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 2, 2016

PROS Holdings, Inc.

(Exact Name of Registrant as Specified in Charter)

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)

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 (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))

Item 2.02. Results of Operations and Financial Condition.

On August 2, 2016, PROS Holdings, Inc. (the "Company”) issued a press release announcing financial results for its quarter ended June 30, 2016. A copy of the press release, dated as of August 2, 2016, is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The press release contains forward looking statements regarding the Company and includes cautionary statements identifying important factors that could cause actual results to differ materially from those anticipated.

The information in 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 5.02.  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On August 2, 2016, the Company also announced that its Chief Operating Officer, D. Blair Crump, separated from his employment with the Company effective July 29, 2016 (the “Departure Date”) to pursue other opportunities. In connection with such separation, the Company and Mr. Crump entered into a General Release, dated as of August 1, 2016 (the “Separation Agreement”) pursuant to the terms of Mr. Crump’s Employment Agreement with the Company, dated February 10, 2014 (the “Employment Agreement”).

Pursuant to the terms of the Separation Agreement, the Company is obligated to (i) pay to Mr. Crump as severance his annual base salary in effect on the Departure Date in installments over a period of twelve months, (ii) pay Mr. Crump’s COBRA premiums for health and welfare benefits continuation for a period of twelve months in a lump sum; (iii) pay to Mr. Crump his cash incentive for the first six months of 2016 in a lump sum; (iv) pay to Mr. Crump his cash incentive for the next twelve months in installments over a twelve month period; and (v) vest all equity awards issued to Mr. Crump by the Company with respect to such shares that would have vested following the Termination Date. The Company’s obligations to provide the forgoing benefits are subject to (i) the effectiveness of the Separation Agreement and (ii) Mr. Crump’s compliance with certain post-employment restrictive covenants which limit Mr. Crump’s ability to compete with the Company, solicit customers or employees of the Company, or divulge confidential information concerning the Company.

The above description of the Separation Agreement is a summary and is qualified in its entirety by the Separation Agreement itself, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

10.1 General Release, dated as of August 1, 2016, by and between PROS, Inc. and D. Blair Crump.

99.1 Press release dated August 2, 2016.

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.

	PROS HOLDINGS, INC.
August 2, 2016		/s/ Stefan Schulz
		Stefan Schulz
		Executive Vice President and Chief Financial Officer

EX-10.1

Exhibit 10.1

GENERAL RELEASE

In consideration for the mutual promises described in that certain Employment Agreement dated February 10, 2014 (“Employment Agreement”)executed between PROS, Inc., a Delaware corporation (the “Company”) and D. Blair Crump (the “Employee”) and the consideration set forth below, the parties enter into the following General Release (“General Release”) and agree as follows:

1. Payment of Severance Package. Notwithstanding anything herein to the contrary, Company agrees to pay Employee the following severance package (the “Severance Package”), and continue to abide by the other surviving provisions of the Employment Agreement:

(i)     severance equivalent to Four Hundred Twenty Thousand and 00/100 Dollars ($420,000.00), less applicable withholding and deductions, paid in equal installments over a twelve (12) month period on Company’s regular paydays, with the first such installment payment made on the first payday following the 30th day after July 29, 2016; and

(ii)     to the extent Employee participates in any medical, prescription drug, dental, vision and any other “group health plan” of the Company immediately prior to July 29, 2016, the Company shall pay to Employee in a lump sum on the first payday following the 30^th day after July 29, 2016, a fully taxable cash payment in an amount equal to twelve (12) times the monthly premium cost to Employee of continued coverage for Employee that would be incurred for continuation coverage under such plans in accordance with Section 4980B of the Internal Revenue Code of 1986, as amended, and Part 6 of Title 1 of the Employee Retirement Income Security Act of 1986, as amended, less applicable tax withholding, payable on the first payday following the 30th day after July 29, 2016. Employee may, but is not obligated to, use such payment toward the cost of continuation coverage premiums; and

(iii)    (A) Two Hundred Ten Thousand and 00/100 ($210,000.00) (the “Unpaid Bonus”), and (B) Four Hundred Twenty Thousand and 00/100 Dollars ($420,000.00) (the “Forward Bonus”). The Unpaid Bonus shall be payable on the first payday following the 30^th day after July 29, 2016, and the Forward Bonus shall be payable in equal installments over a twelve (12) month period on Company’s regular paydays, with the first such installment payment made on the first payday following the 30th day after July 29, 2016; and

(iv)     the acceleration of vesting all restricted stock units issued to the Employee by PROS Holdings, Inc.

2. Continued Compliance. Employee agrees to continue to abide by the surviving provisions of the Employment Agreement, which is incorporated herein by reference. Provided that Employee (a) strictly complies with Employee’s confidentiality obligations in the Employment Agreement and (b) does not otherwise disrupt, impair, damage or interfere with the Company’s relationship with its employees; nothing in the Employment Agreement will in any way limit the Employee from directly or indirectly solicit for employment, either on Employee’s behalf or on behalf of any other entity, Denise Austin for employment.

3. General Release.

3.1 Subject to Employee’s rights under this General Release, including the right to enforce the Company’s obligations in Section 1 above, which are not released, Employee unconditionally, irrevocably and absolutely releases and discharges Company, and any parent and subsidiary corporations, divisions and affiliated corporations, partnerships or other affiliated entities of Company, past and present, as well as their respective employees, officers, directors, members, managers, stockholders, partners, agents, successors and assigns (collectively, “Released Parties”), from all claims related in any way to the transactions or occurrences between them to date, to the fullest extent permitted by law, including, but not limited to, Employee’s employment with Company, the termination of Employee’s employment, and all other losses, liabilities, claims, charges, demands and causes of action, known or unknown, suspected or unsuspected, arising directly or indirectly out of or in any way connected with Employee’s employment with Company. This release is intended to have the broadest possible application and includes, but is not limited to, any tort, contract, common law, constitutional or other statutory claims, including, but not limited to alleged violations of the Texas Labor Code (including but not limited to the Texas Civil Rights Act, the Texas Payday Act, and the Texas Minimum Wage Law), the federal Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act of 1967, as amended, and all claims for attorneys’ fees, costs and expenses. Employee expressly waives Employee’s right to recovery of any type, including damages or reinstatement, in any administrative or court action, whether state or federal, and whether brought by Employee or on

Employee’s behalf, related in any way to the matters released herein. However, this general release is not intended to bar any claims that, by statute, may not be waived, such as claims for any challenge to the validity of Employee’s release of claims under the Age Discrimination in Employment Act of 1967, as amended, as set forth in this General Release.

3.2 Employee acknowledges that Employee may discover facts or law different from, or in addition to, the facts or law that Employee knows or believes to be true with respect to the claims released in this General Release and agrees, nonetheless, that this General Release and the release contained in it shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery of them.

3.3 Employee declares and represents that Employee intends this General Release to be complete and not subject to any claim of mistake, and that the release herein expresses a full and complete release and Employee intends the release herein to be final and complete. Employee executes this release with the full knowledge that this release covers all possible claims against the Released Parties, to the fullest extent permitted by law.

4. Indemnification. The Company and Employee agree that Employee is not releasing any claims Employee may have for indemnification under state or other law or any indemnification agreement in effect between Employee and Company as of the Separation Date (as defined below) or the charter, articles or by-laws of the Company, or under any insurance policy providing directors’ and officers’ coverage for any lawsuit or claim relating to the period when Employee was a director, officer or employee of the Company (if any); provided, however, that (i) Employee’s execution of this General Release is not a concession or guaranty that Employee has any such rights to indemnification, (ii) this General Release does not create any additional rights to indemnification and (ii) the Company retains any defenses it may have to such indemnification or coverage.

5. Representation Concerning Filing of Legal Actions. Employee represents that, as of the date of this General Release, Employee has not filed any lawsuits, charges, complaints, petitions, claims or other accusatory pleadings against Company or any of the other Released Parties in any court or with any governmental agency.

6. Nondisparagement. Each party agrees that such party will not make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage or in any way criticize the personal and/or business reputations, practices or conduct of such party or any of the other Released Parties.

7. Confidentiality and Return of Company Property. Employee understands and agrees that as a condition of receiving the Severance Package in Paragraph 1, all Company property must be returned to Company on or before the last day of Employee’s employment at Company (“Separation Date”). By signing this General Release, Employee represents and warrants that Employee will have returned to Company on or before the Separation Date, all Company property, data and information belonging to Company and agrees that Employee will not use or disclose to others (other than his attorney under an obligation of confidentiality and to the extent necessary to provide legal advice to Employee regarding any termination his employment for Good Reason) any confidential or proprietary information of Company or the Released Parties. In addition, Employee agrees to keep the terms of this General Release confidential between Employee and Company, except that Employee may tell Employee’s immediate family and attorney or accountant, if any, as needed, but in no event should Employee discuss this General Release or its terms with any current or prospective employee of Company.

8. No Admissions. By entering into this General Release, the Released Parties make no admission that they have engaged, or are now engaging, in any unlawful conduct. The parties understand and acknowledge that this General Release is not an admission of liability and shall not be used or construed as such in any legal or administrative proceeding.

9. Older Workers’ Benefit Protection Act. This General Release is intended to satisfy the requirements of the Older Workers’ Benefit Protection Act, 29 U.S.C. 626(f). Employee is advised to consult with an attorney before executing this General Release.

9.1 Acknowledgments/Time to Consider. Employee acknowledges and agrees that (a) Employee has read and understands the terms of this General Release; (b) Employee has been advised in writing to consult with an attorney before executing this General Release; (c) Employee has obtained and considered such legal counsel as Employee deems necessary; (d) Employee has been given twenty-one (21) days to consider whether or not to enter into this General Release (although Employee may elect not to use the full 21-day period at Employee’s option); and (e) by signing this General Release, Employee acknowledges that Employee does so freely, knowingly, and voluntarily.

9.2 Revocation/Effective Date. This General Release shall not become effective or enforceable until the eighth day after Employee signs this General Release. In other words, Employee may revoke Employee’s acceptance of this General Release within seven (7) days after the date Employee signs it. Employee’s revocation must be in writing and received

by PROS, Inc., 3100 Main Street, Suite 900, Houston, Texas 77002, by 5:00 p.m. Central Time on the seventh day in order to be effective. If Employee does not revoke acceptance within the seven (7) day period, Employee’s acceptance of this General Release shall become binding and enforceable on the eighth day (the “Effective Date”).

9.3 Preserved Rights of Employee. This General Release does not waive or release any rights or claims that Employee may have under the Age Discrimination in Employment Act that arise after the execution of this General Release. In addition, this General Release does not prohibit Employee from challenging the validity of this General Release’s waiver and release of claims under the Age Discrimination in Employment Act of 1967.

10. Severability. In the event any provision of this General Release shall be found unenforceable, the unenforceable provision shall be deemed deleted and the validity and enforceability of the remaining provisions shall not be affected thereby.

11. Full Defense. This General Release may be pled as a full and complete defense to, and may be used as a basis for an injunction against, any action, suit or other proceeding that may be prosecuted, instituted or attempted by Employee in breach hereof.

12. Governing Law; Forum. The validity, interpretation and performance of this General Release shall be construed and interpreted according to the laws of the United States of America and the State of Texas without giving effect to conflicts of law principles. Employee agrees that any disputes or litigation that may arise with respect to the General Release shall be brought and prosecuted in Harris County, Texas and waives any and all objections to the location of such litigation, including but not limited to objections based on forum non conveniens. In addition, Employee irrevocably consents to the exclusive personal jurisdiction of the federal and state courts located in Harris County, Texas, as applicable, for any matter arising out of or relating to this General Release.

13. Entire Agreement. This General Release, including the Employment Agreement incorporated herein by reference, constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. This General Release may be amended or modified only with the written consent of Employee and the Board of Directors of Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.

THE PARTIES TO THIS GENERAL RELEASE HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS GENERAL RELEASE ON THE DATES SHOWN BELOW.

COMPANY:

PROS, INC.

a Delaware corporation

By:    /s/ Andres D. Reiner        

Name:    Andres D. Reiner            

Title:    President & CEO            

Date:    August 1, 2016            

EMPLOYEE:

/s/ D. Blair Crump            

D. Blair Crump

EX-99.1

Exhibit 99.1

PROS HOLDINGS, INC. REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS

• Exceeded the high end of guidance on total revenue, subscription revenue, and ACV.

• ACV bookings up 17% year-over-year in the second quarter, and up 40% in the first half of 2016.

• ARR of $109.6 million as of June 30, 2016, up 22% year-over-year.

• Raised full year 2016 guidance on subscription revenue, ARR, ACV, and free cash flow.

HOUSTON – August 2, 2016— PROS Holdings, Inc. (NYSE: PRO), a revenue and profit realization company, today announced financial results for the second quarter ended June 30, 2016.

CEO Andres Reiner stated, “We are pleased with our strong performance in the first two quarters of 2016, with ACV bookings up 40% midway through the year. We are thrilled to help more customers outperform as we continue to drive our transformation to the cloud and deliver market-leading innovation. Based on our increasing momentum, we expect to start delivering quarterly sequential revenue growth, beginning in the fourth quarter. Reaching this important milestone in our cloud transformation is a testament to our PROS team worldwide and customer enthusiasm for our cloud solutions.”

Second Quarter 2016 Financial Highlights

Key financial results for the fiscal second quarter are shown below. Throughout this press release, all dollar figures are in millions, except net loss per share.  Unless otherwise noted, all results are on a reported basis and are compared to the prior-year period.

	GAAP								Non-GAAP
	Q2 2016			Q2 2015			% Change		Q2 2016			Q2 2015			% Change
Revenue and Bookings:
Revenue	$	37.0		$	41.7		(11	)%	$	37.0		$	42.7		(13	)%
Subscription Revenue	9.1			6.8			34	%	$	9.1		$	6.9		32	%
Annual Recurring Revenue ("ARR")	n/a			n/a			n/a		$	109.6		$	89.6		22	%
Annual Contract Value ("ACV") bookings	n/a			n/a			n/a		7.5			6.5			17	%
Profitability:
Operating Loss	(18.1		)	(12.9		)	nm		(11.4		)	(4.4		)	nm
Net Loss	(20.5		)	(15.7		)	nm		(7.8		)	(3.4		)	nm
Net Loss Per Share	(0.68		)	(0.53		)	nm		(0.26		)	(0.11		)	nm
Adjusted EBITDA	n/a			n/a			n/a		(9.7		)	(3.2		)	nm
Cash:
Net cash (used in) provided by operating activities	(6.6		)	3.4			nm		(6.6		)	3.4			nm
Free Cash Flow	n/a			n/a			n/a		$	(8.5	)	$	2.6		nm

The attached tables provide a summary of PROS results for the period, including a reconciliation of GAAP to non-GAAP revenue, gross profit, income (loss) from operations, and net income (loss), as well as earnings (loss) per share.

Recent Business Highlights

• Introduced innovations and enhancements with Spring 2016 release for PROS SellingPRO, PricingPRO and RevenuePRO solutions. New data science-driven capabilities in dynamic pricing, offer optimization, personalization, configure-price-quote

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(CPQ), and contract management can enable companies to realize their revenue and profit potential by delivering a frictionless commerce experience to their customers.

• Announced a technology integration and go-to-market partnership with Icertis to deliver a seamless and easy-to-use lead-to-contract solution for Microsoft Dynamics CRM and Salesforce.com. By combining PROS Smart CPQ with the Icertis Contract Management platform, sellers can more accurately predict customer needs and prescribe - in real-time - product configurations, price guidance, quotes and proposals, and execute contracts, helping drive higher revenue and faster profit realization.

• Completed first Microsoft Azure deployment of PROS real-time dynamic pricing solution for airlines, leveraging two Microsoft cloud environments in Europe to process an average of 12 million transactions per day at less than 100 milliseconds each, with 100% uptime.

• Showcased deep Microsoft integration and go-to-market success as a featured ISV partner at the Microsoft Worldwide Partner Conference; spotlighted in keynote and event video for delivering high value to Microsoft customers through data science, insights, and integration with Microsoft Dynamics CRM, Microsoft Cortana Intelligence Suite, Microsoft SQL Server R Services and Microsoft Azure.

• Announced open registration for PROS Outperform 2017, to be held on May 10-12, 2017 at the Palmer House Hilton in Chicago.

Organizational Update

PROS today announced that Chief Operating Officer, D. Blair Crump, has left PROS to pursue other opportunities. 

CEO Andres Reiner stated, “On behalf of the company, I would like to thank Blair for his contributions, and wish him the best. With the strength of our leadership team and our drive for agility as we execute on our cloud transformation, we do not have any current plans to replace the COO position.”

Mr. Crump has been COO of PROS since February 2014.

Financial Outlook

PROS anticipates the following for the third quarter and full year 2016, based on an estimated 30.4 million basic weighted average shares outstanding and a 36% non-GAAP estimated tax rate:

	Q3 2016 Guidance	v. Q3 2015 at Mid-Point	Full Year 2016 Guidance	v. Prior Year at Mid-Point
Total Revenue	$35 to $36	(15)%	$150 to $153	(12)%
Subscription Revenue	$9.3 to $9.5	36%	$35.5 to $36.5	23%
ARR	n/a	n/a	$118.5 to $120.5	22%
ACV Bookings	$4.5 to $6.5	23%	$26.5 to $28.5	28%
Non-GAAP Loss Per Share	$(0.36) to $(0.34)	n/a	n/a	n/a
Adjusted EBITDA	$(14) to $(13)	n/a	$(45) to $(43)	n/a
Free Cash Flow	n/a	n/a	$(36) to $(34)	n/a

Conference Call

In conjunction with this announcement, PROS Holdings, Inc. will host a conference call on Tuesday, August 2, 2016, at 4:45 p.m. (EDT) to discuss the company’s financial results and business outlook. To access this call, dial 877-407-9039 (toll-free) or 201-689-8470, and enter pass code 13640460. The live webcast of the conference call can be accessed under the “Investor Relations” section of the Company’s website at www.pros.com.

Following the call, an archived webcast will be available in the “Investor Relations” section of the Company’s website at www.pros.com. A telephone replay will be available until Tuesday, August 9, 2016, at 877-870-5176 (toll-free) or 1-858-384-5517

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using the pass code 13640460. An archived webcast of this conference call will also be available in the “Investor Relations” section of the Company’s website at www.pros.com.

Analyst Day

PROS Holdings, Inc. will host an analyst day on Thursday, November 10, 2016, at the Sofitel New York. The event will begin at 10:00 a.m. (EST). The Company’s executive management team will discuss strategy, performance, and the cloud transformation. Guests can register for the live webcast or to attend in-person in the “Investor Relations” section of the Company’s website at www.pros.com.

About PROS

PROS Holdings, Inc. (NYSE: PRO) is a revenue and profit realization company that helps customers realize their potential through the blend of simplicity and data science. PROS offers solutions to help accelerate sales, formulate winning pricing strategies and align product, demand and availability. PROS revenue and profit realization solutions are designed to allow customers to experience meaningful revenue growth, sustained profitability and modernized business processes. To learn more, visit www.pros.com.

Forward-looking Statements

This press release contains forward-looking statements, including statements about our future financial performance; positioning; management's confidence and optimism; customer successes; demand for enterprise revenue and profit realization software solutions; business expansion; business predictability; ARR; ACV bookings; revenue; adjusted EBITDA; free cash flow; shares outstanding and effective tax rate. The forward-looking statements contained in this press release are based upon our historical performance and our 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 risks related to: (a) our ability to execute on our cloud-first strategy, (b) reduced revenue and cash flow resulting from our transition to a cloud-first strategy, (c) threats to the security of our or our customer’s data, (d) potential business or service disruptions from our third party data centers, cloud platform providers or other unrelated service providers, (e) market acceptance of our new products and product enhancements, (f) the risk that the markets for our software does not grow as anticipated, (g) the length of our sales cycles, (h) the risk that we will not be able to maintain historical maintenance, support and subscription renewal rates, (i) competition from vendors of sales, pricing, revenue management and configure-price-quote solutions as well as from companies internally developing their own solutions, (j) potential unauthorized or improper actions of our personnel, (k) the risk that acquisitions we have and may enter into in the future may be difficult to integrate, fail to achieve our objectives, disrupt our business, dilute stockholder value or divert management attention, (l) any downturn in sales to our target markets, (m) potential delays or other challenges related to the implementation of our solutions, (n) the difficulties of making accurate estimates necessary to complete a project and recognize revenue, (o) personnel risks associated with growing a business generally, (p) the impact that a slowdown in the world or any particular economy has on our business sales cycles, prospects’ and customers’ spending decisions, timing of implementation decisions, payment and renewal decision, (q) our debt repayment obligations, (r) the impact of currency fluctuations on our results of operations, and (s) civil and political unrest in geographic regions in which we operate. Additional information relating to the uncertainty affecting PROS’ business is contained in our 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 (loss) income from operations, annual recurring revenue, annual contract value bookings, total contract value bookings, adjusted EBITDA margin, amortization of convertible debt discount and debt issue costs, tax rate, 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 and cloud-first transition.

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

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provided in the tables included as part of this press release, and can be found, along with other financial information, in the investor relations portion of our website. PROS' use of non-GAAP financial measures may not be consistent with the presentations by similar companies in PROS' industry. PROS has also provided in this release certain forward-looking non-GAAP financial measures, including non-GAAP revenue, non-GAAP (loss) income from operations, annual recurring revenue, total contract value bookings, annual contract value bookings, and non-GAAP tax rates (collectively the "non-GAAP financial measures") as follows:

Non-GAAP revenue: Business combination accounting principles under GAAP require us to recognize the fair value of software subscription, maintenance and professional services contracts assumed in our acquisitions of SignalDemand, Inc. and Cameleon Software SA. A portion of these software subscription and professional services are deferred and typically recognized over the term of the software subscription contract, so our GAAP revenues during the term of the contract after the acquisition do not reflect the full amount of revenues that would have been reported if the acquired deferred software subscription and professional services revenues were not written down to fair value. The revenue for maintenance is deferred and typically recognized over a one-year period, so our GAAP revenues for the one-year period after the acquisition do not reflect the full amount of revenues that would have been reported if the acquired deferred maintenance revenue was not written down to fair value. The non-GAAP revenue adjustments eliminate the effect of the deferred revenue write-down and include the costs associated with the revenue adjustment. We believe these adjustments to the revenue from these contracts and to the associated costs are useful to investors as an additional means to reflect revenue trends of our business.

Non-GAAP income from operations: Non-GAAP (loss) income from operations includes the non-GAAP revenue discussed above and also excludes the impact of stock-based compensation, amortization of acquisition-related intangibles, amortization of debt discount and issuance costs, recovery of bankruptcy claims, severance, as well as the tax consequences associated with stock-based compensation costs arising from our acquisitions. Non-GAAP (loss) income from operations excludes the following items from non-GAAP estimates:

• 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.

• Amortization of Debt Discount and Issuance Costs: Amortization of debt discount and issuance costs are related to our Senior Notes due 2019. These amounts are unrelated to our core performance during any particular period, and therefore, we believe it is useful to exclude these amounts in order to better understand our business performance and allow investors to compare our results with peer companies.

• Taxes: We exclude the tax consequences associated with non-GAAP items 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. In the fourth quarter of 2014, we concluded that it is more likely than not that we will be unable to fully realize our deferred tax assets and accordingly, established a valuation allowance against those assets. The ongoing impact of the valuation allowance on our non-GAAP effective tax rate has been eliminated to allow investors to better understand our business performance and compare our operating results with peer companies.

Annual Recurring Revenue: Annual Recurring Revenue ("ARR") is used to assess the trajectory of our cloud business. ARR means, as of a specified date, the contracted recurring revenue which includes both subscription and maintenance contracts, and excludes perpetual license, term license and service agreements, which are current and contracted with a future start date. ARR should be viewed independently of revenue and any other GAAP measure.

Annual Contract Value Bookings: Annual Contract Value ("ACV") bookings are comprised of the estimated annual value of our Total Contract Value ("TCV") bookings. ACV bookings are comprised of annual maintenance and subscriptions, one seventh of the license TCV, and excludes services and subscription renewals. ACV should be viewed independently of revenue and any other GAAP measure. TCV bookings are comprised of the total value of new customer contracts closed during a specified period, excluding

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maintenance in excess of one year, and including license, maintenance, services, term license and subscription renewals, that we believe to be firm commitments to provide our software solutions and related services. Bookings by their nature are significantly based on estimates and judgments that we make regarding total contract values, and our bookings growth projections are not meant as a substitute measure for revenue in accordance with GAAP. We believe our bookings growth projection is useful to investors as an additional means to evaluate our business performance.

Non-GAAP Tax Rate: The estimated non-GAAP effective tax rate adjusts the tax effect to quantify the impact of the excluded non-GAAP items.

Adjusted EBITDA: Adjusted EBITDA is defined as GAAP net (loss) income before interest expense, provision for income taxes, depreciation and amortization, as adjusted to eliminate the effect of the deferred revenue write-down from our acquisitions of SignalDemand, Inc. and Cameleon Software SA, tax consequences associated with the stock-based compensation costs arising from our acquisitions, amortization of acquisition-related intangibles, depreciation and amortization, impairment of internal-use software and capitalized internal-use software development costs. Adjusted EBITDA should not be considered as an alternative to net (loss) income as an indicator of our operating performance.

Free Cash Flow: Free cash flow is a non-GAAP financial measure which is defined as net cash provided by operating activities, less additions to property, plant and equipment and capitalized internal-use software development costs.

These non-GAAP estimates are not measurements of financial performance prepared in accordance with GAAP, and we are unable to reconcile these forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information described above which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.

Investor Contact:

PROS Investor Relations
Tim Girgenti

713-335-5879

ir@pros.com

Media Contact:

PROS Public Relations
Yvonne Donaldson

713-335-5310

ydonaldson@pros.com

5

PROS Holdings, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

	June 30, 2016			December 31, 2015
Assets:
Current assets:
Cash and cash equivalents	$	103,151		$	161,770
Short-term investments	41,954			2,500
Accounts and unbilled receivables, net of allowance of $447 and $586, respectively	36,770			39,115
Prepaid and other current assets	7,456			7,540
Total current assets	189,331			210,925
Property and equipment, net	15,490			15,777
Intangibles, net	12,786			14,191
Goodwill	20,623			20,445
Other long-term assets	2,699			1,873
Total assets	$	240,929		$	263,211
Liabilities and Stockholders’ Equity:
Current liabilities:
Accounts payable and other liabilities	$	4,718		$	8,273
Accrued liabilities	4,883			4,333
Accrued payroll and other employee benefits	10,846			13,084
Deferred revenue	68,762			60,664
Total current liabilities	89,209			86,354
Long-term deferred revenue	10,288			4,665
Convertible debt, net	119,026			115,860
Other long-term liabilities	710			918
Total liabilities	219,233			207,797
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; 34,752,402 and 34,156,561 shares issued, respectively; 30,334,817 and 29,738,976 shares outstanding, respectively	35			34
Additional paid-in capital	165,571			158,674
Treasury stock, 4,417,585 common shares, at cost	(13,938		)	(13,938		)
Accumulated deficit	(126,038		)	(85,034		)
Accumulated other comprehensive loss	(3,934		)	(4,322		)
Total stockholders’ equity	21,696			55,414
Total liabilities and stockholders’ equity	$	240,929		$	263,211

6

PROS Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Revenue:
License	$	2,457		$	9,392		$	5,759		$	20,584
Services	8,663			10,196			18,426			19,827
Subscription	9,143			6,780			17,344			14,080
Total license, services and subscription	20,263			26,368			41,529			54,491
Maintenance and support	16,775			15,321			33,437			30,877
Total revenue	37,038			41,689			74,966			85,368
Cost of revenue:
License	99			141			161			191
Services	8,283			8,987			17,214			17,926
Subscription	4,088			3,150			7,534			6,225
Total license, services and subscription	12,470			12,278			24,909			24,342
Maintenance and support	3,578			3,452			6,850			6,389
Total cost of revenue	16,048			15,730			31,759			30,731
Gross profit	20,990			25,959			43,207			54,637
Operating expenses:
Selling and marketing	16,066			17,978			34,084			36,171
General and administrative	9,616			9,562			18,657			20,160
Research and development	13,358			11,287			26,490			22,897
Loss from operations	(18,050		)	(12,868		)	(36,024		)	(24,591		)
Convertible debt interest and amortization	(2,317		)	(2,223		)	(4,604		)	(4,408		)
Other expense, net	(55		)	(207		)	(113		)	(419		)
Loss before income tax provision	(20,422		)	(15,298		)	(40,741		)	(29,418		)
Income tax provision	105			370			263			480
Net loss	$	(20,527	)	$	(15,668	)	$	(41,004	)	$	(29,898	)
Net loss per share:
Basic and diluted	$	(0.68	)	$	(0.53	)	$	(1.35	)	$	(1.01	)
Weighted average number of shares:
Basic and diluted	30,330			29,565			30,278			29,470

7

PROS Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited) 

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Operating activities:
Net loss	$	(20,527	)	$	(15,668	)	$	(41,004	)	$	(29,898	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	2,508			2,376			4,973			4,771
Amortization of debt discount and issuance costs	1,598			1,505			3,166			2,971
Share-based compensation	5,869			7,005			11,253			14,750
Deferred income tax, net	15			116			42			116
Provision for doubtful accounts	(43		)	220			(139		)	66
Changes in operating assets and liabilities:
Accounts and unbilled receivables	1,223			(2,248		)	2,480			10,817
Prepaid expenses and other assets	(1,262		)	754			(804		)	1,508
Accounts payable and other liabilities	(2,255		)	203			(1,454		)	(1,715		)
Accrued liabilities	(394		)	(345		)	640			129
Accrued payroll and other employee benefits	957			2,980			(2,246		)	(6,324		)
Deferred revenue	5,703			6,513			13,721			4,786
Net cash (used in) provided by operating activities	(6,608		)	3,411			(9,372		)	1,977
Investing activities:
Purchases of property and equipment	(1,817		)	(740		)	(5,339		)	(1,850		)
Capitalized internal-use software development costs	(72		)	(115		)	(72		)	(233		)
Purchases of short-term investments	(53,982		)	(18,713		)	(88,928		)	(31,200		)
Proceeds from maturities of short-term investments	47,000			20,000			49,500			20,000
Net cash provided by (used in) investing activities	(8,871		)	432			(44,839		)	(13,283		)
Financing activities:
Exercise of stock options	14			511			14			767
Proceeds from employee stock plans	—			—			470			382
Tax withholding related to net share settlement of stock awards	(42		)	(409		)	(4,839		)	(4,728		)
Payments of notes payable	(53		)	(52		)	(91		)	(159		)
Debt issuance costs related to convertible debt	—			—			—			(408		)
Net cash (used in) provided by financing activities	(81		)	50			(4,446		)	(4,146		)
Effect of foreign currency rates on cash	11			278			38			264
Net change in cash and cash equivalents	(15,549		)	4,171			(58,619		)	(15,188		)
Cash and cash equivalents:
Beginning of period	118,700			141,660			161,770			161,019
End of period	$	103,151		$	145,831		$	103,151		$	145,831

8

PROS Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

(Unaudited)

We use these non-GAAP financial measures to assist 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.

See breakdown of the reconciling line items on page 10.

		Three Months Ended June 30,		Quarter over Quarter	Six Months Ended June 30,		Year over Year
		2016	2015	% change	2016	2015	% change
GAAP revenue		$37,038	$41,689	(11)%	$74,966	$85,368	(12)%
	Non-GAAP adjustment:
	Acquisition-related deferred revenue write-down	—	$1,033		—	$2,197
Non-GAAP revenue		$37,038	$42,722	(13)%	$74,966	$87,565	(14)%
GAAP gross profit		$20,990	$25,959	(19)%	$43,207	$54,637	(21)%
	Non-GAAP adjustments:
	Acquisition-related deferred revenue write-down, net of cost of revenue	—	418		—	839
	Amortization of intangible assets	495	549		986	1,106
	Share-based compensation	577	1,031		1,176	2,044
Non-GAAP gross profit		$22,062	$27,957	(21)%	$45,369	$58,626	(23)%
Non-GAAP gross margin		59.6%	65.4%		60.5%	67.0%
GAAP loss from operations		$(18,050)	$(12,868)	40%	$(36,024)	$(24,591)	46%
	Non-GAAP adjustments:
	Acquisition-related deferred revenue write-down, net of cost of revenue	—	418		—	839
	Amortization of intangible assets	766	1,063		1,551	2,163
	Accretion expense for acquisition-related contingent consideration	—	11		—	22
	Recovery of bankruptcy claim	—	—		—	(626)
	Share-based compensation	5,869	7,005		11,253	14,750
	Total Non-GAAP adjustments	$6,635	$8,497		$12,804	$17,148
Non-GAAP loss from operations		$(11,415)	$(4,371)	161%	$(23,220)	$(7,443)	212%
Non-GAAP loss from operations % of total revenue		(30.8)%	(10.2)%		(31.0)%	(8.5)%
GAAP net loss		(20,527)	(15,668)	31%	$(41,004)	$(29,898)	37%
	Non-GAAP adjustments:
	Total Non-GAAP adjustments affecting loss from operations	6,635	8,497		12,804	17,148
	Amortization of debt discount and issuance costs	1,598	1,505		3,166	2,971
	Tax impact related to non-GAAP adjustments	4,492	2,275		9,180	3,809
Non-GAAP net loss		$(7,802)	$(3,391)	130%	$(15,854)	$(5,970)	166%
Non-GAAP diluted loss per share		$(0.26)	$(0.11)		$(0.52)	$(0.20)
Shares used in computing non-GAAP loss per share		30,330	29,565		30,278	29,470

9

PROS Holdings, Inc.

Supplemental Schedule of Non-GAAP Financial Measures

Increase (Decrease) in GAAP Amounts Reported

(In thousands)

(Unaudited)

		Three Months Ended June 30,					Six Months Ended June 30,
		2016		2015			2016		2015
Revenue Items
	Acquisition-related deferred revenue write-down - service revenue	—		898			—		1,943
	Acquisition-related deferred revenue write-down - subscription revenue	—		109			—		204
	Acquisition-related deferred revenue write-down - maintenance revenue	—		26			—		50
	Total revenue items	$	—	$	1,033		$	—	$	2,197
Cost of License Items
	Amortization of intangible assets	11		11			21		21
	Total cost of license items	$	11	$	11		$	21	$	21
Cost of Services Items
	Acquisition-related deferred cost write-down	—		(615		)	—		(1,358		)
	Share-based compensation	394		884			865		1,751
	Total cost of services items	$	394	$	269		$	865	$	393
Cost of Subscription Items
	Amortization of intangible assets	321		379			643		763
	Share-based compensation	103		85			154		165
	Total cost of subscription items	$	424	$	464		$	797	$	928
Cost of Maintenance Items
	Amortization of intangible assets	163		159			322		322
	Share-based compensation	80		62			157		128
	Total cost of maintenance items	$	243	$	221		$	479	$	450
Sales and Marketing Items
	Amortization of intangible assets	271		431			559		889
	Share-based compensation	1,697		2,280			3,477		4,312
	Total sales and marketing items	$	1,968	$	2,711		$	4,036	$	5,201
General and Administrative Items
	Accretion expense for acquisition-related contingent consideration	—		11			—		22
	Amortization of intangible assets	—		83			6		168
	Recovery of bankruptcy claim	—		—			—		(626		)
	Share-based compensation	2,302		2,372			4,032		5,720
	Total general and administrative items	$	2,302	$	2,466		$	4,038	$	5,284
Research and Development Items
	Share-based compensation	1,293		1,322			2,568		2,674
	Total research and development items	$	1,293	$	1,322		$	2,568	$	2,674

10

PROS Holdings, Inc.

Supplemental Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands)

(Unaudited)

		Three Months Ended June 30,						Six Months Ended June 30,
		2016			2015			2016			2015
Adjusted EBITDA
	GAAP Loss from Operations	$	(18,050	)	$	(12,868	)	$	(36,024	)	$	(24,591	)
	Acquisition-related deferred revenue write-down, net of cost of revenue	—			418			—			839
	Amortization of intangible assets	766			1,063			1,551			2,163
	Accretion expense for acquisition-related contingent consideration	—			11			—			22
	Recovery of bankruptcy claim	—			—			—			(626		)
	Share-based compensation	5,869			7,005			11,253			14,750
	Depreciation	1,742			1,313			3,422			2,608
	Capitalized internal-use software development costs	(72		)	(115		)	(72		)	(233		)
	Adjusted EBITDA	$	(9,745	)	$	(3,173	)	$	(19,870	)	$	(5,068	)
Free Cash Flow
	Net cash (used in) provided by operating activities	$	(6,608	)	$	3,411		$	(9,372	)	$	1,977
	Purchase of property and equipment	(1,817		)	(740		)	(5,339		)	(1,850		)
	Capitalized internal-use software development costs	(72		)	(115		)	(72		)	(233		)
	Free Cash Flow	$	(8,497	)	$	2,556		$	(14,783	)	$	(106	)
Guidance		Q3 2016 Guidance						Full Year 2016 Guidance
		Low			High			Low			High
Adjusted EBITDA
	GAAP Loss from Operations	$	(22,400	)	$	(21,400	)	$	(77,900	)	$	(75,900	)
	Amortization of intangible assets	750			750			2,950			2,950
	Share-based compensation	5,900			5,900			23,222			23,222
	Depreciation	1,750			1,750			6,800			6,800
	Capitalized internal-use software development costs	—			—			(72		)	(72		)
	Adjusted EBITDA	$	(14,000	)	$	(13,000	)	$	(45,000	)	$	(43,000	)

11