Operator
Good day ladies and gentlemen, and welcome to the Second Quarter 2012 PROS Holdings, Inc. Earnings Conference Call.
My name is Angela, and I will be your coordinator for today. [Operator Instructions] And now, I would like to turn the presentation over to your host for today’s conference, Mr.
Damian Olthoff, General Counsel. Please proceed, sir.
Damian Olthoff
Thank you, operator. Good afternoon everyone and thank you for joining us today for the PROS Holdings financial results conference call for the second quarter of 2012.
As mentioned, my name is Damian Olthoff, and I am the General Counsel of PROS. Joining me on today’s call are Andres Reiner, our President and Chief Executive Officer; and Charlie Murphy, Executive Vice President and Chief Financial Officer.
Damian Olthoff
In today’s conference call, Andres will provide commentary on the second quarter of 2012, and then Charlie will provide a review of the financial results and our outlook before we open up the call for questions.
Before we begin, I must caution you that some of today’s remarks, including our guidance for the year, our competitive position, future business prospects, revenue growth, market opportunity, as well as statements made during the question and answer session contain forward-looking statements. These statements are subject to numerous and important factors, risks and uncertainties, which can cause actual results to differ from the results implied by these or other forward-looking statements.
Also these statements are based solely on the present information, and are subject to risks and uncertainties that can cause actual results to differ materially from those projected in the forward-looking statements. Additional information concerning risks and other factors that may cause actual results to differ can be found in the company’s filings with the SEC.
Also please note that a replay of today’s webcast will be available in the investor relations section of our website at www.prospricing.com. Finally, PROS has provided in its earnings release and will provide in this conference call forward-looking guidance.
We will not provide any further guidance or updates on our performance during the year, unless we do so in a public forum. PROS does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they are made.
I would also like to point out that in addition to reporting financial results in accordance with Generally Accepted Accounting Principles, or GAAP, that PROS also reports certain non-GAAP financial results. Investors are encouraged to review the reconciliation of each non-GAAP measure to the most directly comparable GAAP measure in the tables accompanying the press release distributed earlier today, and can also be found on the website in the investor relations section.
With that I would like to turn the call over to Andres.
Andres Reiner
Thank you, Damian, and thank you all for joining us on today’s call. I’m excited to report a strong second quarter for PROS with record revenue exceeding the high end of guidance, coming in at $28.1 million, a growth rate of 18% over the second quarter of 2011.
Andres Reiner
We generated non-GAAP operating income of $4.4 million for the second quarter, up 19% from a year ago. Non-GAAP EPS was $0.10 per share, up from $0.09 a year ago.
I’m proud of our team for executing as planned, and for delivering these outstanding results, especially in a challenging economy.
As you recall, in the first quarter we reported that a few deals had experienced extended sales cycles beyond our normal variability. However, our second-quarter results confirm that this was not a trend as sales cycles were in line with historic norms.
In fact through the first half of the year, new customer signings in our B2B industries notably increased relative to our total book of business. We also continued to see strong demand in all geographies.
In the first half we closed business in North America, Asia, Middle East, and Europe. I am also proud of our many customers for demonstrating market leadership by investing in PROS big data technologies, which address growing economic pressures.
For example, our solutions directly address the volatility of foreign currency in commodity costs that put additional strain on margin. This is just one way we are helping companies in this difficult macroeconomic environment to improve revenues, margins, and market share.
Our current demand is broad-based, including demand from companies that are facing tough times. We believe this underscores the strategic nature of our solution, and validates our mission of being an engine of prosperity for our customers.
With our strong first half performance, our proven value proposition, and our growing pipeline of opportunities, we are on track to deliver 20% revenue growth for the year.
I would now like to provide a few highlights of the second quarter that centre on our 3 key growth strategies, which include accelerating awareness and adoption of PROS, further extending our product leadership, and increasing our global reach and scale. For execution of these strategies all supported by our big data analytic platform, and high ROI resulted in new customer signings and a continued increase in the mix of business from more manufacturing, distribution and services markets.
Companies representing a variety of industries selected PROS during the second quarter, including TE Connectivity in the high-tech electronics sector, Kimberly Clark Professional in paper and packaging, and ARUP Laboratories in the medical services market just to name a few. More than 2/3 of the B2B customers we have added this year run SAP, which further validates that PROS is the customer solution of choice for price and margin management in the SAP community.
We are also pleased with the continued adoption of our solutions that cross a diverse number of sub industries, which now totals more than 30, up from 8 in 2005. Today we have customers ranging from high-tech to chemicals, to service parts, wholesale distribution, equipment rental services, and software just to name a few.
We believe this is further evidence that interest for our solutions continues to expand and mature. The horizontal nature of our platform enables us to serve this broad set of industries with the same common platform, while our market leading configurability enables customers to take advantage of the industry best practices.
This is not only an important differentiator for PROS, but also critical success factors we continue to scale to meet the growing market demand for big data solution across many industries. In the second quarter, we continue to invest in accelerating awareness and adoption through a number of sales and marketing initiatives.
We participated in global events such as SAP SAPPHIRE in the U.S., the European pricing platform chemicals forum in Sweden, and Microsoft ChemRA event for the chemical industry in Germany.
We also continued to increase our level of media coverage through social media participation, and continued to deliver thought leadership during the quarter. As a result of these and other efforts our sales pipeline continues to get stronger.
Our initiative for increasing awareness and adoption are working and we will continue to invest in this area.
Our investments in extending our product leadership in the market are also paying off. Through the first-half of the year, we filed 4 new patents to our growing patent portfolio, released the latest versions of our enterprise pricing and revenue management solution, and introduced a new product in Rebate Optimizer.
We remain focused on providing real-time big data applications that enable our customers to outperform by better understanding their customers buying behavior.
Research analysts are reporting on the growing demand for such solutions. For example, IBC Research recently projected that spending for big data technologies will reach $17 billion per year by 2015, up from $3 billion in 2010.
We believe PROS is uniquely positioned to capitalize on this opportunity given our 2.5 decades of experience providing real-time big data applications across many industries.
We will continue to invest in our innovation engine to further extend our product leadership in the market. In the second quarter, we also made progress in expanding our global reach and scale through direct sales coverage in our partner ecosystems.
In the second quarter, we increased our quota carrying personnel to 31 and remain on track for a 40% increase for the year. We are pleased with the efforts our resellers are making to bring PROS into their respective markets.
For example, our reseller in Brazil recently led a successful B2B pricing workshop in Sao Paulo. In addition, our reseller in China will be presenting on the topic of price optimization at an upcoming CFO event in the region.
We are on track with our reseller expectations that 2012 is about building awareness in pipelines with revenue contributions beginning in 2013. Our technology partnerships continue to get stronger as well.
For example, we recently entered the Microsoft dynamics CRM Global ISD Partnership program to provide sales teams with an integrated solution for accurate and timely customer insight at the point of negotiation. This program is a natural extension of our long-standing relationship with Microsoft, and is indicative of our commitment to provide differentiated solutions that improve sales performance in enterprise collaboration.
We believe our technology partnership with Microsoft has and will continue to be a key differentiator for PROS in the market. We continue to invest in our SAP partnerships.
For example, we recently achieved another product certification that set the standard for most complete and seamless integration experience with SAP in our market. We have been investing in our SAP partnership for the past 7 years, and believe our steps of integration with SAP, ERP, and SAP CRM is the key reason why SAP customers choose PROS.
With more than 50% of our B2B customers running SAP, we remain committed to providing the most compelling price and margin management solutions to the SAP community. We are also making strides with our system integration partners, who participated in half of PROS B2B implementations in the quarter, up 30% year-over-year.
We continue to certify additional partner resources for implementing and configuring PROS solutions, now totaling more than 160 partner consultants, up more than 40% from the second quarter last year.
We have made great overall progress in expanding our reach and scale through direct sales coverage in our partner ecosystems, and will continue to invest in these areas going forward. As you can see, our efforts to grow our business organically are paying off.
We continue to believe that M&A is a key part of our business strategy. During the quarter, we continue to prepare internally for such opportunities by securing a $50 million working capital credit facility that enables us to be more agile in our M&A pursuits, which are focused on technologies that optimize the value chain.
While we have nothing to announce, we continue to actively seek strategic opportunities that further strengthen our position in the market. We remain committed to M&A and feel good about our ability to act decisively for the right opportunity.
Overall this was an outstanding quarter for PROS. We remain confident in our business because demand for our solutions has never been stronger.
Our customers are realizing high value, our partner ecosystem is strengthening and we continue to set the pace of innovation in the market. Our real-time big data applications are more relevant than ever before as companies across diverse industries look to effectively compete and win in a challenging global economy.
Looking ahead, we will continue to invest in initiatives to accelerate awareness and adoption, extend our product leadership position, and increase our global reach and scale. We remain focused on execution across all of our target industries and believe PROS is in a strong position to capitalize on this sizeable market opportunity.
Now let me turn the call over to Charlie to provide you with a review of our financial results and outlook for the third quarter of 2012.
Charles Murphy
Thanks, Andres. I will be discussing our financial results on a non-GAAP basis.
A full GAAP to non-GAAP reconciliation is included in our earnings release, which can be found on our website in the investor relations section.
Charles Murphy
We are pleased with our performance in the second quarter with total revenue of $28.1 million, exceeding the high-end of our guidance, and up 18% from a year ago. License and implementation revenue were $18.2 million, up 21% from a year ago.
In the majority of our contracts, license and implementation fees are bundled together, and revenue is recognized on a percentage of completion phases over the implementation period.
Maintenance and support revenue of $10 million was up 14% year-over-year, and represent the largest component of revenue from recurring sources. Total recurring revenue, which includes maintenance and support revenue, a number of term licenses, and cloud service contracts, was 43% of revenue in the second quarter.
Our revenue recognition model gives us good revenue visibility.
In the second quarter, 61% of revenue came from outside the United States as compared to 66% a year ago. Revenue from Europe was 28% of both this and last year’s quarters.
Europe is a large market opportunity, which we will continue to invest in to capture the growth we see in front of us. Also to note, 80% of second-quarter European revenue was denominated in U.S.
dollars. So movements in European currency had a minimal impact on our reported results.
During the quarter, we experienced foreign currency exchange losses of approximately $100,000 due to the weakening of foreign currency exchange rates. Our foreign currency exchange loss had no impact on earnings per share.
Overall, we are pleased with the strong growth we achieved both in the U.S. and across our international markets as we continue to diversify our revenue around the globe.
Non-GAAP gross margins were approximately 74% for the second quarter of both 2012 and 2011. Margins can vary from period to period primarily due to the level of implementation services required relative to the total contract value.
We believe our overall blended gross margins are very strong, driven by our product platform.
Looking at operating expenses, total non-GAAP operating expenses for the quarter were $16.5 million compared with $13.9 million a year ago, with the increase of 19% representing planned investments consistent with our growth strategy. We will continue to invest as we look ahead to capitalize on what we believe is a very large market opportunity.
We are pleased with our non-GAAP operating income in the second quarter, which increased approximately 19% to $4.4 million, for a non-GAAP operating margin of 15.7%. Based on a non-GAAP effective tax rate of 35% non-GAAP net income was $2.8 million for the quarter, an increase of 12% over the prior year.
Non-GAAP earnings per share were $0.10, exceeding the high-end of our guidance compared to $0.09 per share a year ago. GAAP earnings per share were $0.04 compared to $0.05 last year.
A reconciliation of GAAP to non-GAAP is provided in our press release.
Now moving to the balance sheet, we ended the second quarter with cash and cash equivalents of $71.2 million, an increase of $2.7 million from the beginning of the year. Gross trade accounts receivable at the end of the quarter were $37.3 million.
Days sales outstanding were approximately 104 days, which remained unchanged from the first quarter and slightly above our historical average, which considers normal variations in accounts receivable and the timing of collections in invoicing of milestone buildings under our contracts.
We continue to generate operating cash flow. With approximately $3.5 million of operating cash flow generated in the quarter, yielding a cash flow margin of 12.6%.
Year-to-date operating cash flow was $7 million, also yielding cash flow gross margins of 12.6% year-to-date. For the year, we expect our annual operating cash flow to approximate our annual non-GAAP operating income.
We expect capital spending for the year to be approximately $6.5 million as a result of increased infrastructure investments in facility costs.
Finally headcount, including outsourcing, at the end of the quarter was 620, up from 580 at the end of the first quarter, an increase of 40 or approximately 7%. Year-to-date headcount has increased 15%.
We continue to increase our sales, marketing, engineering, professional services, and administrative resources to support growth reflecting confidence in our long-term opportunity.
Before I turn to guidance for the third quarter and full year, I wanted to provide you with a little more color on how we see the business operating currently. As Andres mentioned, deal closures returned to more normal levels and we have bagged contracts for the first half of the year.
While we can experience deal closure variability, our pipeline activity remained strong, and we believe the remainder of the year will continue to have solid deal activity. With that we remain confident in our ability to grow full-year revenue approximately 20%.
Now turning to our outlook, for the third quarter, we anticipate revenue in the range of $29.1 million to $29.7 million. We expect total expenses to be approximately $25.3 million, up from $20.9 million in the third quarter of 2011 as we continue to make strategic investments in our business.
With a tax rate of 35% in the third quarter, we anticipate non-GAAP earnings per share of $0.09 to $0.10 based on an estimated 28.3 million shares outstanding.
On a GAAP basis, we expect operating income of $1.4 million to $1.9 million, GAAP earnings per share in the range of $0.02 to $0.03. At this time we could be more specific about the full year.
On a full year basis, we expect revenue in the range of $115.4 million to $116.6 million, which at the midpoint is a 20% increase in revenue over full year 2011.
We expect non-GAAP operating margins of approximately 15%. We continue to view 2012 as an investment year and are balancing continued investments and our future growth with profitability.
We continue to believe that long-term we will see increasing operating margin leverage as our business scales, and we realize the benefits of our investments.
One more item before I turn the call over to Q&A. The research and experimentational tax credit has not been renewed for 2012.
If the credit is reinstated during 2012 and if it is retroactive to the beginning of the year, as has been the case in the past then we will make a cumulative adjustment in the quarter in which the tax credit is reinstated as we did during 2010.
Should the credit be reinstated, the estimated non-GAAP tax rate for the year will be approximately 31%. In summary, we are pleased with our performance for the first-half of the year.
We are confident that our growth strategies are working and that we are positioned well to capture the growing opportunity for real-time big data solutions.
With that let me turn the call back to the operator for questions.
Operator
[Operator Instructions] Gentlemen, your first question will come from the line of Thomas Ernst with Deutsche Bank.
Nandan Amladi
This is Nandan Amladi on behalf of Tom. You talked about strength across the different regions, but how is the pipeline looking in Europe, specifically trying to compare Northern Europe versus Southern Europe?
Andres Reiner
Yes. So, Europe also feels it is very strong order pipeline.
In the regions that we see strength are in the stronger economies, the U.K., Germany and the Nordic region. Those are the areas where we see strength, but overall across all geographies our pipeline is stronger year-to-date.
Nandan Amladi
A short follow up here if I might, there was a significant increase in CapEx during the quarter, can you characterize where those investments are going?
Charles Murphy
Yes, absolutely. We have commented previously that this is the year that we are making investments and renovating our facility here in Houston, Texas.
We renewed the lease last year. We have been in the facility for 10 years, and we have been talking about capital spending this year in total being about $6.5 million, and we started talking about this I think in the fourth quarter of last year.
Of that, about $4 million of that is for the facility, and $2.5 million is for our normal IT infrastructure spend.
Operator
And gentlemen, your next question will come from the line of John DiFucci with JPMorgan.
John DiFucci
Andres, I assume those deals that switched from last quarter, I assume, well, actually can you tell us whether they all closed this quarter? And when I look at, because when I look at the guidance it looks like these results look good, but when I look at the guidance, it looks pretty good, but it is a bit lower than we had modeled.
And I was just wondering was - the deals that slipped last quarter, do you look at those as sort of a one-time shift, or do you look at that as an opportunity to see sort of a catch up in I guess a future quarter?
Andres Reiner
So the deals that we expected to close did all close, and we are very pleased with the execution of that. We also saw very strong demand in the second quarter.
It wasn’t just about the deals that slipped. We don’t expect other deals to slip.
Like we said, we are seeing normal sales cycle times, and we are not seeing any slip in any of the current type pipeline opportunities.
Charles Murphy
And I would also like to say too that we are pleased that we reaffirmed our 20% revenue growth for this year. We thought - we find that to be I think a good performance for the company, and we did cite some specifics with a range, and the range could be high as 21%.
John DiFucci
Okay. That is helpful, and I don’t - I agree with the all that Charlie.
And Charlie one for you, can you tell us what the delta would be in cash tax regarding the R&D tax credit? And would that actually even that might not hit like right at the end of this year, right, and might hit at the beginning of next year?
Charles Murphy
It depends really when it gets renewed. If it gets renewed, if it gets renewed say before we have to make our fourth-quarter estimated tax payment, you could get a little bit of a benefit in the fourth quarter.
Does that make sense?
John DiFucci
Yes, yes, it does.
Charles Murphy
Yes, if it gets renewed after you made the estimated tax planning, you get the benefit sometime next year.
John DiFucci
Can you tell us, can you even roughly tell us - could you quantify that benefit, and what it might be?
Charles Murphy
We think it is approximately 4%. The tax rate without the credit is 35% on a non-GAAP basis.
With it, it is about 31%. That is 4% of our pre-tax income.
Operator
And your next question will come from the line of Tom Roderick with Stifel, Nicolaus.
Chris Koh
This is Chris Koh in for Tom. Good job on the quarter.
So going back to what you guys had mentioned earlier, Charlie I think you mentioned, if you could clarify the comment about signings increasing in the first half of ’12 relative to total booked business, would you say that - you caught up enough in Q2, and is the pipeline strong enough, where you are ahead of plan in terms of bookings, or is it pretty much kind of just making up for the lengthening of the sales cycles in the first quarter?
Charles Murphy
Yes, I will take it, and that we have reaffirmed the 20% revenue growth, I think it is validation that where we expected to be. We caught up to plan.
We feel good about where we are, and we feel particularly good about the type of activity coming into the third quarter. That is why we are very comfortable in reconfirming our 20% revenue growth at the high end of the range perhaps 21%.
And we are also pleased that we exceeded the high-end of our guidance in Q2 by $300,000. I think it is a good position for the company to be in going into the last half of the year.
Chris Koh
Great, and then so if I look at deferred, it looks like it had a pretty nice bump, especially last year it declined in this quarter, should we read anything into that or is that timing issues?
Charles Murphy
Not relative to last year, I think generally deferred revenues does not reflect our contract value, our full contract value. That is why it is hard to defer it much in the deferred revenue balance, but obviously we are pleased with the number of milestone billings we are able to get out in the second quarter driving that increase.
I think deferred revenue today at least June 30, is probably a record for the company. So we’re pleased with that as well.
But don’t infer too much on that because again it does not reflect full contract value.
Chris Koh
Great. And then one last one, in terms of your comments about M&A, so where do you think you guys would pursue in terms of supplementing your product or complementing your products, would it be at scale buy, would it be a geographic buy, if you could maybe, and I know you have nothing to announce today obviously, but if you could kind of just direct us in terms of where your line of thinking is relative to opening up that line of credit?
Andres Reiner
Yes, we have commented on our vision of providing solutions to help optimize the sales process and the whole value chain. So the areas that are of most interest to us are adjacencies around our technologies to help optimize the whole value chain.
Operator
[Operator Instructions] Your next question will come from the line of Joe Fadgen with Craig-Hallum Capital.
Joe Fadgen
On here for Chad today, just a couple of quick questions, I know you said that Europe seems to be going pretty well for you, but I’m thinking this quarter you said it was 28% of revenue, I think last quarter it was like 32%, looking forward do you still think around that 30% is probably the right number to think about in terms of revenue from Europe?
Andres Reiner
Yes, I would say that that is probably not an unreasonable expectation. Again, our B2B business is doing well.
So we would expect that Europe probably should stay about where it is today.
Charles Murphy
Now, it is also going to stay. I think historically you’re probably not that familiar with historic, but we had a very strong presence in Europe, and we are very pleased about our position there.
And also of course in Europe, the 2 segments that have been talked about quite extensively are government and financial institutions, and we’re not in either of those. Very strong in manufacturing, distribution services and travel, which are all very large enterprise wide organizations.
So actually we feel good about Europe.
Andres Reiner
One last point that I will add is one of the companies that I commented on in the script Kimberly Clark Professional was a deal out of Europe. So that is just one of the deals that we have done within that geography.
Joe Fadgen
Okay, great. Then can you give me some color on how contraction is going with our Rebate Optimizer product over this last few months?
Andres Reiner
Yes, we are actually very pleased with the Rebate Optimizer. We have seen a lot of interest both from our customer base, as well as from new customers, new target opportunities and we did close deals in both quarters on the Rebate Optimizer.
Bringing marketing pricing in sales together to a common collaboration platform that resonates very well in the market, and there is really no solution in the market that brings the total collaboration, and brings our predictive - prescriptive capabilities. So we have seen very strong demand.
Joe Fadgen
Okay, great. Real quick, did you give maintenance renewal rates on the call?
Maybe I didn’t catch it.
Andres Reiner
No, we generally don’t give it on the call, but our maintenance renewal rates remain best in class mid to high 90% renewal rates. It is consistent with historical performance.
Joe Fadgen
Okay, great. And then just one more from me, on the sales headcount I think you said you ended this quarter at 31, and if I remember correctly, last quarter was 28, so we’re looking at about 3 net adds over the last couple of quarters.
I mean, do you still feel that - do you still feel pretty confident that you are going to be able to get to that, I think it is 40% growth in the sales force by the end of the year, and I guess, what gives you that confidence seeing that it is - you seems like you probably have to get a pretty good push here in the second half to get to that?
Andres Reiner
Yes, we still feel confident that we will reach the 40% growth based on our recruiting pipeline. So we still have a lot of activity in recruiting, and based on that pipeline we feel confident that we will increase by 40%.
Charles Murphy
Also our plan has not changed. The plan is still to increase by 40%.
Operator
And gentlemen, your next question will come from the line of Jesse Hulsing with Pacific Crest Securities.
Jesse Hulsing
You won a deal in the quarter with Etihad Airlines. One, how is the airline vertical trending versus manufacturing and distribution and are you seeing more opportunity in the pipeline in emerging markets?
Andres Reiner
Yes, as far as the trend, we have said for quite a while that the big growth opportunity for the company is in the B2B business, the manufacturing distribution and services. We have also said that the travel industry, which is predominantly airline continues to grow.
So it is trending - we are pleased with the trend for travel. It is growing.
But the bigger growth of course is, as we have been saying, is in the B2B manufacturing distribution and services. And as far as going down-market a bit there is an opportunity for us there.
We did a number of deals last year in airline in the down-market, and we are pleased with that and we continue to look at those opportunities. But also a couple of things you may or may not know is that some of the historical metrics is we have I think 18 of the top 25 largest airlines in the world, and we have got 8 of the 10 most profitable airlines in the world.
So the legacy for the company has been the larger airlines but we also are attracting a nice position with the midmarket airlines as well.
Jesse Hulsing
Great. And you talked a little bit about your midmarket product, I know you have added some leadership in that department, how is that trending, how is that team getting ramped up, and are there any particular geos that you have been focusing on and trying to penetrate?
Andres Reiner
Yes. So in the mid-market our leader, Kevin Fitzgerald, has made a lot of progress on building out an inside sales organization, as well as continuing to build the awareness in our pipeline, and we see quite a bit of interest in that market, and expect to see some revenue contribution next year from those investments.
Predominantly most of the interest that we are targeting right now is North America and a little bit in Europe, but mostly North America.
Jesse Hulsing
And last one from me, average deal size any movement in the quarter, is it still trending along with historical averages.
Andres Reiner
We are very pleased that it is still trending at the historical averages.
Operator
[Operator Instructions] Gentlemen, your next question comes from the line of Ross MacMillan with Jefferies & Company.
Ross MacMillan
I was wondering if you could just go back to the quarter itself, and you clearly beat the high end of your revenue expectations, what actually drove that was it more net new bookings that started to convert, was it just pace of implementation? If you could just put some color around what actually drove the upside in the quarter that will be great?
Andres Reiner
Yes. Actually I would say it is a mix of both.
As we mentioned we’re very pleased with the bookings activity for the quarter. So that helped.
We are also pleased with the timing of our implementations during the quarter. We got some help there as well.
So we feel - first of all it was obviously a catch up in Q1, right the deals that didn’t close. That is really the booking phase.
So we feel good about both of those components.
Ross MacMillan
Okay. That is great, and then, most of my other questions have been asked, I just wanted to recap on cash flow, Charlie, I think I heard you say that you still expect your cash flow from operations this year to approximate to non-GAAP operating income, is that correct?
Charles Murphy
That is correct.
Ross MacMillan
And just in terms of the first half performance on cash flows, and I guess specifically I think the DSOs are still tracking a little bit above last year, anything to comment on there, or is it just - is it really just timing on payments, are you seeing any extended payment terms from customers, or any change in cash collection?
Andres Reiner
No. It is entirely based on the timing of our billing, timing of our milestone billings and the bookings we have in the quarter, the billings go out, don’t necessarily get the collection in the quarter.
That is why we’re actually from a cash flow standpoint one of the reasons I feels good about the last half is our trade receivables are up substantially, about $8 million in trade receivables. So that is going to help the cash flow in the last half of the year.
So it is really just a function of timing of the billings. It is not extended terms.
It is not credit issues that we see in the market place. So we actually feel good about that.
Ross MacMillan
And then just in terms of the geographic mix, I think I got the numbers you gave, and it obviously suggests that the U.S. is growing faster than international business, but I think the comp was a lot easier, so just in terms of net new business, is that also kind of the reflection of what you are seeing in terms of net new business mix that North America from a growth perspective is leading the way or is that not necessarily the case, is it more broad-based?
Andres Reiner
Yes, it is definitely net new. North America is doing very strong, but also Europe.
What we commented on the script is the industries in manufacturing and distribution services we are seeing heavy growth as you know. Most of our business in Travel well over 90% is outside of North America.
So most of the growth that we are seeing is in the B2B manufacturing distribution and services industries.
Ross MacMillan
So if we compare just B2B in North America and B2B in Europe, those will be more similar, but when you add in the lower growth travel business outside of the U.S. that brings that international growth rate down?
Andres Reiner
That is exactly right.
Charles Murphy
Exactly right. That is what we are expecting as they go forward.
Operator
And ladies and gentlemen, at this time, I have no further questions in queue. I would like to turn the call back over to Andres Reiner for any closing comments.
Andres Reiner
Thank you for your participation in today’s call and for your support of PROS. We are confident that our growth strategies are working.
More and more companies look to PROS to monetize their big data and improve their business performance. We continue to invest in innovation in our go-to-market strategies in order to drive long-term sustainable growth.
Andres Reiner
I would like to thank our PROS team worldwide for their relentless passion and commitment to innovation and customer success. Thank you to our customers, partners and shareholders as well for your support of PROS.
We look forward to speaking with you on our next call. Thank you and good-bye.
Operator
Ladies and gentlemen we thank you for your participation in today’s conference. This does conclude the presentation and you may now disconnect.
Good day.