in operating cash flow, while interest and amortization on its convertible debt totaled $1.1 mln for the quarter, leaving minimal headroom for capital expenditures or operational needs. This tight cash flow margin underscores the company’s constrained financial flexibility.
• Furthermore, PROS issued a disappointing Q1 earnings report on May 1 in which it issued downside guidance for Q2 as the company took a cautious approach in a complex selling environment amid rising macroeconomic uncertainty. 
• Adding to the negative sentiment are recent executive shake-ups at PROS, which have raised concerns about leadership stability. On May 1, 2025, the company announced Jeff Cotten as its new CEO, signaling a shift in strategic direction but also introducing uncertainty about execution under new leadership. Before being named President and CEO, Cotten served as Chairman and previously as CEO of Alvaria, a company focused on customer experience and workforce engagement management solutions.
• Additionally, PROS disclosed that Chief Revenue Officer Todd McNabb and the company mutually agreed to part ways, further unsettling investors. These changes at the executive level, particularly in critical roles overseeing revenue generation and corporate strategy, suggest potential internal challenges or disagreements on growth priorities.

In summary, the weakness in PROS is driven by a confluence of factors: the debt restructuring agreement raising concerns about liquidity and dilution risk, reaffirmed Q2 guidance failing to inspire confidence, tight cash flow margins, disappointing Q1 results with soft Q2 guidance, and recent executive shake-ups signaling leadership instability. Investors will require tangible evidence of a clearer financial picture and operational improvements to restore confidence in the company’s long-term prospects.

RH (RH +12%) is surging following its Q1 (Apr) results after it reported a surprise profit when a loss was expected. What is surprising is that the stock for this luxury home furnishings company is sharply higher despite missing on Q1 revenue and guiding Q2 (Jul) revs below consensus. However, investors were thrilled that RH reaffirmed FY26 rev growth at +10-13% despite the tariff headwinds and despite RH calling this the worst housing market in almost 50 years.

• Our quick take is that these results were better than feared. Recall that the stock gapped 40% lower in early April following its Q4 (Jan) report, wherein RH offered some very ugly guidance. That report was just a day after President Trump announced his reciprocal tariffs on April 2. It's important to understand that nearly three-quarters of RH's products last year were sourced from Asia, including 35% from Vietnam, 23% from China, and the remainder from Indonesia and India. As such, investors were rightly alarmed when some of the highest reciprocal tariffs were on Vietnam, China, Indonesia, and India, charging 46%, 34%, 32%, and 26%, respectively.
• RH said last night, that due to the significant and unexpected Liberation Day Tariffs announced April 2, shipments and resourcing efforts were disrupted globally. In response, and in order to mitigate risk, RH announced last night that it would delay the launch of a new concept that was planned for the second half of 2025 to the Spring of 2026 when there should be more certainty regarding tariffs.
• In addition, RH has continued to shift sourcing out of China and expects receipts to decrease from 16% in Q1 to 2% in Q4 with a meaningful portion of the tariffs absorbed by vendor partners. RH has also resourced a significant portion of its upholstered furniture to its own North Carolina factory. RH is now projecting that 52% of its upholstered furniture will be produced in the US and 21% in Italy by the end of 2025.
• In terms of the Q1 results/Q2 guidance, the surprise profit looks to have been achieved by margins coming in at the high end of prior guidance. And while RH expects the tariff disruption will hurt Q2 revs by 6 points, RH expects that will be recovered in the second half. And that is why RH reaffirmed full year revenue guidance. Also, RH guided to full year free cash flow of $250-350 mln after not guiding for FCF last quarter. Furthermore, RH expects significant and growing cash flow from operations and lower cap-ex over the next several years as it cycles through this aggressive investment period.

Our overall take is that investors came into this Q1 report bracing for the worst after the stock got hit very hard last quarter. This report could not have gone much better. Not only did RH report a surprise profit, margins were good, the tariff impact on revs seems limited to Q2 with RH regaining those sales in 2H25. That was evident with RH reaffirming its full year outlook. Also, RH is making good progress on reducing sourcing from Asia. All in all, the report was much better than feared.

Adobe's (ADBE) 2Q25 earnings report once again showcased the company's ability to surpass earnings expectations as revenue also edged past forecasts, growing 11% yr/yr to $5.87 bln. Despite the upside results, the stock is trading lower potentially signaling investor disappointment with the company’s guidance for FY25, which, while raised, may not have met loftier expectations set by the market’s enthusiasm for AI-driven growth. 

• ADBE's recent advancements in AI, notably the AEP Agent Orchestrator within its Adobe Experience Platform, have positioned the company to capitalize on the growing demand for AI-driven solutions in creative and marketing workflows. Products like Adobe Firefly, Adobe Express, and GenStudio are gaining traction, with Q1 reports indicating $125 mln in direct AI-generated annual recurring revenue (ARR), a figure that likely grew in Q2 given ADBE’s emphasis on AI monetization.
• However, while these AI tools are contributing to growth, particularly in enterprise adoption, the market may be disappointed that they have not yet driven more significant top-line acceleration. The modest FY25 guidance revision suggests that AI products, while promising, are still in the early stages of scaling across ADBE’s customer base, potentially leading investors to question the pace of AI-driven revenue contributions relative to competitors in the tech sector.
• The Digital Media segment, ADBE’s largest revenue driver, posted solid Q2 performance with revenue of $4.35 bln, up 12% yr/yr in constant currency, fueled by strong demand for Creative Cloud and Document Cloud offerings. ARR for the segment reached $18.09 bln exiting the quarter, a 12.1% yr/yr increase, though this marked a slight deceleration from the 13% growth reported in Q1. This slowdown, albeit marginal, may be a factor in the post-earnings selloff, as investors scrutinize ADBE’s ability to sustain high growth in its core business.
• The Digital Experience segment, which enables businesses to manage and analyze customer journeys through platforms like AEP, reported Q2 revenue of $1.46 bln, a 10% yr/yr increase, with subscription revenue growing 11% to $1.33 bln. Growth in this segment is driven by rising enterprise demand for real-time customer data platforms and AI-powered personalization tools, such as AEP Agent Orchestrator, which streamlines customer experience workflows. ADBE’s partnerships with major brands and agencies, including Newell Brands, NBC Universal, and Coca-Cola, underscore the segment’s momentum, particularly in secure first-party data activation and ad effectiveness measurement.

ADBE’s consistent ability to exceed EPS expectations underscores its operational discipline and strong market position, yet its Q2 stock selloff highlights investor skepticism about the pace of growth, particularly in AI-driven offerings. While AI products like AEP Agent Orchestrator and Firefly are fueling incremental revenue, the modest FY25 guidance revision suggests ADBE’s transformation into an AI powerhouse is still unfolding, leaving some investors wanting more.

Despite delivering upside 1Q26 EPS of $(0.73), Lovesac (LOVE) is plunging lower reflecting investor disappointment with the company’s reaffirmed FY26 guidance rather than an upward revision. The reaffirmed outlook -- EPS of $0.80-$1.36 and net sales of $700-$750 mln -- was still in-line with the FactSet consensus estimates, but investors were anticipating a more optimistic revision, particularly given the EPS beat, signaling caution amid persistent category headwinds in the home furnishings sector that remains highly promotional.

• LOVE's s Q1 EPS outperformance was driven by disciplined cost management and operational leverage, as the company began to realize returns on prior investments in its omni-channel “infinity flywheel” and product innovation capabilities. Operating expenses were effectively leveraged, with SG&A as a percentage of net sales declining to 48.5% from 51.6% a year earlier due to efficiencies in infrastructure, rent, and marketing spend.
• However, gross margin contracted by 60 bps to 53.7%, primarily due to a 230 bps decline in product margin driven by increased promotional discounting to counter category softness. This was partially offset by cost savings, including a 130 bps reduction in inbound transportation costs and a 40 bps decrease in outbound transportation and warehousing expenses, reflecting supply chain optimizations.
• A bright spot was LOVE's omni-channel comparable net sales growth of 2.8%, a key metric signaling market share gains against a furniture category that declined by high single digits. Product innovation, particularly the launch of the EverCouch platform and strong reception of the Sactionals Reclining Seat, drove customer engagement, with quotes for large setups rising significantly, though conversion rates were tempered by cautious consumer spending. The company’s focus on its Designed for Life philosophy and enhanced CRM tools further supported omni-channel performance.
• The company's Q2 revenue guidance of $157-$167 mln aligns closely with analyst expectations, while its reaffirmed FY26 guidance indicates a cautious outlook amid mixed tailwinds and headwinds. Tailwinds include continued showroom expansion, product innovation ( EverCouch and recliner launches), and supply chain diversification, with only about 10% of sourcing from China, mitigating tariff exposure. However, headwinds such as sluggish consumer spending, exacerbated by high interest rates and inflation, and potential tariff pressures on imports from Malaysia and Vietnam, where LOVE sources heavily, pose risks.

LOVE’s steep sell-off reflects investor frustration with its conservative Q2 EPS guidance and reaffirmed FY26 outlook. However, the company’s 2.8% omni-channel comparable net sales growth underscores its ability to capture market share through showroom expansion and product innovation.

Air India Flight AI-171, a Boeing (BA) 787-8 Dreamliner en route from Ahmedabad, India, to London Gatwick, crashed shortly after takeoff, killing all 242 passengers and crew and causing additional casualties on the ground in the Meghani Nagar residential area. This tragic event, the first fatal crash involving a Boeing 787 since its commercial debut in 2011, has triggered significant market repercussions, with BA’s shares plunging and GE Aerospace (GE), the manufacturer of the aircraft’s GEnx engines, seeing a drop as well.

While the cause of the crash remains under investigation by India’s Directorate General of Civil Aviation (DGCA) and the U.S. Federal Aviation Administration (FAA), with flight data recorders recovered and expert speculation pointing to a potential loss of thrust or lift, definitive answers are likely weeks away, leaving investors grappling with uncertainty as BA faces renewed scrutiny.

• BA's history of safety and quality control challenges has been thrust back into the spotlight with this disaster. The company has been haunted by the 2018 Lion Air Flight 610 and 2019 Ethiopian Airlines Flight 302 crashes, both involving the 737-MAX, which killed 346 people and led to a global grounding of the model for nearly two years. Additional incidents, such as the January 2024 Alaska Airlines 737-MAX 9 door plug blowout and the December 2024 Jeju Air 737-800 crash in South Korea, further eroded confidence.
• However, BA appeared to be regaining its footing under new CEO Kelly Ortberg, with key developments including a settlement with the U.S. Department of Justice on June 4 to avoid criminal prosecution over the 737-MAX crashes (which is facing pushback from crash victims who are looking for more accountability), an FAA-approved action plan to address quality control lapses, and enhanced production discipline that bolstered investor sentiment.4
• Prior to the crash, BA’s stock was trading near 52-week highs, buoyed by a robust 1Q25 earnings report on April 23, 2025, which showcased a 75% revenue surge in the Commercial Airplanes segment, reflecting strong demand and operational recovery. Production of both the 737 and 787 programs has returned to healthier levels with BA delivering approximately 350 commercial aircraft in 2024, and the company has secured significant orders, such as Qatar Airways’ commitment for up to 210 jets, including 130 787 Dreamliners. Additionally, China’s recent decision to lift its ban on Boeing aircraft, with deliveries set to resume in July 2025, provided a critical catalyst, opening access to a key growth market.
• The Air India crash, however, threatens to derail this progress, particularly as it marks the first fatal incident involving the 787 Dreamliner, a cornerstone of BA’s widebody portfolio. This year, BA on pace to deliver about 60-70 Dreamliners per year at an average list price of $250-$300 mln per aircraft (though discounts are common). 
• The 787 program, with approximately 1,190 aircraft in service globally, is critical to BA’s financial health, serving long-haul routes for major carriers like Air India, which operates nearly three dozen 787s. A temporary suspension of the 787 program, should regulators deem it necessary, could disrupt deliveries, delay billions in near-term revenue, and exacerbate BA’s $36+ bln in cumulative losses since 2019. Moreover, persistent quality concerns, including prior whistleblower allegations of improper fuselage fastening and uncompleted inspections, could intensify regulatory and public scrutiny, potentially impacting order flow and customer confidence.

Accurately assessing the full financial and reputational impact of the Air India disaster on BA is challenging, as the investigation will likely take weeks or months to pinpoint the cause, whether mechanical, human error, or external factors like a bird strike. Nevertheless, this tragedy represents another significant blow to BA’s reputation as it competes fiercely with Airbus (EADSY), which has outsold BA in aircraft orders for the past five years and could further erode investor and customer trust in the company’s ability to deliver safe, reliable aircraft.