PROS Holdings, Inc. (PRO) Q2 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance, including record revenue, improved margins, and positive cash flow. The partnership with Microsoft and strategic customer expansions are promising. However, cautiousness in the travel sector and unclear future growth expectations introduce some uncertainty. Overall, the positive financial metrics and raised guidance outweigh these concerns, suggesting a positive stock price movement in the short term.
Key Financial Performance
Subscription Revenue $65.6 million, up 14% year-over-year.
Total Revenue $82 million, up 8% year-over-year.
Recurring Revenue 84% of total revenue.
Services Revenue $13 million, down 3% year-over-year due to a higher portion of subscription bookings related to expansions.
Calculated Billings Increased 10% year-over-year.
Non-GAAP Subscription Margin 80%, an improvement of over 160 basis points year-over-year.
Non-GAAP Gross Margin 67%, an improvement of over 210 basis points year-over-year.
Adjusted EBITDA $5.2 million, improving more than $5 million over last year.
Free Cash Flow $6.2 million, an improvement of nearly 200% year-over-year.
Cash and Investments $149.1 million, net of the settlement of the remaining $21.7 million of convertible notes.
Non-GAAP Earnings Per Share $0.07 per share, exceeding guidance.
Total Revenue Guidance for Full Year Between $329 million and $331 million, representing 9% growth at the midpoint.
Free Cash Flow Guidance for Full Year Between $20 million and $24 million, representing a 94% improvement year-over-year at the midpoint.
Subscription ARR Guidance for Full Year Between $280 million and $284 million, representing 9% growth at the midpoint.
Subscription Revenue Guidance for Full Year Between $263.5 million and $265.5 million, representing 13% growth at the midpoint.
Adjusted EBITDA Guidance for Full Year Between $21 million and $24 million, representing a 275% improvement at the midpoint.
Subscription Revenue Guidance for Q3 Between $65.8 million and $66.3 million, representing 10% growth at the midpoint.
Total Revenue Guidance for Q3 Between $81.5 million and $82.5 million, representing 6% growth at the midpoint.
Adjusted EBITDA Guidance for Q3 Between $6.5 million and $7.5 million.
Non-GAAP Earnings Per Share Guidance for Q3 $0.08 to $0.10 per share.
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Operating Highlights
New Product Launches: Released a new generative AI data transformation solution to power seamless data integration between third-party systems and the PROS platform.
Customer Wins: A top three global medical devices company selected the PROS platform to activate Smart CPQ and smart price optimization.
Customer Expansions: Ingredion has decided to expand the PROS platform globally. Hertz expanded their use of the PROS platform by activating capacity-aware price optimization across all North America locations. Philippine Airlines expanded their use of the PROS platform by activating Group Sales Optimizer.
Market Expansion: Dynata selected the PROS platform to activate Smart CPQ, empowering their global sales team. VFS is expanding the PROS platform across global operations.
Operational Efficiencies: Achieved 80% non-GAAP subscription gross margin, a significant milestone. Reduced operating expenses by 1% per year over the last two years. Generated free cash flow of $6.2 million in Q2, a 200% improvement year-over-year.
Strategic Shifts: Unified B2B and travel go-to-market teams to drive a centralized revenue engine. Cautious outlook on travel business due to operational cost and supply chain challenges.
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Risk or Challenges
Travel Business Risks: The company is cautious about its travel business due to operational cost and supply chain challenges faced by airlines, which are impacting deal approval processes and lengthening sales cycles. This is expected to result in a year-over-year decline in travel bookings, affecting the outlook for 2024.
Regulatory and Competitive Pressures: While the company sees favorable competitive dynamics, it acknowledges that regulatory issues and competitive pressures could pose risks to its growth and market position.
Service Revenue Decline: Services revenue was down 3% year-over-year, slightly below expectations, attributed to a higher portion of subscription bookings related to expansions, which typically require less service revenue.
Economic Factors: The airline industry's operational challenges and inflationary pressures are noted as economic factors that could impact the company's performance in the second half of the year.
Guidance Adjustments: The company has revised its guidance for total revenue and free cash flow due to anticipated lower service revenue and operational challenges in the airline sector.
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Guidance & Outlook
Subscription Revenue Growth: Subscription revenue grew by 14% year-over-year, achieving $65.6 million.
Total Revenue Growth: Total revenue increased by 8% year-over-year, reaching $82 million.
Adjusted EBITDA Improvement: Adjusted EBITDA improved by 554% year-over-year.
Free Cash Flow Improvement: Free cash flow improved by 112% year-over-year.
Non-GAAP Subscription Gross Margin: Achieved 80% non-GAAP subscription gross margin, exceeding long-term goals.
Customer Expansion: Significant expansions with customers like Ingredion and Hertz, indicating strong demand for PROS platform.
Innovation Initiatives: Released new generative AI data transformation solution to enhance platform integration.
Unified Go-to-Market Strategy: Centralized revenue engine to drive a unified go-to-market across all customer journey phases.
Total Revenue Guidance: Revised total revenue guidance to between $329 million and $331 million, representing 9% growth at the midpoint.
Free Cash Flow Guidance: Anticipating free cash flow of between $20 million and $24 million, a 94% improvement year-over-year.
Subscription ARR Guidance: Expecting subscription ARR of between $280 million and $284 million, representing 9% growth at the midpoint.
Subscription Revenue Guidance: Reiterating subscription revenue guidance of between $263.5 million and $265.5 million, representing 13% growth at the midpoint.
Adjusted EBITDA Guidance: Raising guidance for adjusted EBITDA to between $21 million and $24 million, a 275% improvement at the midpoint.
Q3 Subscription Revenue Guidance: Expecting Q3 subscription revenue between $65.8 million and $66.3 million, representing 10% growth at the midpoint.
Q3 Total Revenue Guidance: Expecting Q3 total revenue between $81.5 million and $82.5 million, representing 6% growth at the midpoint.
Q3 Adjusted EBITDA Guidance: Expecting Q3 adjusted EBITDA between $6.5 million and $7.5 million.
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Shareholder Return Plan
Free Cash Flow: Generated free cash flow of $6.2 million in Q2, an improvement of nearly 200% year-over-year.
Free Cash Flow Guidance: For the full year, free cash flow is anticipated to be between $20 million and $24 million, representing a 94% improvement year-over-year at the midpoint.
Adjusted EBITDA Guidance: Raising guidance for adjusted EBITDA to between $21 million and $24 million, representing a 275% improvement at the midpoint.
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Key Q&A
Q:What are you hearing from travel customers about their challenges and timeline to overcome them?
A:We're working closely with airline customers to help them get their operations back in line. They are focused on operational challenges, and we are supporting them with minimal investment and team support. We believe that by Q3, there will be an impact, but we are committed to helping them come out stronger.
Q:What are your thoughts on the potential efficiencies from unifying the travel and B2B go-to-market strategies?
A:The increase in sales and marketing costs was primarily due to marketing activities. We expect to see efficiency benefits from unifying the travel and B2B organizations, but costs may slightly increase due to additional marketing investments.
Q:Can you provide insights on revenue growth expectations for calendar '25?
A:I'm not going to comment on '25 yet as we are still in the planning process. Our subscription ARR is a leading factor, but other elements like in-quarter bookings also play a role. We are not conceding to a growth rate in the upper single digits for next year.
Q:Why has the Rule of 40 goal been pushed from '26 to '27?
A:The components of our growth and free cash flow targets remain the same. We are focused on executing our strategy and believe that pushing the goal back will allow us to achieve consistent performance.
Q:How has the Microsoft partnership progressed?
A:We are pleased with the Microsoft partnership and have won Partner of the Year again. We are excited about the innovations and the opportunities that are being generated from this collaboration.
Q:Has there been a change in customer willingness to sign deals this quarter?
A:The selling environment remains difficult, and it is hard to get deals through. However, we are seeing consistent deal sizes and good expansion activity.
Q:When did you start to see extra cautiousness in the travel sector?
A:The crowd site incident had a significant impact on the travel industry, causing many to focus on getting back to operational stability.
Q:How have average sales cycle duration times changed in the B2B business?
A:B2B sales cycle times have improved by 15% year-to-date, and this improvement is consistent between Q1 and Q2.
Q:What is the split between new versus existing customers?
A:Currently, we are seeing a higher percentage of existing customers than new. We expect a 40-60 split between new and existing customers for the back half of the year.
Q:What are your thoughts on the FTC's study on market data usage?
A:It's too early to determine implications. We have clear data segregation between customers and do not use personal identifiable data for our algorithms.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the revenue growth expectations for calendar '25, stating they are still in the planning process and not conceding to a specific growth rate. Additionally, there was a lack of clarity on the implications of the FTC's study on market data usage, as management stated it was too early to determine any broad implications.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BB side
Berg Needham
FTC market
Hertz
Hi question
Ingredion
PROS platform
Philippine Airlines
Understood
VFS
activation
airline
basis point
beauty
belief
booking BB
challenge
comment
cost
date
demand
detail
election
expansion activity
expectation
guide
land expansion
margin improvement
midpoint subscription
outcome
platform value
point rate
process
renewal
selling environment
size
split
starting
supply
technology
term goal
value proposition
PRO Transcript
PROS Holdings, Inc. (PRO) Q2 2025 Earnings Call Transcript
Positive8-1
The earnings call summary and Q&A reveal strong financial performance, strategic partnerships, and positive industry trends, particularly in the airline sector. Despite some macroeconomic challenges, management's focus on AI innovation, strategic partnerships, and a new leadership transition contribute to a positive outlook. The lack of raised EBITDA guidance is offset by reinvestment plans for long-term growth. Overall, the sentiment is positive, likely leading to a 2% to 8% stock price increase in the short term.
PROS Holdings, Inc. (PRO) Q1 2025 Earnings Call Transcript
Positive5-1
The earnings call presents a positive outlook with strong financial performance, exceeding guidance in several metrics, and optimistic guidance for the year. Despite macroeconomic uncertainties and competitive pressures, the company reports increased demand and successful customer engagement, particularly in the travel sector. The Q&A section reveals no significant demand pattern changes, and management focuses on efficiency improvements. The only concern is the unclear response on guidance reiteration, but overall, the positive financial results and optimistic guidance outweigh this, leading to a positive stock price prediction.
PROS Holdings, Inc. (PRO) Q3 2024 Earnings Call Transcript
Positive10-29
The earnings call summary shows strong financial performance with significant improvements in revenue, EBITDA, and cash flow. The guidance is optimistic, especially with raised subscription revenue and EBITDA projections. Although there are risks like geopolitical uncertainties and competitive pressures, the company's strategic initiatives and AI-driven efficiencies are promising. The Q&A section reflects confidence in the business outlook, despite some management evasiveness. Overall, the strong financial metrics and optimistic guidance suggest a positive stock price movement.
PROS Holdings, Inc. (PRO) Q2 2024 Earnings Call Transcript
Positive7-31
The earnings call highlights strong financial performance, including record revenue, improved margins, and positive cash flow. The partnership with Microsoft and strategic customer expansions are promising. However, cautiousness in the travel sector and unclear future growth expectations introduce some uncertainty. Overall, the positive financial metrics and raised guidance outweigh these concerns, suggesting a positive stock price movement in the short term.
PRO Report
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