EX-99.1 2 h69635exv99w1.htm EX-99.1 exv99w1
         
Exhibit 99.1
(PROS LOGO)
PROS Holdings, Inc. Reports Fourth Quarter and Full Year 2009
Financial Results
    Fourth quarter total revenue of $16.9 million.
 
    Full year revenues of $68.8 million
 
    GAAP income from operations of $1.6 million, and net income of $1.2 million or $0.04 per diluted share for the fourth quarter.
 
    Non-GAAP income from operations of $3.0 million, and net income of $2.3 million or $0.09 per diluted share for the fourth quarter, above our guided range.
 
    Cash and cash equivalents of $62.4 million, no debt and $11.3 million of positive cash flow from operations for the year ended December 31, 2009.
Houston, Texas — February 11, 2010 — PROS Holdings, Inc. (NYSE: PRO), a leading provider of pricing and margin optimization science and software, today announced financial results for the fourth quarter ended December 31, 2009.
Total revenue for the fourth quarter of 2009 was $16.9 million, near the high end of the company’s guided range. License and implementation revenue was $10.3 million and maintenance and support revenue was $6.6 million. For the year ended December 31, 2009, revenue was $68.8 million, with 64% from license and implementation revenue and 36% from maintenance revenue.
Bert Winemiller, Chairman and CEO, stated, “We are pleased with our financial performance in the fourth quarter of 2009. We remain focused on our strategic goals of delivering significant value to our customers early in the implementation with a high return on investment and low total cost of ownership, while also scaling to meet the needs of the large long-term market opportunity. We are growing our pricing partner and influencer ecosystem as we expand our work with industry analysts, strategic consultants, technology providers and system integrators. We believe the market for pricing and margin optimization software is in the innovator early adopter stage. We also believe there are thousands of companies that would greatly benefit from our software with a current market penetration in the low single digits. While the macro economy continues to be challenging and forecasting for the longer-term remains difficult, we believe interest in PROS’ science-based pricing and margin optimization software continues to increase as sales-related activity levels continue to be very good and third party coverage of the power of pricing continues to reach a broader audience.”
For the quarter ended December 31, 2009, PROS reported income from operations, in accordance with generally accepted accounting principles (“GAAP”), of $1.6 million compared with $3.8 million in the fourth quarter of 2008. GAAP net income in the quarter was $1.2 million, or $0.04 per diluted share, compared with $3.6 million, or $0.14 per diluted share, in the fourth quarter of 2008.
For the quarter ended December 31, 2009, non-GAAP income from operations was $3.0 million compared with $4.9 million for the same period in 2008. Non-GAAP net income was $2.3 million, or $0.09 per diluted share, above the Company’s guided range, compared with non-GAAP net income of $4.6 million, or $0.17 per diluted share, in the fourth quarter of 2008. These non-GAAP results in the fourth quarter of 2009 and 2008 exclude $1.5 million and $1.1 million, respectively, of stock-based compensation charges.

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For the year ended December 31, 2009, income from operations, in accordance with GAAP was $7.4 million compared with $13.9 million for the year ended December 31, 2008. GAAP net income for the year was $5.5 million, or $0.21 per diluted share, compared with $10.8 million, or $0.40 per diluted share, in 2008. Cash flow from operations was $11.3 million for the year ended December 31, 2009.
For the year ended December 31, 2009, non-GAAP income from operations was $12.8 million compared with $18.0 million for the year ended December 31, 2008. Non-GAAP net income for the year was $9.5 million, or $0.36 per diluted share, compared with $13.6 million, or $0.51 per diluted share, in 2008. These non-GAAP results for the year ended December 31, 2009 and 2008 exclude $5.5 million and $4.0 million, respectively, of stock-based compensation charges.
The effective tax rate was approximately 24% for the three months ended December 31, 2009 compared to an effective tax rate of approximately 9.0% for the three months ended December 31, 2008. The change in the tax rates was due to the timing of the reinstatement of the Research and Experimentation (“R&E”) tax credit which was not signed into law until October 2008. As a result, PROS recorded the full benefit of the R&E tax credit for 2008 in the fourth quarter of 2008. For the year ended December 31, 2009 and 2008, the effective tax rate was approximately 27% and 28%, respectively.
Charles Murphy, Executive Vice President and CFO, stated, “We are pleased to have recorded sequential revenue growth in the fourth quarter. Even in this challenging economy we were able to maintain a good level of profitability with non-GAAP operating margin of 18% for the quarter and 19% for the full year. Our strong balance sheet, with over $62 million in cash and no debt, and history of profitability and positive cash flow positions us favorably as customers consider vendor viability when making purchasing decisions. Our business trends are showing signs of stabilizing, but we believe it is too early to discern a significant upswing in our business environment.”
The attached table provides a reconciliation of GAAP to non-GAAP income from operations and net income as well as net income per share available to common stockholders for the year ended December 31, 2009 and 2008.
Financial Outlook
Based on information as of today, PROS is providing the following outlook for the first quarter of 2010:
First Quarter of Fiscal Year 2010:
    The Company expects total revenue in the range of $16.9 million to $17.3 million.
 
    The Company is projecting GAAP income from operations of $0.3 million to $0.7 million and GAAP diluted earnings per share of $0.01 to $0.02. Earnings per share are based on an estimated weighted average of 27.0 million diluted shares outstanding.
 
    The Company is projecting non-GAAP income from operations of $1.8 million to $2.2 million and non-GAAP diluted earnings per share of $0.05 to $0.06. Non-GAAP income from operations for the first quarter excludes estimated stock based compensation charges of approximately $1.5 million.
The projections provided above are based on an estimated tax rate of 30%. This rate assumes that Congress will reinstate on a retroactive basis the Research & Experimentation (“R&E”) tax credit. Congress has reinstated on a retroactive basis the R&E tax credit several times since its enactment in 1981, and PROS believes Congress will do so in 2010. However, until the credit is reinstated, PROS overall tax rate will be 37% to 38%. The impact of the R&E tax credit not being reinstated translates to a $0.01 diluted earnings per share impact for the first quarter of 2010 on a non-GAAP basis.

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Backlog
Our backlog is derived from agreements that we believe to be firm to provide software products and related implementation and maintenance services in the future. Our backlog varies significantly period to period depending on a number of factors including the timing of our sales and the nature of the agreements we enter into with our customers. We typically do not recognize any revenue upon the signing of an agreement. Therefore, we do not seek to accelerate our sales processes around any reporting period.
Our backlog is also significantly based on estimates and judgments that we make regarding total contract values, requisite man-days to complete engagements and the value and number of man-days worked or expected to be worked in any particular period. For example, we could have agreements that include refund, delay or termination for convenience provisions, and we exercise judgment over the extent to which, if any, to include these agreements in our backlog. However, based on our history of successfully implementing our software products, we generally include the full estimated value of these agreements in backlog.
We make significant estimates and judgments regarding maintenance renewals and changes to existing maintenance agreements. Backlog includes committed maintenance amounts and amounts payable to us under maintenance agreements that we reasonably expect to renew. For example, we include annualized monthly maintenance revenue reduced by our historical average maintenance non-renewal rate in backlog.
We compute our backlog as of a specific date, and we update our backlog to reflect changes in our estimates and judgments or subsequent additions, delays, terminations or reductions in our agreements. We also have agreements denominated in foreign currencies, and variation in currency exchange rates can influence our calculation of backlog. We compute backlog using then-existing currency exchange rates and update backlog to reflect changes in these rates.
For these and other reasons, we do not believe that backlog is a meaningful indicator of future revenue to be recognized in any particular period, and there can be no assurance that our backlog at any point in time will translate into revenue in any subsequent period.
We had backlog of $84.3 million as of December 31, 2009 as compared to backlog of $83.6 million as of December 31, 2008. The portion of our backlog as of December 31, 2009 not reasonably expected to be recognized as revenue within the next twelve months is estimated to be $33 million.
Conference Call
In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on February 11, 2010, at 4:30 p.m. (EST) to discuss the company’s financial results. To access this call, dial (866) 271-5140 (domestic) or (617) 213-8893 (international). The pass code for the call is 80279314. Additionally, a live web cast of the conference call will be available in the “Investor Relations” section of the Company’s web site at www.prospricing.com.
Following the conference call, a replay will be available at (888) 286-8010 (domestic) or (617) 801-6888 (international). The replay pass code is 39900651. An archived web cast of this conference call will also be available in the “Investor Relations” section of the Company’s web site at www.prospricing.com.
About PROS
PROS Holdings, Inc. (NYSE: PRO) is a leading provider of pricing and margin optimization software products, specializing in price analytics, price execution, and price optimization. By using PROS’ software products, companies gain insight into their pricing strategies, identify pricing-based profit leaks, optimize their pricing decision making and improve their business processes and financial performance. PROS’ software products implement advanced pricing science, which includes operations research, forecasting and statistics. PROS high performance software architecture supports real-time high volume transaction processing and allows PROS to handle the processing and database requirements of the most sophisticated and largest customers, including customers with 100’s of simultaneous users and sub-second electronic transactions. PROS provides professional

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services to configure its software products to meet the specific pricing needs of each customer. PROS has implemented over 200 solutions across a range of industries in more than 40 countries.
Founded in 1985, PROS is headquartered in Houston, Texas. Today, PROS has over 350 employees, more than 100 with advanced degrees and over 25 with Ph.D.s. To learn more about PROS, please visit www.prospricing.com.
Forward-looking Statements
This press release contains forward-looking statements, including statements about PROS’ future financial performance, the interest, stabilization and demand of customers in PROS’ target market of pricing and margin optimization, the growth of PROS pricing partner and influencer ecosystem, PROS’ markets, product development, the demand for PROS solutions, the performance of PROS solutions, and the predictability of the PROS business. The forward-looking statements contained in this press release are based upon PROS’ historical performance and its current plans, estimates and expectations and are not a representation that such plans, estimates or expectations will be achieved. Factors that could cause actual results to differ materially from those described herein include: (a) the risk that the continued slowdown in the economy has on PROS’ sales cycles, prospects’ and customers’ spending decisions and timing of implementation decisions, (b) PROS’ ability to sell its solutions and successfully install and deliver the products and services at levels required to meet its future financial performance expectations, (c) PROS’ ability to develop and sell new products and product enhancements with the required technical specifications and functionality desired by customers, (d) the ability of the market for enterprise pricing and margin optimization software to grow, (e) the ability of the PROS revenue model to continue to provide the level of predictability to the PROS business which it historically has provided, (f) PROS’ ability to maintain its current level of gross margins, (g) PROS’ ability to maintain historical maintenance renewal rates, (h) PROS’ ability to deliver its solutions according to the acceptance criteria of its customers and the avoidance of dispute related thereto, (i) PROS’ successful implementation of its solutions without modification or negotiation of contractual arrangements and (j) the impact of currency fluctuations on our results of operations. Additional information relating to the uncertainty affecting the PROS business are contained in PROS’ filings with the Securities and Exchange Commission. These forward-looking statements represent PROS’ expectations as of the date of this press release. Subsequent events may cause these expectations to change, and PROS disclaims any obligations to update or alter these forward-looking statements in the future, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
PROS has provided in this release certain financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP income from operations, net income and diluted earnings per share. PROS uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating PROS’ ongoing operational performance. PROS believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results. As noted, the non-GAAP financial measures discussed above are equity-based compensation charges for the quarter and year ended December 31, 2009 of $1.5 million and $5.5 million, respectively, pursuant to GAAP stock-based compensation.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measure as detailed above. A reconciliation of GAAP to the non-GAAP financial measures has been provided in the tables included as part of this press release. PROS use of non-GAAP financial measures may not be consistent with the presentations by similar companies in PROS industry.
Investor Contact:
PROS Investor Relations
Tel: 713-335-5879
e-mail: ir@PROSpricing.com
Media Contact:
PROS Corporate Communications
Tel: 713-335-5197
e-mail: corpcomm@PROSpricing.com

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PROS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
                 
    December 31,  
    2009     2008  
Assets:
               
Current assets:
               
Cash and cash equivalents
  $ 62,449     $ 51,979  
Accounts and unbilled receivables, net of allowance of $1,300 and $1,900, respectively
    12,035       16,552  
Prepaid expenses and other current assets
    4,143       3,238  
 
           
Total current assets
    78,627       71,769  
Property and equipment, net
    2,959       2,901  
Other long term assets, net
    3,743       2,297  
 
           
Total assets
  $ 85,329     $ 76,967  
 
           
 
               
Liabilities and stockholders’ equity:
               
Current liabilities:
               
Accounts payable
  $ 1,198     $ 1,088  
Accrued liabilities
    3,504       3,293  
Accrued payroll and other employee benefits
    4,205       4,493  
Deferred revenue
    14,099       16,288  
Other current liabilities
    4,866       4,866  
 
           
Total current liabilities
    27,872       30,028  
Long-term deferred revenue
    2,418       3,187  
 
               
Commitments and contingencies
               
 
               
Stockholders’ equity:
               
Common stock, $0.001 par value, 75,000,000 shares authorized, 30,163,508 and 30,095,846 shares issued, respectively, 25,745,923 and 25,678,261 shares outstanding, respectively
    30       30  
Additional paid-in capital
    63,438       57,668  
Treasury stock 4,417,585 common shares, at cost
    (13,938 )     (13,938 )
Retained earnings (deficit)
    5,509       (8 )
 
           
Total stockholders’ equity
    55,039       43,752  
 
           
Total liabilities and stockholders’ equity
  $ 85,329     $ 76,967  
 
           

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PROS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
                                 
    For the Three Months     For the Year  
    Ended December 31,     Ended December 31,  
    2009     2008     2009     2008  
Revenue:
                               
License and implementation
  $ 10,280     $ 14,043     $ 43,684     $ 53,923  
Maintenance and support
    6,641       5,722       25,099       21,665  
 
                       
Total revenue
    16,921       19,765       68,783       75,588  
 
                               
Cost of revenue:
                               
License and implementation
    3,471       4,072       13,893       14,894  
Maintenance and support
    1,146       1,063       4,752       4,358  
 
                       
Total cost of revenue
    4,617       5,135       18,645       19,252  
 
                       
 
                               
Gross profit
    12,304       14,630       50,138       56,336  
Gross margin
    72.7 %     74.0 %     72.9 %     74.5 %
 
                               
Operating expenses:
                               
Selling, general and administrative
    5,616       5,589       22,635       22,094  
Research and development
    5,137       5,236       20,136       20,309  
 
                       
Total operating expenses
    10,753       10,825       42,771       42,403  
 
                               
Income from operations
    1,551       3,805       7,367       13,933  
 
                               
Other income:
                               
Interest income
    19       127       196       1,112  
 
                       
Income before income tax provision
    1,570       3,932       7,563       15,045  
Income tax provision
    378       347       2,047       4,288  
 
                       
Net income
  $ 1,192     $ 3,585       5,516       10,757  
 
                       
 
                               
Net earnings attributable to common stockholders per share:
                               
Basic
  $ 0.05     $ 0.14     $ 0.21     $ 0.41  
Diluted
  $ 0.04     $ 0.14     $ 0.21     $ 0.40  
 
                               
Weighted average number of shares:
                               
Basic
    25,734,068       25,919,422       25,710,569       26,120,613  
Diluted
    26,736,311       26,236,828       26,430,817       26,569,074  

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PROS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS — RECONCILIATION
OF GAAP TO NON-GAAP

(Dollars in thousands, except per share data)
(Unaudited)
                                 
    For the Three Months     For the Year  
    Ended December 31,     Ended December 31,  
    2009     2008     2009     2008  
Net income
  $ 1,192     $ 3,585     $ 5,516     $ 10,757  
 
                               
GAAP stock based compensation:
                               
Cost of revenue
    232       147       872       611  
Selling, general and administrative
    810       582       2,938       2,145  
Research and development
    411       356       1,665       1,265  
 
                       
Total operating expenses
    1,453       1,085       5,475       4,021  
 
                               
Tax impact of stock based compensation
    (362 )     (103 )     (1,482 )     (1,146 )
 
                       
Total non-GAAP tax impact
    (362 )     (103 )     (1,482 )     (1,146 )
 
                               
Non-GAAP net income
  $ 2,283     $ 4,567     $ 9,509     $ 13,632  
 
                       
 
                               
Basic
  $ 0.09     $ 0.18     $ 0.37     $ 0.52  
Diluted
  $ 0.09     $ 0.17     $ 0.36     $ 0.51  
 
                               
Shares used in computing net income per common share:
                               
Basic
    25,734,068       25,919,422       25,710,569       26,120,613  
Diluted
    26,736,311       26,236,828       26,430,817       26,569,074  

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PROS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS — RECONCILIATION
OF GAAP TO NON-GAAP

(Dollars in thousands)
(Unaudited)
                                 
    For the Three Months     For the Year  
    Ended December 31,     Ended December 31,  
    2009     2008     2009     2008  
Income from operations
  $ 1,551     $ 3,805     $ 7,367     $ 13,933  
 
                               
GAAP stock based compensation
    1,453       1,085       5,475       4,021  
 
                       
 
                               
Non-GAAP income from operations
  $ 3,004     $ 4,890     $ 12,842     $ 17,954  
 
                       
 
                               
Non-GAAP income from operations %
    17.8 %     24.7 %     18.7 %     23.8 %
 
                               
GAAP — gross profit
  $ 12,304     $ 14,630     $ 50,138     $ 56,336  
 
                               
GAAP stock based compensation
    232       147       872       611  
 
                       
 
                               
Non-GAAP gross profit
  $ 12,536     $ 14,777     $ 51,010     $ 56,947  
 
                       
 
                               
Non-GAAP gross margin
    74.1 %     74.8 %     74.2 %     75.3 %
 
                               
GAAP — cost of license and implementation
  $ 3,471     $ 4,072     $ 13,893     $ 14,894  
 
                               
GAAP stock based compensation
    232       147       872       611  
 
                       
 
                               
Non- GAAP — cost of license and implementation
  $ 3,239     $ 3,925     $ 13,021     $ 14,283  
 
                       
 
                               
Non-GAAP cost license and implementation margin
    68.5 %     72.1 %     70.2 %     73.6 %
 
                               
GAAP — selling, general and administrative
  $ 5,616     $ 5,589     $ 22,635     $ 22,094  
 
                               
GAAP stock based compensation
    810       582       2,938       2,145  
 
                       
 
                               
Non- GAAP — selling, general and administrative
  $ 4,806     $ 5,007     $ 19,697     $ 19,949  
 
                       
 
                               
GAAP — research and development
  $ 5,137     $ 5,236     $ 20,136     $ 20,309  
 
                               
GAAP stock based compensation
    411       356       1,665       1,265  
 
                       
 
                               
Non- GAAP — research and development
  $ 4,726     $ 4,880     $ 18,471     $ 19,044  
 
                       

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PROS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
                 
    For the Year  
    Ended December 31,  
    2009     2008  
Operating activities:
               
Net income
  $ 5,516     $ 10,757  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    1,283       1,363  
Stock based compensation
    5,475       4,021  
Deferred income taxes
    (1,189 )     (821 )
Provision for doubtful accounts
    (566 )     288  
Other
    119        
Changes in operating assets and liabilities:
               
Accounts receivable
    4,377       (669 )
Unbilled receivables
    1,932       (1,064 )
Prepaid expenses and other
    (1,281 )     860  
Accounts payable, accrued liabilities, accrued contract labor and accrued payroll
    (1,423 )     (340 )
Deferred revenue
    (2,958 )     (572 )
 
           
Net cash provided by operating activities
    11,285       13,823  
 
               
Investing activities:
               
Purchases of property and equipment
    (1,111 )     (1,208 )
 
           
Net cash used in investing activities
    (1,111 )     (1,208 )
 
               
Financing activities:
               
Proceeds from the exercise of stock options
    296       286  
Secondary offering costs
          (300 )
Purchase of treasury stock
          (5,000 )
 
           
Net cash provided by (used in) financing activities
    296       (5,014 )
 
           
Net increase in cash and cash equivalents
    10,470       7,601  
Cash and cash equivalents:
               
Beginning of period
    51,979       44,378  
 
           
End of period
  $ 62,449     $ 51,979  
 
           

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