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PROS Holdings Inc. Reports Operating Results (10-Q)

August 06, 2009 | About:

PROS Holdings Inc. (PRO) filed Quarterly Report for the period ended 2009-06-30.

PROS Holdings Inc. a world leader in Pricing and Revenue Optimization Software today announced that the underwriters of its initial public offering have exercised in full their over-allotment option. PROS is a leading provider of pricing and revenue optimization software products specializing in price analytics price execution and price optimization. By using PROS\' software products companies gain insight into their pricing strategies identify pricing-based profit leaks optimize their pricing decision making and improve their business processes and financial performance. PROS\' software products implement advanced pricing science which includes operations research forecasting and statistics. PROS also provides a range of services that include analyzing a company\'s current pricing processes and implementing software products to improve pricing performance PROS Holdings Inc. has a market cap of $185.6 million; its shares were traded at around $7.22 with a P/E ratio of 18.5 and P/S ratio of 2.5.

Highlight of Business Operations:

Cost of license and implementation. Cost of license and implementation increased $0.2 million to $3.8 million for the three months ended June 30, 2009 from $3.6 million for the three months ended June 30, 2008, representing a 5% increase. The increase in cost of license and implementation is primarily attributable to an increase of $0.4 million in personnel costs resulting from research and development personnel with specific technical expertise assisting with implementation tasks during the quarter, a $0.1 million increase in third party software deployment costs procured in connection with certain implementations and a $0.1 million increase in stock-based compensation expenses resulting from the increase of grants of restricted stock units and stock options. These increases were offset by a decrease of $0.3 million in travel and other expenses resulting from managements actions to more closely manage expenses in the current global economic environment, $0.1 million beneficial change in foreign currency exchange, and a $0.1 million decrease in amortized costs related to subscription contracts. Due primarily to our lower license and implementation revenue for the three months ended June 30, 2009, license and implementation gross margins were 66% for the three months ended June 30, 2009 versus 73% for the three months ended June 30, 2008. License and implementation gross margins may vary from period to period depending on factors, such as the amount of implementation services required to deploy our products relative to the total contracted price and mix of business.

Cost of maintenance and support. Cost of maintenance and support increased $0.1 million to $1.2 million for the three months ended June 30, 2009 from $1.1 million for the three months ended June 30, 2008, representing a 9% increase, principally from increased personnel costs. Due to an increase in maintenance and support revenue while maintaining relatively the same levels of maintenance and support costs maintenance and support gross margins were 81% for the three months ended June 30, 2009 versus 80% for the three months ended June 30, 2008. Maintenance and support gross margins may vary from period to period depending on factors, such as the cost of providing maintenance and support relative to maintenance and support revenue.

Gross profit. Gross profit decreased $1.6 million to $12.4 million for the three months ended June 30, 2009 from $14.0 million for the three months ended June 30, 2008, representing an 11% decrease. The decrease in gross profit was attributed to a decrease in license and implementation revenue and modestly higher costs of license and implementation revenue, offset by an increase in maintenance and support gross profit.

Selling, general and administrative expenses. Selling, general and administrative expenses were $5.6 million for the three months ended June 30, 2009 and 2008. There was an increase of $0.2 million in 2009 as a result of selling and marketing personnel expenses and an increase of $0.2 million of stock-based compensation expense resulting from the increase of grants of restricted stock units and stock options, offset by a decrease in general and administrative expenses of $0.2 million related to professional fees and a decrease of $0.2 million in other expenses both resulting from managements actions to closely manage expenses in the current global economic environment.

Research and development expenses. Research and development expenses decreased by $0.4 million to $4.8 million for the three months ended June 30, 2009 from $5.2 million for the three months ended June 30, 2008, representing a 7% decrease. The decrease is primarily the result of a decrease of $0.4 million resulting from research and development personnel with specific technical expertise assisting with implementation tasks during the quarter. Even though we dont view this as a trend, we may choose to use technical personnel on future implementation tasks on future projects. In addition, there was a decrease of $0.2 million in travel and other expenses resulting from managements actions to closely manage expenses in the current global economic environment. These decreases were offset by an increase of $0.1 million in personnel expenses as a result of an increase in the number of research and development personnel and an increase of $0.1 million of stock-based compensation expense resulting from the increase of grants of restricted stock units and stock options.

Income tax provision. Our income tax provision decreased $0.7 million to $0.6 million for the three months ended June 30, 2009 from $1.3 million for the three months ended June 30, 2008, representing a 53% decrease. The decrease in the effective tax rate from 36% to 28% is primarily due to the utilization of Research and Experimentation (R&E) tax credits resulting from the reinstatement of the R&E tax credit by Congress in October 2008.

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Rating: 3.5/5 (2 votes)

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