Delaware | ||||
(State or Other Jurisdiction of Incorporation) | ||||
001-33554 | 76-0168604 | |||
(Commission File Number) | (IRS Employer Identification No.) |
3100 Main Street, Suite 900 Houston TX | 77002 | |||||||
(Address of Principal Executive Offices) | (Zip Code) | |||||||
Registrant’s telephone number, including area code | (713) 335-5151 | |||||||
(Former Name or Former Address, if Changed Since Last Report) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
PROS HOLDINGS, INC. | ||
Date: August 7, 2014 | ||
/s/ Charles H. Murphy Charles H. Murphy | ||
Chief Financial Officer and Executive Vice President |
• | Record non-GAAP revenue of $46.5 million, exceeding the high end of guidance, an increase of 31% over the second quarter of 2013; GAAP revenue of $44.4 million, an increase of 25% over the second quarter of 2013. |
• | Non-GAAP operating income for the second quarter was $3.5 million; GAAP operating loss of $7.9 million for the second quarter. |
• | Non-GAAP earnings per share for the second quarter was $0.06; GAAP earnings per share was a loss of $0.24. |
• | Recorded strong bookings growth in the first half, outpacing revenue growth, both on an organic basis and a total basis; growth driven by a record number of deals in a first half, of which approximately 70% were new customer wins. |
• | Added a record number of new customers across a diverse set of industries, such as Anixter International, The Perstorp Group, Stahl Group, Qantas Airways, and YRC Worldwide, among others; continued to strengthen partnerships with existing customers such as Etihad Airways, Mopar and Swiss International Air Lines, among others. |
• | Continued to strengthen PROS leadership team and position the company for continued growth with the addition of John “Jake” Cleveland as senior vice president of worldwide sales, and the appointment of Chris J. Jones as senior vice president of alliances and partners. |
• | Achieved the latest level of product certifications from SAP for integration of PROS solutions into SAP ERP and SAP CRM, continuing to provide the most complete and seamless integration experience in SAP. |
• | Total non-GAAP revenue for the third quarter of 2014 in the range of $47 million to $48.5 million. The Company is reiterating its full year revenue guidance with total non-GAAP revenue for the full year ending December 31, 2014, in the range of $190 million to $194 million. |
• | Non-GAAP operating income of $3 million to $4.5 million and non-GAAP income per share of $0.05 to $0.08 for the third quarter of 2014, which excludes estimated non-cash share-based compensation charges of approximately $6.4 million, and estimated intangible amortization and integration-related expenses of approximately $2.1 million. Non-GAAP operating margin expectations for the full year 2014 remain at approximately 10%. |
• | Non-GAAP estimated tax rate of approximately 40% for the third quarter and full year 2014. |
• | Estimated weighted average diluted shares outstanding of 30.4 million for the third quarter and full year 2014. |
• | Acquisition-Related Expenses: Acquisition-related expenses include transaction fees, due diligence costs and other one-time direct costs associated with our acquisitions. These amounts are unrelated to our core performance during any particular period and are impacted by the timing and size of the acquisitions. We exclude acquisition-related expenses to provide investors a method to compare our operating results to prior periods and to peer companies because such amounts can vary significantly based on the frequency of acquisitions and magnitude of acquisition expenses. |
• | Share-Based Compensation: Although share-based compensation is an important aspect of compensation for our employees and executives, our share-based compensation expense can vary because of changes in our stock price and market conditions at the time of grant, varying valuation methodologies, and the variety of award types. Since share-based compensation expense can vary for reasons that are generally unrelated to our performance during any particular period, we believe this could make it difficult for investors to compare our current financial results to previous and future periods. Therefore, we believe it is useful to exclude share-based compensation in order to better understand our business performance and allow investors to compare our operating results with peer companies. |
• | Amortization of Acquisition-Related Intangibles: We view amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company's research and development efforts, trade names, customer lists and customer relationships, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period. |
• | Impairment of internal-use software: We review the software that has been capitalized for impairment when events or changes in circumstances indicate the software might be impaired. From time to time, we may determine that an impairment is required under GAAP. Since the impairment of internal-use software can vary for reasons that are generally unrelated to our performance during any particular period, we believe this could make it difficult for investors to compare our current financial results to previous and future periods. Therefore, we believe it is useful to exclude any such impairments in order to better understand our business performance and allow investors to compare our operating results with peer companies. |
• | Tax Consequences: In addition, we exclude the tax consequences associated with stock-based compensation to provide investors with a useful comparison of our operating results to prior periods and to our peer companies because such amounts can vary significantly based on the frequency of acquisitions and the tax rates applicable to stock-based compensation in certain jurisdictions. |
June 30, 2014 | December 31, 2013 | |||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 30,034 | $ | 44,688 | ||||
Accounts and unbilled receivables, net of allowance of $816 and $1,060, respectively | 62,047 | 46,566 | ||||||
Prepaid and other current assets | 10,866 | 6,157 | ||||||
Restricted cash - current | 2,501 | 39,718 | ||||||
Total current assets | 105,448 | 137,129 | ||||||
Restricted cash- noncurrent | 100 | 100 | ||||||
Property and equipment, net | 16,761 | 15,587 | ||||||
Intangibles, net | 24,227 | 8,232 | ||||||
Goodwill | 23,352 | 7,024 | ||||||
Deferred tax assets - noncurrent, net of valuation allowance | 10,505 | 10,505 | ||||||
Other long term assets, net | 1,334 | 1,251 | ||||||
Total assets | $ | 181,727 | $ | 179,828 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Current liabilities: | ||||||||
Accounts payable and other liabilities | $ | 12,249 | $ | 7,839 | ||||
Accrued liabilities | 8,653 | 5,210 | ||||||
Accrued payroll and other employee benefits | 10,398 | 9,679 | ||||||
Deferred revenue | 46,347 | 42,274 | ||||||
Total current liabilities | 77,647 | 65,002 | ||||||
Long-term deferred revenue | 3,437 | 2,977 | ||||||
Other long-term liabilities | 3,316 | 546 | ||||||
Total liabilities | 84,400 | 68,525 | ||||||
PROS Stockholders' equity: | ||||||||
Preferred stock, $0.001 par value, 5,000,000 shares authorized none issued | — | — | ||||||
Common stock, $0.001 par value, 75,000,000 shares authorized; 33,385,511 and 32,606,228 shares issued, respectively; 28,967,926 and 28,188,643 shares outstanding, respectively | 34 | 33 | ||||||
Additional paid-in capital | 106,044 | 106,880 | ||||||
Treasury stock, 4,417,585 common shares, at cost | (13,938 | ) | (13,938 | ) | ||||
Retained earnings | 2,879 | 18,328 | ||||||
Accumulated other comprehensive loss | 157 | — | ||||||
Non-controlling interest | 2,151 | — | ||||||
Total stockholders’ equity | 97,327 | 111,303 | ||||||
Total liabilities and stockholders’ equity | $ | 181,727 | $ | 179,828 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenue: | ||||||||||||||||
License | $ | 12,332 | $ | 9,725 | $ | 24,195 | $ | 19,114 | ||||||||
Services | 13,079 | 12,509 | 25,195 | 23,744 | ||||||||||||
Subscription | 5,813 | 1,936 | 10,126 | 3,904 | ||||||||||||
Total license, services and subscription | 31,224 | 24,170 | 59,516 | 46,762 | ||||||||||||
Maintenance and support | 13,144 | 11,357 | 25,765 | 22,391 | ||||||||||||
Total revenue | 44,368 | 35,527 | 85,281 | 69,153 | ||||||||||||
Cost of revenue: | ||||||||||||||||
License | 51 | 192 | 106 | 233 | ||||||||||||
Services | 10,167 | 8,227 | 20,620 | 16,160 | ||||||||||||
Subscription | 1,592 | 389 | 2,517 | 885 | ||||||||||||
Total license, services and subscription | 11,810 | 8,808 | 23,243 | 17,278 | ||||||||||||
Maintenance and support | 2,361 | 1,978 | 4,937 | 4,061 | ||||||||||||
Total cost of revenue | 14,171 | 10,786 | 28,180 | 21,339 | ||||||||||||
Gross profit | 30,197 | 24,741 | 57,101 | 47,814 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, marketing, general and administrative | 24,267 | 15,935 | 46,722 | 30,223 | ||||||||||||
Research and development | 11,092 | 8,026 | 22,651 | 16,121 | ||||||||||||
Acquisition-related | 579 | — | 1,969 | — | ||||||||||||
Impairment charge | 2,130 | — | 2,130 | — | ||||||||||||
(Loss) income from operations | (7,871 | ) | 780 | (16,371 | ) | 1,470 | ||||||||||
Other expense, net | (571 | ) | (129 | ) | (1,543 | ) | (234 | ) | ||||||||
(Loss) income before income tax provision | (8,442 | ) | 651 | (17,914 | ) | 1,236 | ||||||||||
Income tax (benefit) provision | (1,240 | ) | 71 | (1,800 | ) | (1,078 | ) | |||||||||
Net (loss) income | $ | (7,202 | ) | $ | 580 | $ | (16,114 | ) | $ | 2,314 | ||||||
Net loss attributable to non-controlling interest | (206 | ) | — | (663 | ) | — | ||||||||||
Net (loss) income attributable to PROS Holdings, Inc. | (6,996 | ) | 580 | (15,451 | ) | 2,314 | ||||||||||
Net (loss) income | $ | (7,202 | ) | $ | 580 | $ | (16,114 | ) | $ | 2,314 | ||||||
Net (loss) earnings per share attributable to PROS Holdings, Inc.: | ||||||||||||||||
Basic | $ | (0.24 | ) | $ | 0.02 | $ | (0.54 | ) | $ | 0.08 | ||||||
Diluted | $ | (0.24 | ) | $ | 0.02 | $ | (0.54 | ) | $ | 0.08 | ||||||
Weighted average number of shares: | ||||||||||||||||
Basic | 28,958,233 | 28,006,517 | 28,813,008 | 27,881,957 | ||||||||||||
Diluted | 28,958,233 | 29,958,580 | 28,813,008 | 29,710,202 |
For the Six Months Ended June 30, | ||||||||
2014 | 2013 | |||||||
Operating activities: | ||||||||
Net (loss) income | $ | (16,114 | ) | $ | 2,314 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 5,416 | 1,999 | ||||||
Share-based compensation | 10,396 | 7,559 | ||||||
Tax shortfall from share-based compensation | — | (10 | ) | |||||
Provision for doubtful accounts | (244 | ) | (70 | ) | ||||
Impairment charge | 2,130 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts and unbilled receivables | (4,771 | ) | 1,317 | |||||
Prepaid expenses and other assets | (3,780 | ) | (821 | ) | ||||
Accounts payable and other liabilities | 122 | 715 | ||||||
Accrued liabilities | 371 | 391 | ||||||
Accrued payroll and other employee benefits | (1,753 | ) | (2,841 | ) | ||||
Deferred revenue | (859 | ) | (2,619 | ) | ||||
Net cash (used in) provided by financing activities | (9,086 | ) | 7,934 | |||||
Investing activities: | ||||||||
Purchases of property and equipment | (4,520 | ) | (2,172 | ) | ||||
Acquisition of Cameleon Software, net of cash acquired | (22,048 | ) | — | |||||
Capitalized internal-use software development costs | (1,623 | ) | (1,534 | ) | ||||
Decrease in restricted cash | 37,218 | — | ||||||
Net cash provided by (used) in investing activities | 9,027 | (3,706 | ) | |||||
Financing activities: | ||||||||
Exercise of stock options | 1,091 | 2,771 | ||||||
Tax withholding related to net share settlement of restricted stock units | (12,319 | ) | (2,330 | ) | ||||
Increase in Parent's ownership in Cameleon Software | (3,410 | ) | — | |||||
Net cash (used in) provided by financing activities | (14,638 | ) | 441 | |||||
Effect of foreign currency rates on cash | 43 | — | ||||||
Net change in cash and cash equivalents | (14,654 | ) | 4,669 | |||||
Cash and cash equivalents: | ||||||||
Beginning of period | 44,688 | 83,558 | ||||||
End of period | $ | 30,034 | $ | 88,227 |
For the Three Months Ended June 30, | Quarter over Quarter | For the Six Months Ended June 30, | Year over Year | |||||||||||||||||||||
2014 | 2013 | % change | 2014 | 2013 | % change | |||||||||||||||||||
GAAP revenue | $ | 44,368 | $ | 35,527 | 25% | $ | 85,281 | $ | 69,153 | 23% | ||||||||||||||
Non-GAAP adjustment: | ||||||||||||||||||||||||
Acquisition-related deferred revenue write-down | 2,107 | $ | — | 4,073 | $ | — | ||||||||||||||||||
Non-GAAP revenue | $ | 46,475 | $ | 35,527 | 31% | $ | 89,354 | $ | 69,153 | 29% | ||||||||||||||
GAAP gross profit | $ | 30,197 | $ | 24,741 | 22% | $ | 57,101 | $ | 47,814 | 19% | ||||||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||||||
Acquisition-related deferred revenue write-down, net of cost of revenue | 1,323 | — | 2,464 | — | ||||||||||||||||||||
Acquisition-related foreign taxes on equity grants | — | — | 68 | — | ||||||||||||||||||||
Amortization of intangibles assets | 71 | — | 139 | — | ||||||||||||||||||||
Share-based compensation | 959 | 534 | 1,681 | 996 | ||||||||||||||||||||
Non-GAAP gross profit | $ | 32,550 | $ | 25,275 | 29% | $ | 61,453 | $ | 48,810 | 26% | ||||||||||||||
Non-GAAP gross margin | 70.0 | % | 71.1 | % | 68.8 | % | 70.6 | % | ||||||||||||||||
GAAP (loss) income from operations | $ | (7,871 | ) | $ | 780 | (1,109)% | $ | (16,371 | ) | $ | 1,470 | (1,214)% | ||||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||||||
Acquisition-related deferred revenue write-down, net of cost of revenue | 1,323 | — | 2,464 | |||||||||||||||||||||
Acquisition-related expenses | 579 | — | 1,969 | — | ||||||||||||||||||||
Acquisition-related foreign taxes on equity grants | — | 942 | ||||||||||||||||||||||
Amortization of intangibles assets | 1,372 | — | 2,725 | — | ||||||||||||||||||||
Accretion expense for acquisition-related contingent consideration | 60 | — | 125 | — | ||||||||||||||||||||
Impairment of internal-use software due to acquisition | 2,130 | — | 2,130 | — | ||||||||||||||||||||
Share-based compensation | 5,945 | 4,139 | 10,304 | 7,559 | ||||||||||||||||||||
Total Non-GAAP adjustments | $ | 11,409 | $ | 4,139 | $ | 20,659 | $ | 7,559 | ||||||||||||||||
Non-GAAP income from operations | $ | 3,538 | $ | 4,919 | (28)% | $ | 4,288 | $ | 9,029 | (53)% | ||||||||||||||
Non-GAAP income from operations % of total revenue | 7.6 | % | 13.8 | % | 4.8 | % | 13.1 | % |
For the Three Months Ended June 30, | Quarter over Quarter | For the Six Months Ended June 30, | Year over Year | |||||||||||||||||||||
2014 | 2013 | % change | 2014 | 2013 | % change | |||||||||||||||||||
GAAP net (loss) income | $ | (7,202 | ) | $ | 580 | (1,342)% | $ | (16,114 | ) | $ | 2,314 | (796)% | ||||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||||||
Total Non-GAAP adjustments affecting income (loss) from operations | 11,409 | 4,139 | 20,659 | 7,559 | ||||||||||||||||||||
Acquisition-related foreign currency loss | — | — | 593 | — | ||||||||||||||||||||
Tax impact related to non-GAAP adjustments | (2,427 | ) | (1,216 | ) | (3,135 | ) | (2,041 | ) | ||||||||||||||||
Non-GAAP net income | $ | 1,780 | $ | 3,503 | (49)% | $ | 2,003 | $ | 7,832 | (74)% | ||||||||||||||
Non-GAAP income attributable to non-controlling interest | 19 | — | (68 | ) | — | |||||||||||||||||||
Non-GAAP income attributable to PROS Holdings, Inc. | 1,761 | 3,503 | 2,071 | 7,832 | ||||||||||||||||||||
Non-GAAP diluted earnings per share attributable to PROS Holdings, Inc. | $ | 0.06 | $ | 0.12 | $ | 0.07 | $ | 0.26 | ||||||||||||||||
Shares used in computing non-GAAP earnings per share | 30,179 | 29,959 | 30,323 | 29,710 | ||||||||||||||||||||
Detail of share-based compensation expense: | ||||||||||||||||||||||||
Cost of revenue | $ | 959 | $ | 534 | $ | 1,681 | $ | 996 | ||||||||||||||||
Selling, marketing, general and administrative | 3,770 | 2,838 | 6,442 | 5,059 | ||||||||||||||||||||
Research and development | 1,216 | 767 | 2,181 | 1,504 | ||||||||||||||||||||
Total share-based compensation expense | $ | 5,945 | $ | 4,139 | $ | 10,304 | $ | 7,559 | ||||||||||||||||
Detail of amortization of intangible assets: | ||||||||||||||||||||||||
Cost of revenue | $ | 71 | $ | — | $ | 139 | $ | — | ||||||||||||||||
Selling, marketing, general and administrative | 735 | — | 1,485 | — | ||||||||||||||||||||
Research and development | 566 | — | 1,101 | — | ||||||||||||||||||||
Total amortization of intangible assets | $ | 1,372 | $ | — | $ | 2,725 | $ | — | ||||||||||||||||