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PROS Holdings, Inc. Reports Fourth Quarter and Full Year 2012 Financial Results

  PROS Holdings, Inc. Reports Fourth Quarter and Full Year 2012 Financial
  Results

  *Record fourth quarter revenue of $32.7 million, exceeding the high end of
    guidance, an increase of 25% over the fourth quarter of 2011.
  *Record 2012 revenue of $117.8 million, exceeding the high end of guidance,
    an increase of 22% over 2011.
  *GAAP operating income of $2.3 million for the fourth quarter, exceeding
    the high end of guidance, and $8.2 million for 2012.
  *Non-GAAP operating income for the fourth quarter was $4.9 million,
    exceeding the high end of guidance, and $17.8 million for 2012.
  *GAAP earnings per share for the fourth quarter of $0.05, and non-GAAP
    earnings per share of $0.11. GAAP net income for the full year 2012 of
    $0.17 per share, and non-GAAP net income of $0.42 per share.

Business Wire

HOUSTON -- February 12, 2013

PROS Holdings, Inc. (NYSE: PRO), a big data software company, today announced
financial results for the fourth quarter and full year ended December31,
2012.

Total revenue for the fourth quarter of 2012 was $32.7 million and represented
an increase of 25% over the fourth quarter of 2011, exceeding the high end of
guidance.

CEO Andres Reiner stated, “We are excited to report another strong performance
in the fourth quarter and full year 2012, exceeding expectations with record
revenues. Our growth was driven by a strong uptick in new customer signings in
our business-to-business industries, a testament to PROS attractive value
proposition for companies interested in monetizing their big data. I am proud
of the PROS team worldwide for this incredible accomplishment, and believe
PROS has never been in a stronger position as we enter 2013 with great
momentum.”

For the quarter ended December31, 2012, GAAP operating income was $2.3
million, compared with $2.8 million in the fourth quarter of 2011. GAAP net
income for the fourth quarter was $1.4 million, or $0.05per share, compared
with $2.1 million, or $0.08per share, in the fourth quarter of 2011.

For the quarter ended December31, 2012, non-GAAP operating income was $4.9
million, compared with $4.6 million in the fourth quarter of 2011. Non-GAAP
net income for the fourth quarter of 2012 and 2011 was $3.3 million and $3.2
million, respectively, or $0.11 per share for both periods.

For the year ended December 31, 2012, GAAP revenue was $117.8 million, above
the high end of guidance, a 22% increase from $96.6 million for the full year
2011. GAAP operating income was $8.2 million for the full year 2012, compared
with $8.8 million for the full year 2011. GAAP net income for the full year
2012 was $5.0 million, or $0.17 per share, compared with $6.4 million, or
$0.23 per share for the full year 2011.

For the year ended December 31, 2012, non-GAAP operating income was $17.8
million, a 14% increase from $15.6 million for the full year 2011. Non-GAAP
net income for the full year 2012 was $11.9 million, or $0.42 per share,
compared with $10.7 million, or $0.39 per share for the full year 2011.

Backlog was $146.5 million as of December 31, 2012, as compared with backlog
of $124.1 million as of December 31, 2011. The portion of backlog as of
December 31, 2012 reasonably expected to be recognized as revenue within the
next twelve months is estimated to be $108.0 million, an increase of 26% from
December 31, 2011.

2012 Business Highlights

  *Signed new customers across several industries in the fourth quarter, such
    as American Standard, Guardian Analytics, O'Reilly Automotive, Oman Air,
    Panduit, Stramit Building Products, and Volvo Group Trucks, among others.
    These companies joined those who selected PROS earlier in the year,
    including ARUP Laboratories, Ecolab, Hewlett Packard, Kimberly-Clark
    Professional, Nexidia, Sichuan Airlines, TE Connectivity, and Zimmer among
    others.
  *Filed six new patents, introduced Rebate Optimizer as a new product, and
    released new versions of our big data applications for pricing and sales
    effectiveness.
  *Announced participation in Microsoft Dynamics ISV Partnership Program to
    provide Microsoft Dynamics CRM customers with actionable, real-time
    customer insights that can improve sales performance.
  *Achieved new product certifications from SAP for integration of PROS
    solutions into SAP ERP and SAP CRM, providing the most complete and
    seamless integration experience in SAP. Approximately two-thirds of PROS
    new B2B customers signed in 2012 run SAP, and more than half of PROS B2B
    customers overall run SAP.
  *Increased annual headcount by 31% to approximately 700 people, reflecting
    investments made across the company in support of our long-term growth.

Executive Vice President and Chief Financial Officer Charles Murphy stated,
“Our strong performance was directly attributable to the investments we have
made to diversify our business, expand our go-to-market initiatives and
increase awareness for our solutions, resulting in 22% revenue growth for the
full year and very strong backlog entering 2013. We are confident in our
ability to grow full year 2013 revenue approximately 22% to 23%. We plan to
accelerate our investments in order to capture the significant opportunity we
see in front of us and believe we can drive growth of 20% or greater for the
next several years while delivering solid profitability.”

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 quarter and the year ended December 31, 2012 and 2011.

Financial Outlook

Based on information as of today, PROS anticipates the following:

  *Total revenue for the first quarter of 2013 in the range of $32.7 million
    to $33.3 million
  *GAAP income from operations of $0.3 million to $0.9 million and GAAP
    earnings per share of $0.05 to $0.06 for the first quarter of 2013. GAAP
    earnings per share includes a tax benefit of approximately $1.1 million
    related to the 2012 R&E tax credit recorded in the first quarter
  *Non-GAAP income from operations of $3.4 million to $4.0 million, which
    excludes estimated non-cash share-based compensation charges of
    approximately $3.1 million for the first quarter of 2013
  *Non-GAAP earnings per share, which includes the full impact of the 2012
    R&E tax credit recorded in the first quarter, is expected to be $0.12 to
    $0.14 for the first quarter of 2013. Excluding the 2012 R&E tax credit,
    non-GAAP earnings per share is expected to be $0.08 to $0.10 for the first
    quarter of 2013. On a non-GAAP basis there will be essentially no tax
    provision in the quarter
  *Estimated weighted average of 29.0 million diluted shares outstanding for
    the first quarter of 2013

Conference Call

In conjunction  with this announcement, PROS Holdings, Inc. will host a
conference call on February 12, 2013, at 4:30 p.m. (ET) to discuss the
company’s financial results. To access this call, dial (800) 322-5044
(domestic) or (617) 614-4927 (international). The pass code for the call is
86425356. Additionally, a live webcast of the conference call will be
available in the “Investor Relations” section of the Company’s web site at
www.pros.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
71371803. 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.pros.com.

About PROS

PROS Holdings, Inc. (NYSE: PRO) is a big data software company that helps
customers outperform in their markets by using big data to sell more
effectively. We apply 27 years of data science experience to unlock buying
patterns and preferences within transaction data to reveal which opportunities
are most likely to close, which offers are most likely to sell and which
prices are most likely to win. PROS offers big data solutions to optimize
sales, pricing, quoting, rebates and revenue management across more than 30
industries. PROS has implemented more than 500 solutions in more than 50
countries. The PROS team comprises more than 700 professionals around the
world. To learn more, visit www.pros.com.

Forward-looking Statements

This press release contains forward-looking statements,including statements
about PROS’ momentum and future financial performance, positioning of PROS, in
the enterprise and mid-market sectors, the confidence and optimism of PROS
management, customer successes, the growth and reach of PROS’ reseller
network, awareness of PROS sales, pricing and revenue management optimization
solutions, the demands for PROS solutions, the predictability of the PROS
business and PROS’ effective tax rate and the continued 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 risks related to: (a)
the impact that a slowdown in the world or any particular economy has on PROS’
business sales cycles, prospects’ and customers’ spending decisions and timing
of implementation decisions, (b) the challenges associated with PROS’ selling
its solutions and successfully installing and delivering the products and
services, (c) the difficulties and risks associated with developing and
selling complex new products and enhancementswith the technical
specifications and functionalitydesired by customers,(d)the risk that the
market for PROS’ sales, pricing quoting, rebate and revenue management
optimization softwaredoes not grow as anticipated, (e) the difficulties of
making accurate estimates necessary to complete a project and recognize
revenue and risk thatPROS’ revenue model will not continue to provide
predictability of the PROS business, (f) the risk that PROS will not be able
to maintain historical maintenance renewal rates, (g) personnel and other
risks associated with growing a business generally (h) the risk that
modification or negotiation of contractual arrangements will be necessary
during PROS’ implementations of its solutions, (i) the impact of currency
fluctuations on PROS’ results of operations, (j) the risk that reseller and
other relationships do not increase sales of PROS’ solutions, (k) civil and
political unrest in regions in which PROS operate and (l) the risk that we may
face increased competition as part of entering new markets. 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.

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.

                                              
                                                   
PROS Holdings, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

(Unaudited)
                                                   
                                                   December 31,
                                                   2012          2011
Assets:
Current assets:
Cash and cash equivalents                          $ 83,558        $ 68,457
Accounts and unbilled receivables, net of          38,801          33,864
allowance of $760 and $1,130, respectively
Prepaid and other current assets                   5,067          8,353     
Total current assets                               127,426         110,674
Restricted cash                                    329             329
Property and equipment, net                        12,788          4,703
Other long term assets, net                        5,936          5,553     
Total assets                                       $ 146,479      $ 121,259 
Liabilities and Stockholders’ Equity:
Current liabilities:
Accounts payable                                   $ 3,775         $ 4,915
Accrued liabilities                                3,258           1,541
Accrued payroll and other employee                 7,669           4,790
benefits
Deferred revenue                                   39,774         33,094    
Total current liabilities                          54,476         44,340    
Long-term deferred revenue                         2,007           2,850
Long-term accrued liabilities                      1,327          126       
Total liabilities                                  57,810         47,316    
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; 31,966,432 and
31,432,430 shares issued, respectively;            32              31
27,548,847 and 27,014,845 shares
outstanding, respectively
Additional paid-in capital                         87,693          77,934
Treasury stock, 4,417,585 common shares,           (13,938   )     (13,938   )
at cost
Accumulated other comprehensive loss               (11       )     (11       )
Retained earnings                                  14,893         9,927     
Total stockholders’ equity                         88,669         73,943    
Total liabilities and stockholders’ equity         $ 146,479      $ 121,259 
                                                                             
                                                                             

PROS Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands, except share and per share data)

(Unaudited)
                                                
                       For the Three Months            For the Year Ended December
                       Ended December 31,              31,
                       2012          2011             2012          2011
Revenue:
License and            $  22,190      $  17,540        $  77,656      $  62,975
implementation
Maintenance            10,533        8,700           40,135        33,664     
and support
Total revenue          32,723         26,240           117,791        96,639
Cost of
revenue:
License and            7,740          5,406            25,830         19,627
implementation
Maintenance            1,938         1,744           7,955         6,675      
and support
Total cost of          9,678         7,150           33,785        26,302     
revenue
Gross profit           23,045         19,090           84,006         70,337
Operating
expenses:
Selling,
marketing,             13,691         9,571            48,215         35,891
general and
administrative
Research and           7,093         6,719           27,611        25,671     
development
Income from            2,261          2,800            8,180          8,775
operations
Other
(expense)              (42        )   (108       )     (163       )   (141       )
income, net
Income before
income tax             2,219          2,692            8,017          8,634
provision
Income tax             795           571             3,051         2,284      
provision
Net income             $  1,424      $  2,121        $  4,966      $  6,350   
Net earnings
per share:
Basic                  $  0.05        $  0.08          $  0.18        $  0.24
Diluted                $  0.05        $  0.08          $  0.17        $  0.23
Weighted
average number
of shares:
Basic                  27,494,076     26,974,685       27,365,731     26,831,530
Diluted                28,715,202     28,035,591       28,419,956     27,761,958
                                                                                 
                                                                                 

PROS Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)
                                          
                                               For the Year Ended December 31,
                                               2012             2011
Operating activities:
Net income                                     $   4,966         $  6,350
Adjustments to reconcile net income to
net
cash provided by operating activities:
Depreciation and amortization                  2,286             1,609
Share-based compensation                       9,645             6,832
Excess tax benefits on share-based             (1,686      )     (1,379     )
compensation
Tax benefit from share-based                   1,573             1,320
compensation
Deferred income tax, net                       962               315
Provision for doubtful accounts                (326        )     178
Changes in operating assets and
liabilities:
Accounts and unbilled receivables              (4,609      )     (6,656     )
Prepaid expenses and other assets              2,215             (2,971     )
Accounts payable                               (790        )     2,579
Accrued liabilities                            1,700             (392       )
Accrued payroll and other employee             2,879             405
benefits
Deferred revenue                               5,837            6,053      
Net cash provided by operating                 24,652            14,243
activities
Investing activities:
Purchases of property and equipment,
and capitalized internal-use software          (9,527      )     (3,002     )
development costs
Increase in restricted cash                    —                 (36        )
Increase in short-term investment              —                73         
Net cash used in investing activities          (9,527      )     (2,965     )
Financing activities:
Exercise of stock options                      1,354             1,874
Excess tax benefits on share-based             1,686             1,379
compensation
Tax withholding related to net share           (2,814      )     (1,919     )
settlement of restricted stock units
Debt issuance costs related to credit          (250        )     —          
facility
Net cash (used in) provided by                 (24         )     1,334      
financing activities
Net increase in cash and cash                  15,101            12,612
equivalents
Cash and cash equivalents:
Beginning of period                            68,457           55,845     
End of period                                  $   83,558       $  68,457  
                                                                            
                                                                            

PROS Holdings, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Dollars 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.
                                                                                     
                       For the Three Months      Quarter   For the Year              Year
                                                 over                                over
                       Ended December 31,        Quarter   Ended December 31,        Year
                                                                                     
                       2012        2011         %         2012        2011         %
                                                 change                              change
GAAP gross             $ 23,045     $ 19,090     20.7%     $ 84,006     $ 70,337     19.4%
profit
Non-GAAP
adjustment:
GAAP
share-based            486         307                   1,451       1,201    
compensation
Non-GAAP gross         $ 23,531    $ 19,397    21.3%     $ 85,457    $ 71,538    19.5%
profit
                                                                                     
Non-GAAP gross         71.9     %   73.9%                  72.5     %   74.0     %
margin
                                                                                     
GAAP selling,
marketing,             $ 13,691     $ 9,571      43.0%     $ 48,215     $ 35,891     34.3%
general and
administrative
Non-GAAP
adjustment:
GAAP
share-based            1,707       1,067                 6,273       4,038    
compensation
Non- GAAP
selling,
marketing,             $ 11,984    $ 8,504     40.9%     $ 41,942    $ 31,853    31.7%
general and
administrative
                                                                                     
GAAP research
and                    $ 7,093      $ 6,719      5.6%      $ 27,611     $ 25,671     7.6%
development
Non-GAAP
adjustment:
GAAP
share-based            490         450                   1,921       1,593    
compensation
Non- GAAP
research and           $ 6,603     $ 6,269     5.3%      $ 25,690    $ 24,078    6.7%
development
                                                                                     
Income from            $ 2,261      $ 2,800      (19.3)%   $ 8,180      $ 8,775      (6.8)%
operations
Non-GAAP
adjustment:
GAAP
share-based            2,683       1,824                 9,645       6,832    
compensation
Non-GAAP
income from            $ 4,944     $ 4,624     6.9%      $ 17,825    $ 15,607    14.2%
operations
                                                                                     
Non-GAAP
income from
operations %           15.1     %   17.6     %             15.1     %   16.1     %
of total
revenue
                                                                                     
GAAP net               $ 1,424      $ 2,121      (32.9)%   $ 4,966      $ 6,350      (21.8)%
income
Non-GAAP
adjustment:
GAAP
share-based            2,683        1,824                  9,645        6,832
compensation
Tax impact
related to             (857     )   (741     )             (2,696   )   (2,436   )
non-GAAP
adjustments
Non-GAAP net           $ 3,250     $ 3,204     1.4%      $ 11,915    $ 10,746    10.9%
income
                                                                                     
Non-GAAP
diluted                $ 0.11       $ 0.11                 $ 0.42       $ 0.39
earnings per
share
                                                                                     
Shares used in
computing
non-GAAP               28,715       28,036                 28,420       27,762
earnings per
share
                                                                                     
Detail of
non-GAAP
share-based
compensation
expense:
Cost of                $ 486        $ 307                  $ 1,451      $ 1,201
revenue
Selling,
marketing,             1,707        1,067                  6,273        4,038
general and
administrative
Research and           490         450                   1,921       1,593    
development
Total
share-based            $ 2,683     $ 1,824               $ 9,645     $ 6,832  
compensation
expense

Contact:

Investor Contact:
PROS Investor Relations
Staci Strauss-Mortenson, 646-277-1200
Staci.Mortenson@icrinc.com
or
Media Contact:
PROS Public Relations
Yvonne Donaldson, 713-335-5310
ydonaldson@pros.com