Thursday, March 1, 2012

Pros Holding ( NYSE - PRO ) -- Pricing Technology Leader Builds Momentum

Pros Holding (PRO $17.00) reported excellent on target Q4 results.  Earnings (excluding non cash stock option expense) rose 37% to $.11 a share.  Revenues climbed 30% to $26.2 million.  Income was held back by the launch of the company's cloud based service for mid-market customers.  In the past Pros focused primarily on Fortune 1000 corporations.  The new line is priced lower to begin with.  It also will generate revenue on a month to month subscription basis.  So the build up in incremental sales will be gradual.  Demand for Pros's enterprise products remained robust in the period, propelling backlog to $124 million.  Existing customers placed new orders for affiliated business units.  And new customers continued to sign up, both in core applications and emerging industries and geographic markets.

We are raising our 2012 earnings estimate by a nickel to $.50 a share.  A higher tax rate will prevent income from advancing at an even faster pace.  Marketing and product development costs will be hiked, as well.  And the cloud based product line will impact margins in the short term, too.  Longer term, margins are likely to expand as volume builds.  Sales are poised to keep growing at above average levels.  In 2-3 years earnings could reach $.75-$1.00 a share on sales of $175-$200 million.

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