8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

Current Report
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): August 5, 2010

PROS Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-33554	76-0168604
(State of incorporation or organization)	(Commission File	(I.R.S. Employer Identification No.)
	Number)

3100 Main Street, Suite 900
Houston, TX, 77002	(713) 335-5151
(Address of principal executive offices)	(Registrant’s Telephone Number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o     Written communications pursuant to Rule 425 under the Securities Act (17CFR230.425)

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR240.14a-12)

o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR240.14d-2(b))

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

     On August 5, 2010, PROS Holdings, Inc (“the Company”) issued a press release announcing financial results for its second quarter ended June 30, 2010. A copy of the press release, dated as of August 5, 2010, is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

     The information in the this Current Report, including the exhibit attached hereto, shall not be deemed “filed” with the Securities and Exchange Commission for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any registration statement or other document filed with the Securities and Exchange Commission by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits

     (d) Exhibits

     99.1 Press release dated August 5, 2010.

Page 2 of 12

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 5, 2010	PROS HOLDINGS, INC.
	/s/ Charles H. Murphy
	Charles H. Murphy
	Chief Financial Officer and Executive Vice President (Principal Accounting Officer)

Page 3 of 12

EX-99.1

Exhibit 99.1

PROS Holdings, Inc. Reports Second Quarter 2010
Financial Results

• Second quarter total revenue of $17.8 million.

• GAAP loss from operations of $1.0 million, and net loss of $0.6 million or $0.02 loss per share for the second quarter.

• Non-GAAP income from operations of $2.0 million, and net income of $1.4 million or $0.05 per share for the second quarter.

• Cash and cash equivalents of $60.8 million and no debt.

Houston, Texas — August 5, 2010 — PROS Holdings, Inc. (NYSE: PRO), a leading provider of pricing and margin optimization software solutions, today announced financial results for the second quarter ended June 30, 2010.

Total revenue for the second quarter of 2010 was $17.8 million, exceeding the high end of the company’s guided range. License and implementation revenue was $10.4 million and maintenance and support revenue was $7.4 million.

Bert Winemiller, Chairman and CEO, stated, “We are pleased with our financial performance in the second quarter of 2010. In addition to exceeding the high end of our revenue guidance in the second quarter, this was our third quarter of sequential revenue growth and also represented a return to year-over-year revenue growth. Sales activity continues to be healthy and we are pleased that interest in PROS’ science-based pricing and margin optimization software continues to increase as demonstrated by the success of our Chicago Pricing Executive Summit. During the second quarter, we continued to invest in R&D and to expand our pricing partner ecosystem including formal global alliance agreements with systems integrators. We also delivered another release of our Pricing Solution Suite of Products with new science innovation, new user experience enhancements, new pricing features, enhanced industry solutions, and significant performance and scalability improvements. PROS’ focus on delivering industry leading pricing and margin optimization software solutions with fast time-to-value and high ROI for our customers is helping us win new business as well as retaining existing customers as demonstrated by our strong maintenance renewal rates.”

For the quarter ended June 30, 2010, PROS reported a loss from operations, in accordance with generally accepted accounting principles (“GAAP”), of $1.0 million compared with income from operations of $2.1 million in the second quarter of 2009. GAAP net loss in the quarter was $0.6 million, or $0.02 loss per share, compared with GAAP net income of $1.5 million, or $0.06 per share, in the second quarter of 2009. The effective GAAP tax rate for the three months ended June 30, 2010 was a benefit of 34% compared to a provision of 28% for the three months ended June 30, 2009.

For the quarter ended June 30, 2010, non-GAAP income from operations was $2.0 million compared with $3.5 million for the same period in 2009. Non-GAAP net income was $1.4 million, or $0.05 per diluted share, compared with non-GAAP net income of $2.5 million, or $0.10 per diluted share, in the second quarter of 2009. These non-GAAP results in the second quarter of 2010 and 2009 exclude $2.0 million and $1.4 million, respectively, of non cash share-based compensation charges. In addition, the non-GAAP results for the second quarter of 2010 excluded

Page 4 of 12

$1.0 million of litigation expenses. The effective non-GAAP tax rate was approximately 33%, without the reinstatement of the Research and Experimentation (“R&E”) tax credit.

Charles Murphy, Executive Vice President and CFO, stated, “We are pleased to report both year-over-year revenue growth as well as our third quarter of sequential revenue growth. While revenue was above the high end of our guidance, our recent sales momentum is not fully reflected in our year-over-year revenue growth due to the lag between contract signing and recognition of revenue. Even with our spending in support of long term growth we were able to maintain a good level of profitability with a non-GAAP operating margin of 11.5% for the quarter. Our strong balance sheet, with $60.8 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 guidance for third quarter revenue of $18.2 to $18.6 million would be our fourth quarter of sequential revenue growth and a revenue increase of 11% over last year, at the midpoint of our guidance. These positive trends make us incrementally more optimistic than we had been throughout 2009 and helps strengthen our long-term position.”

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 three and six months ended June 30, 2010 and 2009.

Financial Outlook

Based on information as of today, PROS is providing the following outlook for the third quarter of 2010:

Third Quarter of Fiscal Year 2010:

• The Company expects total revenue in the range of $18.2 million to $18.6 million.

• The Company is projecting a GAAP loss from operations of $0.8 million to $1.2 million and GAAP loss per share of $0.02 to $0.03. Loss per share is based on an estimated weighted average of 26.1 million basic shares outstanding.

• The Company is projecting non-GAAP income from operations of $1.8 million to $2.2 million and non-GAAP earnings per share of $0.04 to $0.05. Non-GAAP income from operations for the third quarter excludes estimated non-cash share-based compensation charges of approximately $1.6 million and estimated litigation expenses of approximately $1.4 million. Earnings per share are based on an estimated weighted average of 26.7 million diluted shares outstanding.

The GAAP projections provided above are based on an estimated tax benefit of 23%. Non-GAAP projections provided above are based on an estimated non-GAAP tax rate of 36%; however, if Congress reinstates the R&E credit on a retroactive basis, we anticipate the non-GAAP tax rate to be 31% for the year.

As previously disclosed, PROS has been involved in a lawsuit with a customer. The trial is expected to occur in the first quarter of 2011, and we expect to incur litigation costs of approximately $1.4 million during the third quarter related to this lawsuit, increasing on a quarterly basis. For comparison purposes, we are excluding these expenses from the non-GAAP financial outlook provided above.

Conference Call

In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on August 5, 2010, at 4:30 p.m. (EST) to discuss the company’s financial results. To access this call, dial (866) 788-0547 (domestic) or (857) 350-1685 (international). The pass code for the call is 78039917. 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 71416137. 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.

Page 5 of 12

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 services to configure its software products to meet the specific pricing needs of each customer. PROS’ has implemented over 300 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, the predictability of the PROS business and PROS’ effective tax rate and the reinstatement of the R&E tax credit. 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) the costs of litigation related to the existing customer dispute; (j) PROS’ successful implementation of its solutions without modification or negotiation of contractual arrangements; (j) the impact of the R&E tax credit if reinstated and (k) 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. As noted, the non-GAAP financial measures discussed above for the second quarter exclude non cash share-based compensation charges for the three and six months ended June 30, 2010 of $2.0 million and $3.4 million, respectively, pursuant to GAAP stock-based compensation. In addition, the non-GAAP financial measures discussed above exclude litigation expenses for the three and six months ended June 30, 2010 of $1.0 million.

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

Page 6 of 12

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

Page 7 of 12

PROS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)

	June 30,			December 31,
	2010			2009
Assets:
Current assets:
Cash and cash equivalents	$	60,771		$	62,449
Restricted cash		73			—
Accounts and unbilled receivables, net of allowance of $1,300		20,957			12,035
Prepaid expenses and other current assets		5,015			4,143
Total current assets		86,816			78,627
Restricted cash		293			—
Property and equipment, net		3,255			2,959
Other long term assets, net		3,541			3,743
Total assets	$	93,905		$	85,329
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	2,785		$	1,198
Accrued liabilities		3,158			3,199
Accrued payroll and other employee benefits		3,415			4,510
Deferred revenue		20,379			14,099
Other current liabilities		4,866			4,866
Total current liabilities		34,603			27,872
Long-term deferred revenue		1,478			2,418
Total liabilities		36,081			30,290
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value, 75,000,000 shares authorized, 30,537,510 and 30,163,508 shares issued, respectively, 26,119,925 and 25,745,923 shares outstanding, respectively		30			30
Additional paid-in capital		66,384			63,439
Treasury stock, 4,417,585 common shares, at cost		(13,938	)		(13,938	)
Accumulated other comprehensive income (loss)		(3	)		—
Retained earnings		5,351			5,508
Total stockholders’ equity		57,824			55,039
Total liabilities and stockholders’ equity	$	93,905		$	85,329

Page 8 of 12

PROS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2010			2009			2010			2009
Revenue:
License and implementation	$	10,430		$	11,204		$	20,802		$	23,128
Maintenance and support		7,409			6,122			14,364			12,224
Total revenue		17,839			17,326			35,166			35,352
Cost of revenue:
License and implementation		3,414			3,765			6,634			7,357
Maintenance and support		1,401			1,154			2,896			2,380
Total cost of revenue		4,815			4,919			9,530			9,737
Gross profit		13,024			12,407			25,636			25,615
Gross margin		73.0	%		71.6	%		72.9	%		72.5	%
Operating expenses:
Selling, general and administrative		8,517			5,561			15,149			11,065
Research and development		5,472			4,774			10,686			9,822
Total operating expenses		13,989			10,335			25,835			20,887
Income (loss) from operations		(965	)		2,072			(199	)		4,728
Other income:
Interest income		18			57			29			147
Income (loss) before income tax provision		(947	)		2,129			(170	)		4,875
Income tax provision (benefit)		(319	)		594			(13	)		1,349
Net income (loss)	$	(628	)	$	1,535			(157	)		3,526
Net earnings (loss) attributable to common stockholders per share:
Basic	$	(0.02	)	$	0.06		$	(0.01	)	$	0.14
Diluted	$	(0.02	)	$	0.06		$	(0.01	)	$	0.13
Weighted average number of shares:
Basic		26,033,003			25,697,856			25,972,723			25,694,933
Diluted		26,033,003			26,488,540			25,972,723			26,413,376

Page 9 of 12

PROS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

	For the Six Months
	Ended June 30,
	2010			2009
Operating activities:
Net income (loss)	$	(157	)	$	3,526
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		673			624
Stock-based compensation		3,411			2,551
Excess tax benefits on vesting of restricted stock units		(593	)		—
Provision for doubtful accounts		—			36
Amortization of capitalized costs		82			118
Other non cash		(3	)		—
Changes in operating assets and liabilities:
Accounts receivable		(8,200	)		54
Unbilled receivables		(1,373	)		(1,167	)
Prepaid expenses and other		(159	)		(751	)
Accounts payable, accrued liabilities, accrued contract labor and accrued payroll		1,032			(2,320	)
Deferred revenue		5,340			(554	)
Net cash provided by operating activities		53			2,117
Investing activities:
Purchases of property and equipment		(901	)		(380	)
Increase in restricted cash		(366	)		—
Net cash used in investing activities		(1,267	)		(380	)
Financing activities:
Proceeds from the exercise of stock options		137			30
Excess tax benefits on vesting of restricted stock units		593			—
Tax withholding related to net share settlement of restricted stock units		(1,194	)		—
Net cash (used in) provided by financing activities		(464	)		30
Net (decrease) increase in cash and cash equivalents		(1,678	)		1,767
Cash and cash equivalents:
Beginning of period		62,449			51,979
End of period	$	60,771		$	53,746

Page 10 of 12

PROS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS — RECONCILIATION
OF GAAP TO NON-GAAP
(Dollars in thousands, except per share data)
(Unaudited)

We use these Non-GAAP financial numbers to assist us in the management of the Company because we believe that this information provides a more consistent and complete understanding of the underlying results and trends of the ongoing business due to the uniqueness of these charges.

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2010			2009			2010			2009
Net income (loss)	$	(628	)	$	1,535		$	(157	)	$	3,526
GAAP stock-based compensation:
Cost of revenue		285			232			518			411
Selling, general and administrative		1,258			738			2,054			1,324
Research and development		449			429			839			816
Total operating expenses		1,992			1,399			3,411			2,551
Litigation expense:
Selling, general and administrative		1,022			—			1,022			—
Tax impact		(999	)		(390	)		(1,557	)		(706	)
Total non-GAAP tax impact		(999	)		(390	)		(1,557	)		(706	)
Non-GAAP net income	$	1,387		$	2,544		$	2,719		$	5,371
Basic	$	0.05		$	0.10		$	0.10		$	0.21
Diluted	$	0.05		$	0.10		$	0.10		$	0.20
Shares used in computing net income per common share:
Basic		26,033,003			25,697,856			25,972,723			25,694,933
Diluted		26,457,280			26,488,540			26,397,433			26,413,376

Page 11 of 12

PROS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS — RECONCILIATION
OF GAAP TO NON-GAAP
(Dollars in thousands)
(Unaudited)

We use these Non-GAAP financial numbers to assist us in the management of the Company because we believe that this information provides a more consistent and complete understanding of the underlying results and trends of the ongoing business due to the uniqueness of these charges.

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2010			2009			2010			2009
Income (loss) from operations	$	(965	)	$	2,072		$	(199	)	$	4,728
GAAP stock-based compensation and litigation expense		3,014			1,399			4,433			2,551
Non-GAAP income from operations	$	2,049		$	3,471		$	4,234		$	7,279
Non-GAAP income from operations %		11.5	%		20.0	%		12.0	%		20.6	%
GAAP gross profit	$	13,024		$	12,407		$	25,636		$	25,615
GAAP stock-based compensation		285			232			518			411
Non-GAAP gross profit	$	13,309		$	12,639		$	26,154		$	26,026
Non-GAAP gross margin		74.6	%		72.9	%		74.4	%		73.6	%
GAAP cost of license and implementation	$	3,414		$	3,765		$	6,634		$	7,357
GAAP stock-based compensation		285			232			518			411
Non- GAAP — cost of license and implementation	$	3,129		$	3,533		$	6,116		$	6,946
Non-GAAP cost license and implementation margin		70.0	%		68.5	%		70.6	%		70.0	%
GAAP selling, general and administrative	$	8,517		$	5,561		$	15,149		$	11,065
GAAP stock-based compensation and litigation expense		2,280			738			3,076			1,324
Non- GAAP — selling, general and administrative	$	6,237		$	4,823		$	12,073		$	9,741
GAAP research and development	$	5,472		$	4,774		$	10,686		$	9,822
GAAP stock-based compensation		449			429			839			816
Non- GAAP research and development	$	5,023		$	4,345		$	9,847		$	9,006

Page 12 of 12