Pros Holdings Inc. has a market cap of $207.8 million; its shares were traded at around $8.03 with a P/E ratio of 38.3 and P/S ratio of 3. PRO is in the portfolios of RS Investment Management, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Cost of license and implementation. Cost of license and implementation decreased $0.4 million to $3.2 million for the three months ended March 31, 2010 from $3.6 million for the three months ended March 31, 2009, representing a 10% decrease. The decrease in cost of license and implementation is principally attributable to a $0.4 million decrease in personnel costs, a $0.1 million decrease in amortization costs related to limited term license contracts and a decrease of $0.1 million of travel expenses. These decreases were partially offset by an increase of $0.2 million in third party deployment software expense and an increase of $0.1 million of share-based compensation expense. License and implementation gross margins were 69% for the three months ended March 31, 2010 as compared to 70% for the three months ended March 31, 2009. The reduction in license and implementation gross margins was primarily due to lower license and implementation revenues of $1.6 million partially offset by a $0.4 million reduction of license and implementation costs. License and implementation gross margins vary from period to period depending on the amount of implementation services required to deploy our products relative to the total value of contracts for which implementation services were provided during the quarter.
Selling, general and administrative expenses. Selling, general and administrative expenses increased by $1.1 million to $6.6 million for the three months ended March 31, 2010 from $5.5 million for the three months ended March 31, 2009, representing a 20% increase. The increase was principally attributed to an increase in sales personnel and related expenses of $0.3 million, an increase of $0.3 million related to new sales and marketing initiatives, an increase of $0.2 million of share-based compensation expense, an increase of $0.2 million of other costs and $0.1 million of sales related travel.
Research and development expenses. Research and development expenses increased by $0.2 million to $5.2 million for the three months ended March 31, 2010 from $5.0 million for the three months ended March 31, 2009, representing a 3% increase. The increase was principally attributed to an increase of $0.2 million of personnel expenses.
At March 31, 2010 we had $61.3 million of cash and cash equivalents and $51.8 million of working capital as compared to $62.4 million of cash and cash equivalents and $50.8 million of working capital at December 31, 2009. Our principal source of liquidity is our cash and cash equivalents. Our material drivers or variants of operating cash flow are net income, non-cash expenses (principally stock-based compensation) and the timing of periodic billings and collections related to the sales of our software and related services.
Our working capital was $51.8 million at March 31, 2010 compared to $50.8 million at December 31, 2009, an increase of $1.0 million, or 2.0%. The increase in working capital was principally attributable to an increase in our current assets of $5.8 million as a result of an increase in net accounts receivable of $7.0 million, offset by a decrease in cash and cash equivalents of $1.1 million. The increase in current assets was offset by an increase in our current liabilities of $4.8 million, as a result of an increase in our current deferred revenue of $5.4 million, an increase in accounts payable of $0.6 million and decrease in accrued liabilities of $1.2 million.
Net cash used in operations is principally attributable to a net reduction of $2.1 million in operating assets and liabilities, offset by a net increase of $1.7 million in net earnings before non-cash expenses (principally depreciation, share-based compensation and excess tax benefits on the vesting of restricted stock units). Uses of cash from investing activities for the three months ended March 31, 2010 consisted of $0.2 million of purchases of property and equipment and an increase in restricted cash of $0.3 million related to a letter of credit. Net uses of cash from financing activities consisted of tax withholding related to the net share settlement of restricted stock units, offset by excess tax benefits on the vesting of restricted stock units and proceeds from stock option exercises.
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