2016 Q2 Form 10-Q Financial Statement

#000139297216000172 Filed on August 02, 2016

View on sec.gov

Income Statement

Concept 2016 Q2 2015 Q2
Revenue $37.04M $41.69M
YoY Change -11.16% -6.04%
Cost Of Revenue $16.05M $15.73M
YoY Change 2.02% 6.62%
Gross Profit $20.99M $25.96M
YoY Change -19.14% -12.35%
Gross Profit Margin 56.67% 62.27%
Selling, General & Admin $25.68M $27.54M
YoY Change -6.75% 13.49%
% of Gross Profit 122.35% 106.09%
Research & Development $13.36M $11.29M
YoY Change 18.35% 7.39%
% of Gross Profit 63.64% 43.48%
Depreciation & Amortization $2.500M $2.370M
YoY Change 5.49% -16.25%
% of Gross Profit 11.91% 9.13%
Operating Expenses $39.04M $38.83M
YoY Change 0.55% 11.65%
Operating Profit -$18.05M -$12.87M
YoY Change 40.27% 63.49%
Interest Expense -$2.320M -$2.220M
YoY Change 4.5%
% of Operating Profit
Other Income/Expense, Net -$55.00K -$207.0K
YoY Change -73.43% -63.75%
Pretax Income -$20.42M -$15.30M
YoY Change 33.49% 81.21%
Income Tax $105.0K $370.0K
% Of Pretax Income
Net Earnings -$20.53M -$15.67M
YoY Change 31.01% 123.96%
Net Earnings / Revenue -55.42% -37.58%
Basic Earnings Per Share -$0.68 -$0.53
Diluted Earnings Per Share -$0.68 -$0.53
COMMON SHARES
Basic Shares Outstanding 30.33M shares 29.57M shares
Diluted Shares Outstanding 30.33M shares 29.57M shares

Balance Sheet

Concept 2016 Q2 2015 Q2
SHORT-TERM ASSETS
Cash & Short-Term Investments $145.1M $157.0M
YoY Change -7.58% 423.33%
Cash & Equivalents $103.2M $145.8M
Short-Term Investments $42.00M $11.20M
Other Short-Term Assets $7.500M $7.400M
YoY Change 1.35% -44.78%
Inventory
Prepaid Expenses
Receivables $36.80M $60.20M
Other Receivables $0.00 $0.00
Total Short-Term Assets $189.3M $224.6M
YoY Change -15.7% 113.0%
LONG-TERM ASSETS
Property, Plant & Equipment $15.49M $15.79M
YoY Change -1.87% -5.82%
Goodwill $20.62M $20.61M
YoY Change 0.04% -11.72%
Intangibles $12.79M $17.00M
YoY Change -24.79% -29.83%
Long-Term Investments
YoY Change
Other Assets $2.699M $1.520M
YoY Change 77.57% 13.94%
Total Long-Term Assets $51.60M $54.92M
YoY Change -6.05% -28.0%
TOTAL ASSETS
Total Short-Term Assets $189.3M $224.6M
Total Long-Term Assets $51.60M $54.92M
Total Assets $240.9M $279.5M
YoY Change -13.81% 53.81%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $4.718M $9.350M
YoY Change -49.54% -23.67%
Accrued Expenses $4.883M $5.213M
YoY Change -6.33% -39.75%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00
YoY Change
Long-Term Debt Due
YoY Change
Total Short-Term Liabilities $89.21M $82.22M
YoY Change 8.5% 5.89%
LONG-TERM LIABILITIES
Long-Term Debt $119.0M $113.4M
YoY Change 4.94%
Other Long-Term Liabilities $710.0K $1.035M
YoY Change -31.4% -68.79%
Total Long-Term Liabilities $710.0K $1.035M
YoY Change -31.4% -68.79%
TOTAL LIABILITIES
Total Short-Term Liabilities $89.21M $82.22M
Total Long-Term Liabilities $710.0K $1.035M
Total Liabilities $219.2M $201.0M
YoY Change 9.07% 138.16%
SHAREHOLDERS EQUITY
Retained Earnings -$126.0M -$49.12M
YoY Change 156.59% -1806.18%
Common Stock $35.00K $35.00K
YoY Change 0.0% 2.94%
Preferred Stock
YoY Change
Treasury Stock (at cost) $13.94M $13.94M
YoY Change 0.0% 0.0%
Treasury Stock Shares 4.418M shares 4.418M shares
Shareholders Equity $21.70M $78.52M
YoY Change
Total Liabilities & Shareholders Equity $240.9M $279.5M
YoY Change -13.81% 53.81%

Cashflow Statement

Concept 2016 Q2 2015 Q2
OPERATING ACTIVITIES
Net Income -$20.53M -$15.67M
YoY Change 31.01% 123.96%
Depreciation, Depletion And Amortization $2.500M $2.370M
YoY Change 5.49% -16.25%
Cash From Operating Activities -$6.610M $3.410M
YoY Change -293.84% -127.28%
INVESTING ACTIVITIES
Capital Expenditures -$1.890M -$850.0K
YoY Change 122.35% -77.33%
Acquisitions
YoY Change
Other Investing Activities -$6.980M $1.290M
YoY Change -641.09% -6550.0%
Cash From Investing Activities -$8.870M $440.0K
YoY Change -2115.91% -111.64%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -80.00K 50.00K
YoY Change -260.0% -106.02%
NET CHANGE
Cash From Operating Activities -6.610M 3.410M
Cash From Investing Activities -8.870M 440.0K
Cash From Financing Activities -80.00K 50.00K
Net Change In Cash -15.56M 3.900M
YoY Change -498.97% -122.79%
FREE CASH FLOW
Cash From Operating Activities -$6.610M $3.410M
Capital Expenditures -$1.890M -$850.0K
Free Cash Flow -$4.720M $4.260M
YoY Change -210.8% -148.69%

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CY2016Q2 us-gaap Liabilities And Stockholders Equity
LiabilitiesAndStockholdersEquity
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CY2015Q2 us-gaap License Costs
LicenseCosts
141000 USD
us-gaap License Costs
LicenseCosts
191000 USD
CY2016Q2 us-gaap License Costs
LicenseCosts
99000 USD
us-gaap License Costs
LicenseCosts
161000 USD
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LicensesRevenue
9392000 USD
us-gaap Licenses Revenue
LicensesRevenue
20584000 USD
CY2016Q2 us-gaap Licenses Revenue
LicensesRevenue
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us-gaap Licenses Revenue
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5759000 USD
CY2016Q2 us-gaap Line Of Credit
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0 USD
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50000000 USD
CY2016Q2 us-gaap Long Term Debt Percentage Bearing Fixed Interest Rate
LongTermDebtPercentageBearingFixedInterestRate
0.02
CY2015Q2 us-gaap Maintenance Costs
MaintenanceCosts
3452000 USD
CY2016Q2 us-gaap Maintenance Costs
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3578000 USD
us-gaap Maintenance Costs
MaintenanceCosts
6850000 USD
CY2015Q2 us-gaap Maintenance Revenue
MaintenanceRevenue
15321000 USD
us-gaap Maintenance Revenue
MaintenanceRevenue
30877000 USD
CY2016Q2 us-gaap Maintenance Revenue
MaintenanceRevenue
16775000 USD
us-gaap Maintenance Revenue
MaintenanceRevenue
33437000 USD
us-gaap Net Cash Provided By Used In Financing Activities
NetCashProvidedByUsedInFinancingActivities
-4146000 USD
us-gaap Net Cash Provided By Used In Financing Activities
NetCashProvidedByUsedInFinancingActivities
-4446000 USD
us-gaap Net Cash Provided By Used In Investing Activities
NetCashProvidedByUsedInInvestingActivities
-13283000 USD
us-gaap Net Cash Provided By Used In Investing Activities
NetCashProvidedByUsedInInvestingActivities
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us-gaap Net Cash Provided By Used In Operating Activities
NetCashProvidedByUsedInOperatingActivities
1977000 USD
us-gaap Net Cash Provided By Used In Operating Activities
NetCashProvidedByUsedInOperatingActivities
-9372000 USD
CY2015Q2 us-gaap Net Income Loss
NetIncomeLoss
-15668000 USD
us-gaap Net Income Loss
NetIncomeLoss
-29898000 USD
CY2016Q2 us-gaap Net Income Loss
NetIncomeLoss
-20527000 USD
us-gaap Net Income Loss
NetIncomeLoss
-41004000 USD
CY2015Q2 us-gaap Operating Income Loss
OperatingIncomeLoss
-12868000 USD
us-gaap Operating Income Loss
OperatingIncomeLoss
-24591000 USD
CY2016Q2 us-gaap Operating Income Loss
OperatingIncomeLoss
-18050000 USD
us-gaap Operating Income Loss
OperatingIncomeLoss
-36024000 USD
CY2016Q2 us-gaap Operating Leases Future Minimum Payments Due
OperatingLeasesFutureMinimumPaymentsDue
10606000 USD
CY2016Q2 us-gaap Operating Leases Future Minimum Payments Due Current
OperatingLeasesFutureMinimumPaymentsDueCurrent
1307000 USD
CY2016Q2 us-gaap Operating Leases Future Minimum Payments Due In Five Years
OperatingLeasesFutureMinimumPaymentsDueInFiveYears
795000 USD
CY2016Q2 us-gaap Operating Leases Future Minimum Payments Due In Four Years
OperatingLeasesFutureMinimumPaymentsDueInFourYears
2274000 USD
CY2016Q2 us-gaap Operating Leases Future Minimum Payments Due In Three Years
OperatingLeasesFutureMinimumPaymentsDueInThreeYears
2652000 USD
CY2016Q2 us-gaap Operating Leases Future Minimum Payments Due In Two Years
OperatingLeasesFutureMinimumPaymentsDueInTwoYears
3187000 USD
CY2016Q2 us-gaap Operating Leases Future Minimum Payments Due Thereafter
OperatingLeasesFutureMinimumPaymentsDueThereafter
391000 USD
CY2015Q4 us-gaap Other Assets Noncurrent
OtherAssetsNoncurrent
1873000 USD
CY2016Q2 us-gaap Other Assets Noncurrent
OtherAssetsNoncurrent
2699000 USD
CY2015Q2 us-gaap Other Comprehensive Income Loss Foreign Currency Transaction And Translation Adjustment Net Of Tax
OtherComprehensiveIncomeLossForeignCurrencyTransactionAndTranslationAdjustmentNetOfTax
788000 USD
us-gaap Other Comprehensive Income Loss Foreign Currency Transaction And Translation Adjustment Net Of Tax
OtherComprehensiveIncomeLossForeignCurrencyTransactionAndTranslationAdjustmentNetOfTax
-1766000 USD
CY2016Q2 us-gaap Other Comprehensive Income Loss Foreign Currency Transaction And Translation Adjustment Net Of Tax
OtherComprehensiveIncomeLossForeignCurrencyTransactionAndTranslationAdjustmentNetOfTax
-394000 USD
us-gaap Other Comprehensive Income Loss Foreign Currency Transaction And Translation Adjustment Net Of Tax
OtherComprehensiveIncomeLossForeignCurrencyTransactionAndTranslationAdjustmentNetOfTax
362000 USD
CY2015Q2 us-gaap Other Comprehensive Income Loss Net Of Tax
OtherComprehensiveIncomeLossNetOfTax
787000 USD
us-gaap Other Comprehensive Income Loss Net Of Tax
OtherComprehensiveIncomeLossNetOfTax
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CY2016Q2 us-gaap Other Comprehensive Income Loss Net Of Tax
OtherComprehensiveIncomeLossNetOfTax
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us-gaap Other Comprehensive Income Loss Net Of Tax
OtherComprehensiveIncomeLossNetOfTax
388000 USD
CY2015Q2 us-gaap Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Net Of Tax
OtherComprehensiveIncomeUnrealizedHoldingGainLossOnSecuritiesArisingDuringPeriodNetOfTax
-1000 USD
us-gaap Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Net Of Tax
OtherComprehensiveIncomeUnrealizedHoldingGainLossOnSecuritiesArisingDuringPeriodNetOfTax
-3000 USD
CY2016Q2 us-gaap Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Net Of Tax
OtherComprehensiveIncomeUnrealizedHoldingGainLossOnSecuritiesArisingDuringPeriodNetOfTax
21000 USD
us-gaap Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Net Of Tax
OtherComprehensiveIncomeUnrealizedHoldingGainLossOnSecuritiesArisingDuringPeriodNetOfTax
26000 USD
CY2015Q4 us-gaap Other Liabilities Noncurrent
OtherLiabilitiesNoncurrent
918000 USD
CY2016Q2 us-gaap Other Liabilities Noncurrent
OtherLiabilitiesNoncurrent
710000 USD
CY2015Q2 us-gaap Other Nonoperating Income Expense
OtherNonoperatingIncomeExpense
-207000 USD
us-gaap Other Nonoperating Income Expense
OtherNonoperatingIncomeExpense
-419000 USD
CY2016Q2 us-gaap Other Nonoperating Income Expense
OtherNonoperatingIncomeExpense
-55000 USD
us-gaap Other Nonoperating Income Expense
OtherNonoperatingIncomeExpense
-113000 USD
CY2016Q2 us-gaap Research And Development Expense Software Excluding Acquired In Process Cost
ResearchAndDevelopmentExpenseSoftwareExcludingAcquiredInProcessCost
13358000 USD
us-gaap Research And Development Expense Software Excluding Acquired In Process Cost
ResearchAndDevelopmentExpenseSoftwareExcludingAcquiredInProcessCost
26490000 USD
CY2015Q4 us-gaap Retained Earnings Accumulated Deficit
RetainedEarningsAccumulatedDeficit
-85034000 USD
CY2016Q2 us-gaap Retained Earnings Accumulated Deficit
RetainedEarningsAccumulatedDeficit
-126038000 USD
CY2015Q2 us-gaap Selling And Marketing Expense
SellingAndMarketingExpense
17978000 USD
us-gaap Selling And Marketing Expense
SellingAndMarketingExpense
36171000 USD
us-gaap Payments To Acquire Short Term Investments
PaymentsToAcquireShortTermInvestments
31200000 USD
us-gaap Payments To Acquire Short Term Investments
PaymentsToAcquireShortTermInvestments
88928000 USD
CY2015Q4 us-gaap Preferred Stock Par Or Stated Value Per Share
PreferredStockParOrStatedValuePerShare
0.001
CY2016Q2 us-gaap Preferred Stock Par Or Stated Value Per Share
PreferredStockParOrStatedValuePerShare
0.001
CY2015Q4 us-gaap Preferred Stock Shares Authorized
PreferredStockSharesAuthorized
5000000 shares
CY2016Q2 us-gaap Preferred Stock Shares Authorized
PreferredStockSharesAuthorized
5000000 shares
CY2015Q4 us-gaap Preferred Stock Shares Issued
PreferredStockSharesIssued
0 shares
CY2016Q2 us-gaap Preferred Stock Shares Issued
PreferredStockSharesIssued
0 shares
CY2015Q4 us-gaap Preferred Stock Value
PreferredStockValue
0 USD
CY2016Q2 us-gaap Preferred Stock Value
PreferredStockValue
0 USD
CY2015Q4 us-gaap Prepaid Expense And Other Assets Current
PrepaidExpenseAndOtherAssetsCurrent
7540000 USD
CY2016Q2 us-gaap Prepaid Expense And Other Assets Current
PrepaidExpenseAndOtherAssetsCurrent
7456000 USD
CY2015Q2 us-gaap Proceeds From Issuance Of Warrants
ProceedsFromIssuanceOfWarrants
17106000 USD
us-gaap Proceeds From Maturities Prepayments And Calls Of Available For Sale Securities
ProceedsFromMaturitiesPrepaymentsAndCallsOfAvailableForSaleSecurities
20000000 USD
us-gaap Proceeds From Maturities Prepayments And Calls Of Available For Sale Securities
ProceedsFromMaturitiesPrepaymentsAndCallsOfAvailableForSaleSecurities
49500000 USD
us-gaap Proceeds From Stock Options Exercised
ProceedsFromStockOptionsExercised
767000 USD
us-gaap Proceeds From Stock Options Exercised
ProceedsFromStockOptionsExercised
14000 USD
us-gaap Proceeds From Stock Plans
ProceedsFromStockPlans
382000 USD
us-gaap Proceeds From Stock Plans
ProceedsFromStockPlans
470000 USD
CY2015Q4 us-gaap Property Plant And Equipment Net
PropertyPlantAndEquipmentNet
15777000 USD
CY2016Q2 us-gaap Property Plant And Equipment Net
PropertyPlantAndEquipmentNet
15490000 USD
us-gaap Provision For Doubtful Accounts
ProvisionForDoubtfulAccounts
66000 USD
us-gaap Provision For Doubtful Accounts
ProvisionForDoubtfulAccounts
-139000 USD
us-gaap Repayments Of Notes Payable
RepaymentsOfNotesPayable
159000 USD
us-gaap Repayments Of Notes Payable
RepaymentsOfNotesPayable
91000 USD
CY2015Q2 us-gaap Research And Development Expense Software Excluding Acquired In Process Cost
ResearchAndDevelopmentExpenseSoftwareExcludingAcquiredInProcessCost
11287000 USD
us-gaap Research And Development Expense Software Excluding Acquired In Process Cost
ResearchAndDevelopmentExpenseSoftwareExcludingAcquiredInProcessCost
22897000 USD
CY2015Q2 us-gaap Revenues
Revenues
41689000 USD
us-gaap Revenues
Revenues
85368000 USD
CY2016Q2 us-gaap Revenues
Revenues
37038000 USD
us-gaap Revenues
Revenues
74966000 USD
CY2015Q2 us-gaap Sales Revenue Services Net
SalesRevenueServicesNet
10196000 USD
us-gaap Sales Revenue Services Net
SalesRevenueServicesNet
19827000 USD
CY2016Q2 us-gaap Sales Revenue Services Net
SalesRevenueServicesNet
8663000 USD
us-gaap Sales Revenue Services Net
SalesRevenueServicesNet
18426000 USD
CY2016Q2 us-gaap Selling And Marketing Expense
SellingAndMarketingExpense
16066000 USD
us-gaap Selling And Marketing Expense
SellingAndMarketingExpense
34084000 USD
us-gaap Share Based Compensation
ShareBasedCompensation
14750000 USD
us-gaap Share Based Compensation
ShareBasedCompensation
11253000 USD
us-gaap Share Based Compensation Arrangement By Share Based Payment Award Discount From Market Price Offering Date
ShareBasedCompensationArrangementByShareBasedPaymentAwardDiscountFromMarketPriceOfferingDate
0.05
us-gaap Share Based Compensation Arrangement By Share Based Payment Award Discount From Market Price Offering Date
ShareBasedCompensationArrangementByShareBasedPaymentAwardDiscountFromMarketPriceOfferingDate
0.15
CY2015Q2 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
29565000 shares
us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
29470000 shares
CY2016Q2 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
30330000 shares
us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
30278000 shares
CY2016Q2 us-gaap Share Based Compensation Arrangement By Share Based Payment Award Maximum Employee Subscription Rate
ShareBasedCompensationArrangementByShareBasedPaymentAwardMaximumEmployeeSubscriptionRate
0.10
us-gaap Share Based Compensation Arrangement By Share Based Payment Award Number Of Additional Shares Authorized
ShareBasedCompensationArrangementByShareBasedPaymentAwardNumberOfAdditionalSharesAuthorized
900000 shares
CY2016Q2 us-gaap Share Based Compensation Arrangement By Share Based Payment Award Number Of Shares Available For Grant
ShareBasedCompensationArrangementByShareBasedPaymentAwardNumberOfSharesAvailableForGrant
1043938 shares
CY2015Q4 us-gaap Short Term Investments
ShortTermInvestments
2500000 USD
CY2016Q2 us-gaap Short Term Investments
ShortTermInvestments
41954000 USD
us-gaap Stock Issued During Period Shares Employee Stock Purchase Plans
StockIssuedDuringPeriodSharesEmployeeStockPurchasePlans
23848 shares
CY2015Q4 us-gaap Stockholders Equity
StockholdersEquity
55414000 USD
CY2016Q2 us-gaap Stockholders Equity
StockholdersEquity
21696000 USD
CY2015Q2 us-gaap Subscription Revenue
SubscriptionRevenue
6780000 USD
us-gaap Subscription Revenue
SubscriptionRevenue
14080000 USD
CY2016Q2 us-gaap Subscription Revenue
SubscriptionRevenue
9143000 USD
us-gaap Subscription Revenue
SubscriptionRevenue
17344000 USD
us-gaap Tangible Asset Impairment Charges
TangibleAssetImpairmentCharges
0 USD
CY2015Q4 us-gaap Treasury Stock Shares
TreasuryStockShares
4417585 shares
CY2016Q2 us-gaap Treasury Stock Shares
TreasuryStockShares
4417585 shares
CY2015Q4 us-gaap Treasury Stock Value
TreasuryStockValue
13938000 USD
CY2016Q2 us-gaap Treasury Stock Value
TreasuryStockValue
13938000 USD
CY2016Q2 us-gaap Unamortized Debt Issuance Expense
UnamortizedDebtIssuanceExpense
100000 USD
CY2015Q2 us-gaap Weighted Average Number Diluted Shares Outstanding Adjustment
WeightedAverageNumberDilutedSharesOutstandingAdjustment
0 shares
us-gaap Weighted Average Number Diluted Shares Outstanding Adjustment
WeightedAverageNumberDilutedSharesOutstandingAdjustment
0 shares
CY2016Q2 us-gaap Weighted Average Number Diluted Shares Outstanding Adjustment
WeightedAverageNumberDilutedSharesOutstandingAdjustment
0 shares
us-gaap Weighted Average Number Diluted Shares Outstanding Adjustment
WeightedAverageNumberDilutedSharesOutstandingAdjustment
0 shares
CY2015Q2 us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
29565000 shares
us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
29470000 shares
CY2016Q2 us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
30330000 shares
us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
30278000 shares
us-gaap Nature Of Operations
NatureOfOperations
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Organization and Nature of Operations</font></div><div style="line-height:120%;text-align:justify;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;&#160;&#160;&#160;</font></div><div style="line-height:120%;text-align:justify;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">PROS Holdings, Inc., a Delaware corporation, through its operating subsidiaries (collectively, the "Company"), provides enterprise revenue and profit realization software solutions designed to help companies accelerate sales, formulate winning pricing strategies and align product, demand and availability. The Company's revenue and profit realization solutions are designed to assist customers in growing revenue, supporting sustained profitability and modernizing their business processes. The Company provides its solutions to enterprises across a range of industries, including manufacturing, distribution, services, and travel. The Company offers its solutions via a SaaS delivery model as well as on a perpetual or term license basis. The Company also provides professional services to implement its software applications as well as business consulting. In addition, the Company provides product maintenance and support to its customers through which they receive unspecified upgrades, maintenance releases and bug fixes during the term of the support period on a when-and-if-available basis.</font></div></div>
us-gaap Use Of Estimates
UseOfEstimates
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Use of estimates</font></div><div style="line-height:120%;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:justify;text-indent:48px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company makes estimates and assumptions in the preparation of its unaudited condensed consolidated financial statements, and its estimates and assumptions may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. The complexity and judgment required in the Company's estimation process, as well as issues related to the assumptions, risks and uncertainties inherent in the application of the percentage-of-completion method of accounting, affect the amounts of revenue, expenses, unbilled receivables and deferred revenue. Estimates are also used for, but not limited to, receivables, allowance for doubtful accounts, useful lives of assets, depreciation and amortization, income taxes and deferred tax asset valuation, valuation of stock options, other current liabilities and accrued liabilities. Numerous internal and external factors can affect estimates. The critical accounting policies related to the estimates and judgments are discussed in the Company's Annual Report under management's discussion and analysis of financial condition and results of operations. There have been no significant changes to the Company's critical accounting policies as described in the Company's Annual Report.</font></div></div>

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