Q2 2024 PROS Holdings Inc Earnings Call

Greetings.

Operator: for the Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference call over to Belinda Overdeput, Senior Director of Investment Relations.

Operator: At this time, all participants are in a listen-only mode. A question and answer session will follow the phone presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Speaker Change: Welcome to the PROS Holdings Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference call over to Belinda Overdeput, Senior Director of Address Relations.

Operator: As a reminder, this conference is being recorded.

Belinda Overdeput: I would now like to turn the conference call over to Belinda Overdeput, Senior Director of Interest Relations.

Belinda Overdeput: Thank you, operator.

Belinda Overdeput: Thank you, Operator. Good afternoon, everyone, and thank you for joining us.

Andres Reiner: Good afternoon, everyone, and thank you for joining us. Our earnings press release, SEC filings, and a replay of today's call can be found on the Investor Relations section of our website at pros.com.

Belinda Overdeput: Thank you, operator. Good afternoon, everyone, and thank you for joining us. Our earnings press release, SEC filings, and a replay of today's call can be found on the Investor Relations section of our website at PROS.com.

Belinda Overdeput: Our earnings press release, SEC filings, and a replay of today's call can be found in the Investor Relations section of our website at PROS.com. Our prepared remarks are also available on our website and will be replaced by the official transcript, which includes participant questions, once available. With me on today's call is Andres Reiner, President and Chief Executive Officer, and Stefan Schulz, Chief Financial Officer. Please note that some of the commentary today will include forward-looking statements, including, without limitation, those about our strategy, future business prospects, and market opportunities, and our financial projections and guidance.

Andres Reiner: Our prepared remarks are also available on our website and will be replaced by the official transcript, which includes participant questions. Once available, with me on today's call is Andres Reiner, President and Chief Executive Officer, and Stefan Schulz. Chief Executive Officer, please note that some of the commentary today will include forward-looking statements, including, without limitation, those about our strategy, future business prospects and market opportunities, and our financial projections and guidance. Actual results can differ materially from such statements in our forecast. For more information, please refer to the risk factors described in our SEC filings. Pros assumes no obligation to update any forward-looking statements to reflect future events or circumstances.

Speaker Change: Our prepared remarks are also available on our website and will be replaced by the official transcript, which includes participant questions once available.

Speaker Change: With me on today's call is Andres Reiner, President and Chief Executive Officer, and Stefan Schulz, Chief Financial Officer. Please note that some of the commentary today will include forward-looking statements, including, without limitation, those about our strategy, future business prospects and market opportunities, and our financial projections and guidance.

Belinda Overdeput: Actual results could differ materially from those in our forecast. For more information, please refer to the risk factors described in our SEC filing. PROS assumes no obligation to update any forward-looking statements to reflect future events or circumstances. As a reminder, during the call, we will discuss non-GAAP metrics. Reconciliations between each non-GAAP measure and the most directly comparable GAAP measure to the extent available without unreasonable effort are available in our earnings press release. With that, I'll turn the call over to you, Andres.

Speaker Change: Actual results could differ materially from such statements in our forecast. For more information, please refer to the risk factors described in our SEC filings.

Speaker Change: PROS assumes no obligation to update any forward-looking statements to reflect future events or circumstances.

Andres Reiner: As a reminder, during the call, we will discuss non-GAAP metrics, reconciliations between each non-GAAP measure and the most directly comparable GAAP measure to the extent available without unreasonable effort are available in our earnings press release.

Speaker Change: As a reminder, during the call, we will discuss non-GAAP metrics. Reconciliations between each non-GAAP measure and the most directly comparable GAAP measure, to the extent available without unreasonable effort, are available in our earnings press release. With that, I'll turn the call over to you, Andres.

Andres Reiner: With that, I'll turn the call over to you, Andres.

Andres Reiner: Thank you, Belinda. Good afternoon, everyone, and thank you for joining us on today's call. Year to date, we've delivered a 554% improvement in adjusted EBITDA and a 112% improvement in free cash flow year over year. With both metrics yielding positive first-half results, despite seasonally high expenses. In Q2, we also achieved our long-term goal of 80% non-GAAP subscription gross margin. I'm extremely proud of our team for building the market leading profit and revenue optimization platform, which drives immense value for customers, powering 4.1 trillion transactions a year while delivering expanded subscription gross margins.

Andres D. Reiner: Thank you, Belinda. Good afternoon, everyone, and thank you for joining us on today's call. We delivered a solid second quarter, exceeding the high end of our guidance ranges across all metrics. We grew subscription revenue by 14% and total revenue by 8% while achieving significant profitability miles. Year-to-date, we've delivered a 554% improvement in adjusted EBITDA and a 112% improvement in free cash flow year-over-year, with both metrics yielding positive first-half results despite seasonally high expectations.

Andres D. Reiner: Thank you, Belinda. Good afternoon, everyone, and thank you for joining us on today's call. We delivered a solid second quarter, exceeding the high end of our guidance ranges across all metrics.

Andres D. Reiner: We grew subscription revenue by 14% and total revenue by 8% while achieving significant profitability milestones.

Andres D. Reiner: Year-to-date, we've delivered a 554% improvement in adjusted EBITDA and a 112% improvement in free cash flow year-over-year, with both metrics yielding positive first-half results despite seasonally high expenses.

Andres D. Reiner: In Q2, we also achieved our long-term goal of 80% non-GAAP subscription gross margin. I'm extremely proud of our team for building the market-leading profit and revenue optimization platform, which drives immense value for customers, powering 4.1 trillion transactions a year while delivering expanded subscription growth. Now in the second half, we're being cautious with respect to our travel.

Speaker Change: In Q2, we also achieved our long-term goal of 80% non-GAAP subscription gross margin.

Speaker Change: I'm extremely proud of our team for building the market-leading profit and revenue optimization platform, which drives immense value for customers powering 4.1 trillion transactions a year while delivering expanded subscription gross margins.

Andres Reiner: Now, in the second half, we're being cautious with respect to our travel business. Typically, the second half is seasonally strong for airline bookings, and that certainly was the case in 2023. Despite enjoying strong passenger demand, airlines continue to face operational costs and supply chain challenges. This challenges impact the all-approval processes and infant sale cycles.

Speaker Change: Now, in the second half, we're being cautious with respect to our travel business.

Andres D. Reiner: Typically, the second half is seasonally strong for airline bookings, and that certainly was the case in 2023. However, despite enjoying strong passenger demand, airlines continue to face operational cost and supply chain challenges. These challenges impact deal approval processes in Linton sales sites. As a result, we're assuming our travel bookings will be down year over year, impacting our outlook for 2024, which Stefan will cover in more detail.

Speaker Change: Typically the second half is seasonally strong for airline bookings and that certainly was the case in 2023. Despite enjoying strong passenger demand airlines continue to face operational cost and supply chain challenges.

Speaker Change: These challenges impact deal approval processes and length in sales cycles. As a result, we're assuming our travel bookings will be down year-over-year, impacting our outlook for 2024, which Stefan will cover in more detail.

Andres Reiner: As a result, we're assuming our travel bookings will be down year over year, impacting our outlook for 2024, which Stefan will cover in more detail. We remain fully committed to achieving our long-term goal of becoming a Rule of 40%. Company. We've made considerable progress in our confidence in achieving our long-term goal is strong.

Andres D. Reiner: We remain fully committed to achieving our long-term goal of becoming a Rule of 40 company. We've made considerable progress, and our confidence in achieving our long-term goal is strong. Here's what fuels her conviction.

Stefan B. Schulz: We remain fully committed to achieving our long-term goal of becoming a Rule of 40 company. We've made considerable progress and our confidence in achieving our long-term goal is strong.

Andres Reiner: Here's what fuels our conviction. First, the value proposition of the PROS platform is more relevant than ever. And we see increasingly favorable competitive dynamics, both driving continued strong dual volumes and wind rates. Or clear value proposition is why more customers are prioritizing process at top initiatives supported by their boards as it means for driving revenue growth and margin improvement, fueling strong expansion activity.

Andres D. Reiner: First, the value proposition of the PROS platform is more relevant than ever, and we see increasingly favorable competitive dynamics, both driving continued strong deal volumes and win rates. Our clear value proposition is why more customers are prioritizing PROS as a top initiative supported by their boards as a means for driving revenue growth and margin improvement, fueling strong expansion activity.

Stefan B. Schulz: Here's what fuels her conviction.

Stefan B. Schulz: First, the value proposition of the PROS platform is more relevant than ever, and we see increasingly favorable competitive dynamics, both driving continued strong deal volumes and win rates.

Stefan B. Schulz: A clear value proposition is why more customers are prioritizing PROS as a top initiative supported by their boards as a means for driving revenue growth and margin improvement, fueling strong expansion activity.

Andres Reiner: Second, we continue to invest in innovation to drive faster activation of our market leading platform and accelerate time to value, bolstering our land, realize and expand strategy. I will share a few examples from Q2, the highlight these points starting with new customer wins. At top three global medical devices companies selected the PROS platform in Q2 to activate smart CPQ and smart price optimization. With goals to accelerate sales and drive increased win rates, the company chose PROS as their strategic partner to help them deliver under growth objectives. The initial regional land is the beginning of a partnership that can span over a hundred countries around the globe.

Andres D. Reiner: Second, we continue to invest in innovation to drive faster activation of our market-leading platform and accelerate time-to-value, bolstering our land, realize, and expand strategy. I will share a few examples from Q2 that highlight these points, starting with New Customer 1. A top three global medical devices company selected the PROS platform in Q2 to activate smart CPQ and smart price optimization. With goals to accelerate sales and drive increased win rates, the company chose PROS as its strategic partner to help them deliver on their growth objectives. The initial regional land is the beginning of a partnership that can span over 100 countries around the globe.

Stefan B. Schulz: Second, we continue to invest in innovation to drive faster activation of our market-leading platform and accelerate time-to-value, bolstering our land, realize, and expand strategy.

Speaker Change: I will share a few examples from Q2 that highlight these points starting with new customer wins.

Speaker Change: A top three global medical devices company selected the PROS platform in Q2 to activate smart CPQ and smart price optimization.

Speaker Change: With goals to accelerate sales and drive increased win rates, the company chose PROS as their strategic partner to help them deliver on their growth objectives.

Speaker Change: The initial regional land is the beginning of a partnership that can span over a hundred countries around the globe.

Andres Reiner: Dinata, a leading first-party data solution platform, selected the PROS platform to activate smart CPQ, empowering their global sales team to accelerate time to quote with winning offers. Dinata chose PROS for the depth and breadth of our platform to support their direct sales in future expansion of the ReCommerce channel.

Andres D. Reiner: Dyneda, a leading first-party data solution platform, selected the PROS platform to activate Smart CPQ, empowering their global sales team to accelerate time to quote with winning offers. Dineda chose PROS for the depth and breadth of its platform to support their direct sales in the future expansion of their e-commerce channel. Now onto expansions.

Speaker Change: Dynata, a leading first-party data solution platform, selected the PROS platform to activate Smart CPQ, empowering their global sales team to accelerate time to quote with winning offers.

Speaker Change: Dineda chose PROS for the depth and breadth of her platform to support their direct sales in future expansion of their e-commerce channel.

Andres Reiner: Now into expansions. A few quarters ago I shared ingredients continued success with PROS, highlighting multiple regional expansions of our platform. We are proud to announce that as of Q2, Ingredient has decided to expand the PROS platform globally, underscoring the value they drive with our solution. We are also expanding the PROS platform across BSF's global operations. As the world's largest chemical producer, BASF uses our platform to drive pricing and sales excellence in the face of inflation and supply chain volatility, making PROS the strategic priority for global deployment. Hertz expanded their use of the PROS platform by activating capacity of wear price optimization across all North America locations.

Andres D. Reiner: A few quarters ago, I shared Ingredients' Continued Success with PROS, highlighting multiple regional expansions of our platform. We're proud to announce that, as of Q2, Ingredient has decided to expand the PROS platform globally, underscoring the value they drive with our solution. We're also expanding the PROS platform across BSF's global operations. As the world's largest chemical producer, BSF uses our platform to drive pricing and sales excellence in the face of inflation and supply chain volatility.

Speaker Change: Now on to expansions. A few quarters ago I shared Ingredients Continued Success with PROS, highlighting multiple regional expansions of our platform.

Speaker Change: We're proud to announce that as of Q2, Ingredient has decided to expand the PROS platform globally, underscoring the value they drive with our solution.

Speaker Change: We're also expanding the PROS platform across BSF's global operations. As the world's largest chemical producer, BSF uses our platform to drive pricing and sales excellence in the face of inflation and supply chain volatility.

Andres D. Reiner: Making PROS a strategic priority for global deployment, Hertz expanded their use of the PROS platform by activating capacity-aware price optimization across all North America locations. This solution uses patent-pending technology powered by neural network AI to assess the opportunity cost of diminishing supply against demand in real time.

Speaker Change: Making PROS a strategic priority for global deployment.

Speaker Change: Hertz expanded their use of the PROS platform by activating capacity-aware price optimization across all North America locations.

Andres Reiner: This solution uses patent pending technology powered by neural network AI to assess the opportunity costs of diminishing supply against demand in real time. This allows Hertz to set real time prices based on fleet capacity and fluctuating demand, enabling them to win more business and drive a better customer experience. Filipine Airlines, the PROS customer of over 20 years, expanded their use of the PROS platform by choosing to activate Group Sales Optimizer. With DSO, Philippine Airlines will power a digital sales motion for group travel across channels, driving increased conversion with the frictionless end-to-end customer experience.

Speaker Change: This solution uses patent-pending technology powered by neural network AI to assess the opportunity costs of diminishing supply against demand in real time.

Andres D. Reiner: This allows Hertz to set real-time prices based on fleet capacity and fluctuating demand, enabling them to win more business and drive a better customer experience. Philippine Airlines, a PROS customer of over 20 years, expanded their use of the PROS platform by choosing to activate Group Sales Optimizer. With GSO, Philippine Airlines will power a digital sales motion for group travel across channels.

Speaker Change: This allows Hertz to set real-time prices based on fleet capacity and fluctuating demand, enabling them to win more business and drive a better customer experience.

Speaker Change: Philippine Airlines, a PROS customer of over 20 years, expanded their use of the PROS platform by choosing to activate Group Sales Optimizer.

Speaker Change: With GSO, Philippine Airlines will power a digital sales motion for group travel across channels, driving increased conversion with a frictionless end-to-end customer experience.

Andres D. Reiner: Driving increased conversion with the frictionless end-to-end customer experience. Innovation has always been central to our growth strategy and core to who we are. We released a new generative AI data transformation solution to power seamless data integration between third-party systems and the PROS platform, making our AI innovations even easier and faster to use. This is just one of the many AI innovations we showcased at a record-breaking, outperformed conference in May, which had its largest in-person turnout ever.

Andres Reiner: Innovation has always been central to our growth strategy. We release a new generative AI data transformation solution to power seamless data integration between third-party systems and the PROS platform, making our AI innovations even easier and faster to activate. This is just one of the many AI innovations we showcase at a record-breaking out performance in May, which had its largest in-person turnout ever. The event features 60 customer speakers who share remarkable success stories achieved with PROS, highlighting how these innovations are driving significant business outcomes for their organizations.

Speaker Change: Innovation has always been central to our growth strategy and core to who we are.

Speaker Change: We released a new generative AI data transformation solution to power seamless data integration between third-party systems and the PROS platform, making our AI innovations even easier and faster to activate.

Speaker Change: This is just one of the many AI innovations we showcased at a record-breaking outperformed conference in May, which had its largest in-person turnout ever.

Andres D. Reiner: The event features 60 customer speakers who share remarkable success stories achieved with PROS, highlighting how these innovations are driving significant business outcomes for their organizations. Finally, Todd McNabb, our Chief Revenue Officer, has unified our B2B and travel go-to-market. We're building a centralized revenue engine to drive a unifying approach across all phases of the customer journey. From Demand Generation to Customer Success. This change will drive further productivity, rigor, and scale to strengthen the flywheel that is our land, realize, and expand strategy.

Speaker Change: The event features 60 customer speakers who share remarkable success stories achieved with PROS, highlighting how these innovations are driving significant business outcomes for their organizations.

Andres Reiner: Finally, Todd McNabb, Chief Revenue Officer, has unified our B2B and travel go-to-market teams. We're building a centralized revenue engine to drive a unifying go-to-market across all faces of the customer journey, from demand generation to customer success. This change will drive further productivity, rigor, and scale to strengthen the flywheel that is our land, realize, and expand strategy.

Todd McNabb: Finally, Todd McNabb, our Chief Revenue Officer, has unified our B2B and travel go-to-market teams.

Speaker Change: We're building a centralized revenue engine to drive a unified go-to-market across all phases of the customer journey, from demand generation to customer success.

Speaker Change: This change will drive further productivity, rigor, and scale to strengthen the flywheel that is our land, realize, and expand strategy.

Andres Reiner: I would like to thank our incredible global team for their passion and dedication to PROS or customers in our communities. I would also like to thank our customers, partners, and shareholders for their ongoing supportive PROS.

Andres D. Reiner: I would like to thank our incredible global team for their passion and dedication to PROS, our customers, and our community. I would also like to thank our customers, partners, and shareholders for their ongoing support of PROS. With that, I will turn the call over to Stefan to discuss financial performance.

Speaker Change: I would like to thank our incredible global team for their passion and dedication to PROS, our customers, and our communities.

Speaker Change: I would also like to thank our customers, partners, and shareholders for their ongoing support of PROS. With that, I will turn the call over to Stefan to cover financial performance and outlook.

Stefan Schulz: With that, I will turn the call over to Stefan to cover financial performance and outlook.

Stefan Schulz: Thank you, Andrus, and good afternoon, everyone. A key pillar to our strategy is becoming more efficient as an organization. This is a core component to attaining the profitability range of our Rule of 40 goal, so I wanted to start by discussing the progress we have made over the last two years. Comparing our results from two years ago, we have grown our total revenues by 10% per year while improving our non-GAAP subscription margins by 300 basis points and our non-GAAP gross margins by 400 basis points. We have also reduced our operating expenses by a rate of 1% per year during that span of time, resulting in a 1,700 basis point improvement in our adjusted EBITDA margin.

Stefan B. Schulz: Thank you, Andres. And good afternoon, everyone.

Stefan B. Schulz: Thank you, Andres, and good afternoon, everyone. A key pillar to our strategy is becoming more efficient as an organization. This is a core component to attaining the profitability range of our Rule of 40 goal, so I wanted to start by discussing the progress we have made over the last two years.

Stefan B. Schulz: A key pillar of our strategy is becoming more efficient as an organization. This is a core component to attaining the profitability range of our Rule of Forty goal, so I wanted to start by discussing the progress we have made over the last two years. Comparing our results from two years ago, we have grown our total revenues by 10% per year while improving our non-GAAP subscription margins by 300 basis points and our non-GAAP gross margins by 400 basis points.

Stefan B. Schulz: Comparing our results from two years ago, we have grown our total revenues by 10% per year while improving our non-GAAP subscription margins by 300 basis points and our non-GAAP gross margins by 400 basis points.

Stefan B. Schulz: We have also reduced our operating expenses by a rate of 1% per year during that span of time, resulting in a 1,700 basis point improvement in our adjusted EBITDA model. We have become more efficient in every part of our company, and we have new initiatives underway to drive even more efficiencies in the future.

Stefan B. Schulz: We have also reduced our operating expenses by a rate of 1% per year during that span of time, resulting in a 1,700 basis point improvement in our adjusted EBITDA margin.

Stefan Schulz: We have become more efficient in every part of our company, and we have new initiatives underway to drive even more efficiencies in the future.

Stefan B. Schulz: We have become more efficient in every part of our company, and we have new initiatives underway to drive even more efficiencies in the future.

Stefan Schulz: Now we will share some more details on our second quarter results. Subscription revenue was $65.6 million, up 14% year over year, and total revenue was $82 million, up 8% year over year, both exceeding guidance. Our second quarter recurring revenue was 84% of total revenue, and our training 12 month gross revenue retention rate continues to be 93% or better. Services revenue was $13 million, down 3% year over year. This was slightly below our expectations because a higher portion of our subscription bookings were related to expansions, which require less services than subscription bookings from new logos. In the second quarter, increased 10% year over year and 8% for the training 12 months.

Stefan B. Schulz: Now we'll share some more details on our second quarter results. Subscription revenue was $65.6 million, up 14% year-over-year, and total revenue was $82 million, up 8% year-over-year, both exceeding guidance. Our second quarter recurring revenue was 84% of total revenue, and our trailing 12-month gross revenue retention rate continues to be 93% or better. Services revenue was $13 million, down 3% year over year.

Stefan B. Schulz: Now, we'll share some more details on our second quarter results. Subscription revenue was $65.6 million, up 14% year-over-year, and total revenue was $82 million, up 8% year-over-year, both exceeding guidance.

Stefan B. Schulz: Our second quarter recurring revenue was 84% of total revenue, and our trailing 12-month gross revenue retention rate continues to be 93% or better.

Stefan B. Schulz: Services revenue was 13 million dollars down 3% year-over-year. This was slightly below our expectations because a higher portion of our subscription bookings were related to expansions, which require less services than subscription bookings from new logos.

Stefan B. Schulz: This was slightly below our expectations because a higher portion of our subscription bookings were related to expansion, which requires less services than subscription bookings from New Logo. Calculated billings in the second quarter increased 10% year-over-year and 8% for the trailing 12-months. Looking forward, we expect calculated billings to follow a similar trend to last year, where Q3 growth is expected to be at the lowest point in the year and Q4 to be stronger.

Stefan B. Schulz: Calculated billings in the second quarter increased 10% year-over-year and 8% for the trailing 12 months.

Stefan Schulz: Looking forward, we expect calculated billings to follow a similar trend the last year, or Q3 growth is expected to be at the lowest point in the year and Q4 to be stronger. For the year, we expect the growth rate for calculated billings to approximate total revenue growth. As Anders highlighted, our non-GAAP subscription margin increased to 80% in the second quarter, an improvement of over 160 basis points year over year and an all-time high. To put this achievement into perspective, we first targeted a subscription gross margin goal of 78% nine years ago. Given the sophistication of our AI and the data volumes we process, we really didn't see attaining 80% subscription margins at the time.

Stefan B. Schulz: Looking forward, we expect calculated billings to follow a similar trend to last year, where Q3 growth is expected to be at the lowest point in the year, and Q4 to be stronger.

Stefan B. Schulz: For the year, we expect the growth rate for calculated billings to approximate total revenue. As Andres highlighted, our non-GAAP subscription margin increased to 80% in the second quarter, an improvement of over 160 basis points year over year and an all-time high.

Stefan B. Schulz: For the year, we expect the growth rate for calculated billings to approximate total revenue growth.

Stefan B. Schulz: As Andres highlighted, our non-GAAP subscription margin increased to 80% in the second quarter, an improvement of over 160 basis points year-over-year, and an all-time high.

Stefan B. Schulz: To put this achievement into perspective, we first targeted a subscription gross margin goal of 78% nine years ago. Given the sophistication of our AI and the data volumes we process, we really didn't see attaining 80% subscription margins at the time. As our engineering and operations team improved the efficiency of our cloud services, we eventually saw a path to an 80% subscription margin and set that as a long-term goal at our analyst day 14 months ago. Now we have achieved this updated goal of 80% more quickly than planned. And it is a true testament to our engineering team's innovation and hard work that we have now achieved this milestone.

Andres D. Reiner: To put this achievement into perspective, we first targeted a subscription gross margin goal of 78% nine years ago.

Andres D. Reiner: Given the sophistication of our AI and the data volumes we process, we really didn't see attaining 80% subscription margins at the time.

Stefan Schulz: As our engineering and operations team improved the efficiency of our cloud services, we eventually saw a path to an 80% subscription margin and set that as a long-term goal in our analyst day 14 months ago. Now, we have achieved this updated goal of 80% earlier than planned, and it is a true testament to our engineering team's innovation and hard work that we have now achieved this milestone. Our overall non-GAAP gross margin was 67% in the second quarter and improvement of over 210 basis points year over year. We generated adjusted EBDA of $5.2 million in the second quarter, significantly exceeding guidance and improving more than $5 million over last year.

Speaker Change: As our engineering and operations team improved the efficiency of our cloud services, we eventually saw a path to an 80% subscription margin and set that as a long-term goal at our Analyst Day 14 months ago.

Speaker Change: Now, we have achieved this updated goal of 80% earlier than planned, and it is a true testament to our engineering team's innovation and hard work that we have now achieved this milestone.

Stefan B. Schulz: Our overall non-GAAP gross margin was 67% in the second quarter, an improvement of over 210 basis points year-over-year. We generated adjusted EBITDA of $5.2 million in the second quarter, significantly exceeding guidance and improving by more than $5 million over last year. We generated free cash flow of $6.2 million in the second quarter, an improvement of nearly 200% year over year, and delivered positive free cash flow during the first half of the year for the first time as a SaaS company.

Speaker Change: Our overall non-gap gross margin was 67% in the second quarter, an improvement of over 210 basis points year-over-year.

Speaker Change: We generated adjusted EBITDA of $5.2 million in the second quarter, significantly exceeding guidance and improving more than $5 million over last year.

Stefan Schulz: We generated free cash flow of $6.2 million in the second quarter and improvement of nearly 200% year over year and delivered positive free cash flow during the first half of the year for the first time as a SaaS company. From a balance sheet perspective, we exited the second quarter with $149.1 million in cash and investments, net of the settlement of the remaining $21.7 million of our 2024 convertible notes. Our second quarter non-GAAP earnings per share was $0.7 per share, also exceeding guidance.

Speaker Change: We generated free cash flow of $6.2 million in the second quarter, an improvement of nearly 200% year-over-year, and delivered positive free cash flow during the first half of the year for the first time as a SaaS company.

Stefan B. Schulz: From a balance sheet perspective, we exited the second quarter with $149.1 million in cash and investments, net of the settlement of the remaining $21.7 million of our 2024 convertible notes. Our second quarter non-GAAP earnings per share was $0.07 per share, also exceeding guidance. Now turning to guidance.

Speaker Change: From a balance sheet perspective, we exited the second quarter with $149.1 million in cash and investments, net of the settlement of the remaining $21.7 million of our 2024 convertible notes.

Speaker Change: Our second quarter non-GAAP earnings per share was 7 cents per share, also exceeding guidance.

Stefan Schulz: Now, I'm turning to guidance. As Andreas mentioned, we believe the operational challenges airlines are facing create some risk for us in the second half. Additionally, the stronger than anticipated expansion activity I noted earlier had some impact to our services and total revenue because of the lower attached service revenue that typically comes from expansions. Accordingly, we believe it is prudent to adjust some components of our guidance.

Stefan B. Schulz: As Andres mentioned, we believe the operational challenges airlines are facing create some risk for us in the second half. Additionally, the stronger-than-anticipated expansion activity I noted earlier had some impact on our services and total revenue because of the lower attached service revenue that typically comes from expansion. Accordingly, we believe it is prudent to adjust some components of our guidance. So for the full year, we are revising our guidance in three areas.

Speaker Change: Now turning to guidance.

Speaker Change: As Andres mentioned, we believe the operational challenges airlines are facing creates some risk for us in the second half.

Speaker Change: Additionally, the stronger-than-anticipated expansion activity I noted earlier had some impact to our services and total revenue because of the lower attached service revenue that typically comes from expansions.

Speaker Change: Accordingly, we believe it is prudent to adjust some components of our guidance.

Stefan Schulz: So for the full year, we are revising our guidance in three areas. We anticipate total revenue of between $329 and $331 million, representing 9% growth at the mid-point, because we are now anticipating lower services revenue from what was implied in our previous guidance. We are anticipating free cash flow of between $20 and $24 million, representing a 94% improvement year over year at the midpoint. And we now expect subscription ARR of between $280 and $284 million, representing 9% growth at the midpoint. And 263.5 and 265.5 million dollars, representing 13% growth at the midpoint. And we are raising our guidance for adjusted EBITDA of between $21 and $24 million, representing a 275% improvement at the midpoint.

Speaker Change: So for the full year, we are revising our guidance in three areas.

Stefan B. Schulz: We anticipate total revenue of between $329 and $331 million, representing 9% growth at the midpoint, because we are now anticipating lower services revenue from what was implied in our previous guidance. We are also anticipating free cash flow of between $20 and $24 million, representing a 94% improvement year-over-year at the midpoint. And we now expect subscription ARR of between $280 and $284 million, representing 9% growth at the midpoint. We are reiterating the previous guidance range for subscription revenue of between $263.5 and $265.5 million, representing 13% growth at the midpoint, and we are raising our guidance for adjusted EBITDA of between $21 and $24 million, representing a 275% improvement at the midpoint.

Speaker Change: We anticipate total revenue of between $329 and $331 million, representing 9% growth at the midpoint, because we are now anticipating lower services revenue from what was implied in our previous guidance.

Speaker Change: We are anticipating free cash flow of between $20 and $24 million, representing a 94% improvement year-over-year at the midpoint.

Speaker Change: And we now expect subscription ARR of between 280 and 284 million dollars, representing 9% growth at the midpoint.

Speaker Change: We are reiterating the previous guidance range for subscription revenue of between $263.5 and $265.5 million, representing 13% growth at the midpoint.

Speaker Change: And we are raising our guidance for adjusted EBITDA of between $21 and $24 million, representing a 275% improvement at the midpoint.

Stefan Schulz: Shifting the guidance for the third quarter, we expect subscription revenue to be in the range of between 65.8 and 66.3 million dollars, representing 10% growth at the midpoint. We expect total revenue to be in the range of between 81.5 and 82.5 million dollars, representing 6% growth at the midpoint. We expect adjusted EBITDA of between 6.5 and 7.5 million dollars, and using a non-GAAP estimated tax rate of 22%, we anticipate third quarter non-GAAP earnings per share at 8 to 10 cents per share, based on an estimated 47.8 million diluted weighted average shares outstanding. I want to echo Anderson's comments in saying that we continue to have conviction in achieving the ranges for total revenue growth and free cash flow margin towards our long-term goal of being a Rule of 40 company.

Stefan B. Schulz: Shifting to guidance for the third quarter, we expect subscription revenue to be in the range of between $65.8 and $66.3 million, representing 10% growth at the midpoint. We expect total revenue to be in the range of between $81.5 and $82.5 million, representing 6% growth at the mid-price. We expect adjusted EBITDA of between $6.5 and $7.5 million. And using a non-GAAP estimated tax rate of 22%, we anticipate third quarter non-GAAP earnings per share of eight to 10 cents per share, based on an estimated 47.8 million diluted weighted average shares outstanding.

Speaker Change: Shifting to guidance for the third quarter, we expect subscription revenue to be in the range of between $65.8 and $66.3 million, representing 10% growth at the midpoint.

Speaker Change: We expect total revenue to be in the range of between $81.5 and $82.5 million, representing 6% growth at the midpoint.

Speaker Change: We expect adjusted EBITDA of between $6.5 and $7.5 million, and using a non-GAAP estimated tax rate of 22%, we anticipate third quarter non-GAAP earnings per share at $0.08 to $0.10 per share, based on an estimated 47.8 million diluted weighted average shares outstanding.

Stefan B. Schulz: I want to echo Andres' comments in saying that we continue to have conviction in achieving the ranges for total revenue growth and free cash flow margin towards our long-term goal of being a rule-of-forty company. We've made considerable progress since we set this goal a little over a year ago, and we are confident that we will continue to make progress and ultimately reach our goal. However, we also acknowledge that the current conditions in the airline space will likely push the achievement of this goal by approximately one year.

Speaker Change: I want to echo Andres' comments in saying that we continue to have conviction in achieving the ranges for total revenue growth and free cash flow margin towards our long-term goal of being a Rule of 40 company.

Stefan Schulz: We have made considerable progress since we set this goal a little over a year ago, and we are confident that we will continue to make progress and ultimately reach our goal. Although we also acknowledge that the current conditions in the airline space will likely push the achievement of this goal by approximately one year.

Speaker Change: We've made considerable progress since we set this goal a little over a year ago, and we are confident that we will continue to make progress and ultimately reach our goal.

Speaker Change: Although, we also acknowledge that the current conditions in the airline space will likely push the achievement of this goal by approximately one year.

Stefan Schulz: In closing, I would like to thank our global team and our customers for their continued support of PROS. We also thank you, our shareholders, for your support of PROS, and we look forward to speaking with you at our upcoming events.

Stefan B. Schulz: In closing, I would like to thank our global team and our customers for their continued support of PROS. We also thank you, our shareholders, for your support of PROS, and we look forward to speaking with you at our upcoming event. I will now turn the call back over to the operator for questions. Operator?

Speaker Change: In closing, I would like to thank our global team and our customers for their continued support of PROS. We also thank you, our shareholders, for your support of PROS, and we look forward to speaking with you at our upcoming events. I will now turn the call back over to the operator for questions. Operator?

Operator: I will now turn the call back over to the operator for questions.

Operator: Thank you.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, as we poll for questions. Our first question comes from the line of Parker Language Depot. Please proceed with your question.

Operator: At this time, we will be conducting a question and answer session. If you would like to ask the question, please press star 1 on your telephone keypad. A confirmation toll will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing these star keys. One moment please, as we pull for questions.

Speaker Change: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Speaker Change: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please as we poll for questions.

Parker Lane: Our first question comes from the line of Parker Lane with Steve. Please proceed with your question.

Speaker Change: Our first question comes from the line of Parker Language Depot. Please proceed with your question.

Parker Language Depot: Thanks for taking the question here. Andres, I was wondering if you could go into a bit more detail on what you're hearing in the conversations you're having with the travel customers about the challenges they're facing, and more importantly, when do you anticipate and what are they thinking about the potential for a timeline to put some of those challenges behind them?

Andres Reiner: Yeah, thanks for taking the question here. Andres, I was wondering if you could go into a bit more detail on what you're hearing in the conversations you're having with the travel customers about the challenges they're facing. And more importantly, when do you anticipate and what are they thinking about the potential for a timeline to put some of those challenges behind them?

Speaker Change: Yeah, thanks for taking the question here. Andres, I was wondering if you could go into a bit more detail on what you're hearing in the conversations you're having with the travel customers about the challenges they're facing and more importantly, when do you anticipate and what are they thinking about the potential for a timeline to put some of those challenges behind them?

Andres Reiner: Great question, Parker. I would tell you, look, we're working very close with our airline customers. In fact, myself and the executive team have numerous meetings with CEOs of top airlines and executive themes. What we're seeing right now is that they are wanting to get their operational back in line. And I think that that is their focus area. We're also working with them to help support in some of the changes they're making, as well as provide areas where we can help them drive value with smaller investment. And little team support to activate. So what I would tell you is we're leaning in in areas, whether it be that continuous pricing, willingness to pay off from marketing components of our platform that we can activate to get deals started.

Andres D. Reiner: Great question, Parker. I would tell you, look, we're working very closely with our airline customers. In fact, myself and the executive team have numerous meetings with CEOs of top airlines and their executive teams.

Andres D. Reiner: Great question, Parker. I would tell you, look, we're working very close with our airline customers, in fact, myself and the executive team.

Andres D. Reiner: I've had numerous meetings with CEOs of top airlines and executive teams.

Andres D. Reiner: What we're seeing right now is...

Speaker Change: They are wanting to get their operational back in line, and I think that that is their focus area.

Andres D. Reiner: What we're seeing right now is that they are wanting to get their operations back in line, and I think that that is their focus area. We're also working with them to help support some of the changes they're making, as well as provide areas where we can help them drive value with a smaller investment and little team support to activate. So what I would tell you is we're leaning in on areas, whether it be the app, continuous pricing, willingness to pay off for marketing, components of our platform that we can activate to get deals started.

Speaker Change: Working with them to help support in some of the changes they're making, as well as provide

Speaker Change: areas where we can help them drive value.

Speaker Change: with smaller investment and little team support to activate.

Speaker Change: So what I would tell you is we're leaning in in areas, whether it be DAP, continuous pricing, willingness to pay off for marketing, components of our platform that we can activate to get deals started.

Andres Reiner: While we're supporting them through these operational challenges that they face in supporting their teams in the process, I can tell you we're as close as we've ever been with the airline industry, and we've always lean in to support them. And I feel that the guidance we're providing is consistent with what we believe. Definitely, in Q3, there's going to be an impact due to that. But our approach, like always, has been in times when the airline industry has had challenges, to lean in to support them and help them come out stronger, and we're consistent in convinced that that's going to happen.

Andres D. Reiner: While we're supporting them through these operational challenges that they face in supporting their teams in the process, I can tell you we're as close as we've ever been with the airline industry, and we've always leaned in to support them. And I feel that the guidance we're providing is consistent with what we believe. Definitely, in Q3, there's going to be an impact due to that. But our approach, like always, has been in times when the airline industry has had challenges to lean in, support them, and help them come out stronger. And we're consistent and convinced that that's going to happen.

Speaker Change: While we're supporting them through these operational challenges that they face.

Speaker Change: in supporting their teams in the process. I can tell you we're as close as we've ever been with the airline industry and we've always leaned in to support them.

Speaker Change: And I feel that the guidance we're providing is consistent with what we believe.

Speaker Change: Definitely in Q3 there's going to be an impact due to that, but our approach like always has been in times when the airline industry has had challenges is to lean in, support them, and help them come out stronger, and we're consistent and convinced that that's going to happen.

Unknown Executive: Yeah, that makes sense.

Stefan B. Schulz: That makes sense. And then Stefan, maybe one for you.

Stefan Schulz: And then Stefan, maybe one for you. I see sales and marketing ticked up a little bit, quarter of a quarter. You also talked about the unification of the go-to market of travel and B2B. Just wondering in the initial stages here what your thoughts are and the potential efficiencies that unification can drive in both the near-term and long-term. Yeah, Parker, the tick up in the second quarter was more to do with the marketing activities. We had our out-of-the-form event, and that is really what drove up the cost. I would tell you that we do and continue to expect to see efficiency benefits that come as a result of, to your point, bringing the travel organization and the B2B organization to be more along one organization.

Speaker Change: Got it. That makes sense. And then, Stefan, maybe one for you. I see sales and marketing ticked up a little bit quarter over quarter. You also talked about the unification of the go-to-market of travel and B2B. Just wondering, in the initial stages here, what your thoughts are on the potential efficiencies that unification can drive in both the near term and long term?

Stefan B. Schulz: I see sales and marketing ticked up a little bit quarter over quarter. You also talked about the unification of the go-to market for travel and B2B. Just wondering, in the initial stages here, what your thoughts are on the potential efficiencies that unification can drive in both the near term and long term.

Stefan B. Schulz: Yeah, Parker, the tick up in the second quarter was more to do with the marketing activities.

Speaker Change: You know, we had our outperform event and that is really what drove up the cost.

Speaker Change: I would tell you that we do and continue to expect to see efficiency benefits that come as a result of, to your point,

Speaker Change: bringing the

Speaker Change: You know, the travel organization and the B2B organization.

Parker Lane: So that said, I think you'll continue to see that line item perform well. I think it might be slightly up as we go through the rest of the year as you compared to last year, primarily because of other marketing investments we want to make in order to continue to improve our funnel in our pipeline. Understood.

Speaker Change: to be more along one organization.

Speaker Change: So, that said, I think, you know, you'll continue to see that line item perform well. I think it might be slightly up as we go through the rest of the year, as you compare to last year, primarily because of other marketing investments we want to make in order to, you know, to continue to improve our funnel and our pipeline.

Unknown Executive: Thanks again.

Speaker Change: Understood. Thanks again.

Stefan B. Schulz: Yeah, Parker, the pickup in the second quarter had more to do with marketing activities. You know, we had our outperform event. And that is really what drove up the cost. I would tell you that we do continue to expect to see efficiency benefits that come as a result of, to your point, bringing the travel organization and the b2b organization closer together.

Scottbury: Our next question comes from the line of Stottbury with Needham and Company. Please proceed with your question.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Scott Berg with Needham & Company. Please proceed with your question.

Scottbury: Hi, everyone. Thanks for taking my questions. Stefan, the first question I have for you is on, and I know it's way too early, but thinking about revenue growth in the next year into calendar 25. If you exit with an AR growth rate here of, we'll call it 9% or 10% here by the end of the year given your current guidance. Would that drive a high single digit 10% growth in your subscription revenues next year, or why would that not be the right starting point for us to start getting comfortable with? Thanks.

Stefan B. Schulz: So that said, I think you'll continue to see that line item perform well; I think it might be slightly higher as we go through the rest of the year, compared to last year, primarily because of other marketing investments we want to make in order to, you know, continue to improve our funnel and our pipeline. Okay. Thanks.

Scott Randolph Berg: Hi, everyone. Thanks for taking my questions. Stefan, the first question I have for you is on...

Scott Randolph Berg: And I know it's way too early, but thinking about revenue growth in the next year into calendar 25, if you exit with an AR growth rate here of, we'll call it 9 or 10% here by the end of the year, given your current guidance.

Speaker Change: Would that drive a high single-digit 10% growth in your subscription revenues next year, or why would that not be the right starting point for us to start getting comfortable with? Thanks.

Stefan Schulz: Yeah, so, so I guess first of all, I'm not going to, I'm not going to make a comment really on 25 just yet. We're not, we're not through our planning process to go through that. But second, Scott, what I will say is that, you know, when we look at our subscription AR metric, you know, that is a, that is one leading factor that can dictate what the revenue is going to be. The other part is, you know, what happens from the, you know, in quarter bookings. And so, I think to, to Parker's question earlier, you know, the things that we're doing to respond to the airline situation, things that we're doing to, you know, sell some ancillary products that actually help improve their, their go to market. There's things we can be doing to respond to the situation that I think offset what you might see from a starting point, which would be our subscription AR.

Parker Language Depot: Understood. Thanks again.

Speaker Change: Yeah, so I guess, first of all, I'm not going to make a comment really on 25 just yet.

Speaker Change: We're not through our planning process to go through that, but second...

Speaker Change: Scott, what I will say is that when we look at our subscription ARR metric, that is one leading factor that can dictate what the revenue is going to be. The other part is what happens from the end quarter bookings.

Scott Randolph Berg: Thank you. Our next question comes from the line of Scott Berg with Needham & Company. Please proceed with your question.

Speaker Change: And so, I think to Parker's question earlier, you know, the things that we're doing to respond to the airline situation, things that we're doing to, you know, sell some ancillary products that actually help improve their

Speaker Change: There's things we can be doing to respond to the situation that I think could offset what you might see from a starting point, which would be our subscription ARR.

Scott Randolph Berg: Hi, everyone. Thanks for taking my questions. Stefan, the first question I have for you is about, I know it's way too early, but thinking about revenue growth for the next year into calendar 25. If you exit with an AR growth rate here of, we'll call it nine or 10% here by the end of the year, given your current guidance, would that drive a high single-digit 10% growth in your subscription revenues next year? Or why would that not be the right starting point for us to start getting comfortable with?

Stefan Schulz: So, we are not at this point conceding to a growth rate that would be, you know, in the upper single digits for next year. However, we're also not prepared to give you what a growth rate would look like, but, you know, I think there's some things we can be doing to respond to this environment that could give us a better answer than that starting. Got it helpful.

Speaker Change: So, we are not at this point conceding to a growth rate that would be, you know, in the upper single digits for next year. However, we're also not prepared to give you what a growth rate might look like, but, you know, I think there's some things we can be doing to respond to this environment that could give us a better answer than that starting point.

Stefan B. Schulz: Yeah, so so I guess first of all, I'm not gonna I'm not gonna make a comment really on 25 just yet. We're not, we're not through our planning process to go through that.

Scottbury: And then, following up on Stefan's last comment, I don't know if yourself or Andres want to tackle this one in particular, but pushing your rule of 40 goal from what I believe was calendar 26 now into 27, if you're pushing it for a year, is how do we think about the components or the details of that push? Will that be more related to probably the revenue growth opportunity given what's going on in the travel segment right now? Or is there some component around the profitability that might lag as well.

Speaker Change: Got it. Helpful. And then following up on Stefan's last comment, I don't know if yourself or Andres want to...

Speaker Change: Tackle this one in particular but

Speaker Change: Pushing your Rule of 40 goal from what I believe was calendar 26 now into 27 if you're pushing it for a year is how do we think about

Speaker Change: The components or the details of that push, will that be more related to probably the revenue growth opportunity given what's going on in the travel segment right now or is there some component around the profitability that might lag as well? Thank you.

Andres Reiner: Thank you. Yeah, I'll give you Scott my perspective to me. The components aren't changing with what we had said, you know, 16 to 21% growth on revenue in 19 to 24 and free cash flow. I can tell you look, we're very excited about the market opportunity and how we're executing our land realized expand strategy. We always focus on deal volumes. And we're going to continue to focus on consistency. I can tell you on the B to B side or sales cycles continue to improve and improve 15% year to date. And if you remember last year, improve 30%.

Stefan B. Schulz: But second, Scott, what I will say is that, you know, when we look at our subscriptions, the ARR metric, you know, that is one leading factor that can dictate what the revenue is going to be. The other part is, you know, what happens from the, you know, in-quarter bookings. And so I think to Parker's question earlier, the things that we're doing to respond to the airline situation, things that we're doing to, you know, sell some ancillary products that actually help improve their, their go-to-market, there are things we can be doing to respond to the situation that I think can offset what you might see from a starting point, which would be our subscription ARR.

Speaker Change: Yeah, I'll give you, Scott, my perspective. To me the components aren't changing with what we had said.

Stefan B. Schulz: So we are not at this point conceding to a growth rate that would be, you know, in the upper single digits for next year. However, we're also not prepared to give you what that growth rate might look like. But, you know, I think there are some things we can be doing to respond to this environment that could give us a better answer than that starting point.

Stefan B. Schulz: I got it. Helpful. And then following up on Stefan's last comment, I don't know if yourself or Andres want to tackle this one in particular, but pushing your rule of 40 goal from what I believe was calendar 26 now into 27, if you're pushing it for a year, how do we think about the components or the details of that push? Will that be more related to the revenue growth opportunity, given what's going on in the travel segment right now, or is there some component around profitability that might lag as well?

Speaker Change: You know, 16 to 21% growth on revenue and 19 to 24 on free cash flow. I can tell you, look, we're very excited about the market opportunity and how we're executing our land realize expand strategy. We always focus on deal volumes and we're continuing to focus on consistency.

Andres D. Reiner: Thank you.

Andres D. Reiner: Yeah, I'll give you, Scott, my perspective. To me, the components aren't changing with what we had said, you know, 16 to 21% growth in revenue and 19 to 24 on free cash flow. I can tell you, look, we're very excited about the market opportunity and how we're executing or land realizing our expand strategy. We always focus on deal volumes, and we're continuing to focus on. I can tell you on the B2B side, our sales cycles continue to improve and have improved 15% year to date. And if you remember, last year improved 30%. So we're continuing to drive more rigor. I'm very pleased with Todd and the changes he's making to unify the organization.

Speaker Change: I can tell you on the B2B side, our sales cycles continue to improve and improve 15% year-to-date.

Andres Reiner: So we're continuing to drive more rigor. I'm very pleased with Todd in the changes he's making to unify the organization. And it's all about continuing to execute on our land realized expand strategy. And build if I will affect it. And I believe that, you know, I think that's going to have a big payoff as we continue to execute on the strategy and on travel. You know, our ESPs are down a little bit over 40% is what we expect because of this. But we are trying to land and get small lands that can build growth opportunities next year and beyond.

Speaker Change: And if you remember, last year improved 30%.

Speaker Change: So we're continuing to drive more rigor. I'm very pleased with Todd and the changes he's making to unify the organization.

Andres D. Reiner: And it's all about continuing to execute on our land realize, expand strategy and build if I can affect it. And I believe that, you know, I think that's going to have a big payoff as we continue to execute on the strategy. And on travel, you know, our ASPs are down a little bit over 40%. It's what we expect because of this.

Speaker Change: And it's all about continuing to execute on our land, realize, expand strategy, and build a flywheel effect. And I believe that...

Speaker Change: You know, I think that's going to have a big payoff as we continue to execute on this strategy. And on travel, you know, our ASVs are down a little bit over 40%.

Andres D. Reiner: But we are trying to land and get small lands that can build growth opportunities next year and beyond. So, we are rallying around this to drive the best outcome possible for our customers and for business. So we're all in this together; we're not letting go of growth. And we're just trying to continue to help support them and be cognizant of the areas they need to improve, but support them to drive better business outcomes and growth for us in the future. Yeah, I think just to add...

Speaker Change: is what we expect because of this. But we are trying to land and get

Speaker Change: small lands that can build growth opportunities next year and beyond. So like we are rallying around this to drive the best outcome possible for our customers.

Andres Reiner: So like we are rallying around this to drive the best outcome possible for customers and for business. So we're all in in this. We're not letting go of growth. And we're just trying to continue to help support them and be cognizant of the areas they need to improve, but support them to drive better business outcomes and growth for us in the future.

Speaker Change: and for business so so we're all in in this we're not letting go of growth

Speaker Change: And we're just trying to continue to help support them and be cognizant of the areas they need to improve, but support them to drive better business outcomes and growth for us in the future.

Stefan Schulz: Yeah, I think just to add to that, you know, there's a couple ways to think about how we can achieve the rule of 40. I mean, you know, the comeback year, so to speak, that happens once we're through, you know, the challenges that we've referenced, could be a nice way to fast start an accelerated revenue growth rate. But that's not how we want to achieve a Rule of 40. We want to achieve a rule of 40 and have it be sustainable. So to on this point, we're putting in, you know, the foundation work that that basically shows that we could be at a, you know, a 16 to 21% growth rate on the revenue side, not just for one year, but for many years to come and then also have that working off of a platform that can be generating 19 to 24% free cash flow margins.

Stefan B. Schulz: Yeah, I think just to add to that, you know, there are a couple ways to think about how we can achieve the Rule of 40. I mean, you know, the comeback year, so to speak, that happens once we're through the challenges that we've referenced could be a nice way to fast start an accelerated revenue growth rate.

Speaker Change: Yeah, I think just to add to that, you know, there's there's a couple ways to think about how we can achieve the Rule of Forty. I mean, you know, the comeback year, so to speak, that happens once we're through, you know, the challenges that we've referenced could be a nice way to fast start an accelerated revenue growth rate.

Stefan B. Schulz: But that's not how we want to achieve a Rule of 40. We want to achieve a Rule of 40 and have it be sustainable. So to Andres' point, we're putting in, you know, the foundation work that basically shows that we could be at a 16 to 21 percent growth rate on the revenue side, not just for one year, but for many years to come, and then also have that working off of a platform that can be generating 19 to 24 percent free cash flow margin.

Speaker Change: But that's not how we want to achieve a Rule of 40. We want to achieve a Rule of 40 and have it be sustainable.

Speaker Change: So to Andres' point, we're putting in, you know, the foundation work that basically shows that we could be at a, you know, a

Speaker Change: 16-21% growth rate on the revenue side, not just for one year, but for many years to come, and then also have that working off of a platform that can be generating 19-24% free cash flow margin. So the reason we went ahead and decided to push it to years is because we think that's really what it's going to take for us to find that consistent level of performance, so that you can count on us to be delivering a rule of 40, not just for one year, but multiple years.

Stefan Schulz: And so the reason we went ahead and decided to push it the years because we think that's really what it's going to take for us to find that consistent level of performance so that you can count on us to be delivering a rule of 40, not just for one year, but multiple years.

Stefan B. Schulz: So the reason we went ahead and decided to, you know, push it through the year is because we think that's really what it's going to take for us to find that consistent level of performance so that you can count on us to be delivering a Rule of 40, not just for one year, but for multiple years.

Unknown Executive: I understood.

Scott Randolph Berg: understood. Thank you for taking my questions.

Unknown Executive: Thank you for taking my questions.

Speaker Change: Understood. Thank you for taking my questions.

Patrick A. Schulz: Thank you. Our next question comes from the line of Patrick Schulz with Baird. Please proceed with your question.

Patrick Sholes: Our next question comes from a line of Patrick Sholes with Beard. Please will see what you're a question.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Patrick...

Patrick A. Schulz: Hey guys, I appreciate the time today. Maybe first, just on the Microsoft partnership. Can you just talk a little bit more about how that partnership has progressed? I think at the Outperform event earlier this year, there was a lot of customer interest in this. Just curious how that has translated into Pipeline Build, looking into the second half of this year and into 2025 as well.

Andres Reiner: Hey guys, I appreciate the time today. Maybe first it's on the Microsoft partnership. Can you just talk a little bit more about how that partnership has progressed? I think at the Outperform event earlier this year, there was a lot of customer interest in this. Just curious how that has translated into Pipeline Bill, looking into the second half of this year into 2025 as well. Yeah, so overall, look, we're very pleased with the Microsoft partnership. We just won, you know, Partner of the Year for the second time. In our innovations, in my believe in the areas of the sales co-pilot, this is the next generation of sales technology.

Patrick: with Baird. Please proceed with your

Patrick: Hey guys, I appreciate the time today. Maybe first just on the Microsoft partnership. Can you just talk a little bit more about how that partnership has progressed? I think at the Outperform event earlier this year, there was a lot of customer interest in this. Just curious how that has translated into Pipeline Build, looking into the second half of this year and into 2025 as well.

Andres D. Reiner: Yeah, so overall, look, we're very pleased with the Microsoft partnership. We just won, you know, Partner of the Year for the second time for our innovations in the areas of the sales co-pilot. This is the next generation of sales technology. We're both excited about the opportunity ahead. It's an early stage of sales adopting generative AI technology to power the sales motion.

Speaker Change: Yeah, so overall, look, we're very pleased with the Microsoft partnership. We've just won, you know, Partner of the Year for the second time.

Speaker Change: In our innovations, and I believe in the areas of the sales co-pilot, this is the next generation of sales technology. We're both excited about the opportunity ahead. It's an early...

Andres Reiner: We're both excited about the opportunity ahead. It's an early stage of sales adopting generative AI technology to power the sales motion, but we're innovating. We're very excited, and I would tell you from a collaboration on deals on the pipeline, we continue to collaborate on many opportunities, and we're jointly on this opportunity. So overall, we feel very good. As you saw outperform, we're very excited about Outperform. You know, I had a thousand registrants, 60 customer speakers, and I could tell you that the feedback from it was very, very positive, and we generated, you know, more than doubled the opportunities this year at Outperform compared to a year ago.

Speaker Change: stage of sales adopting generative AI technology to power the sales motion, but where we're innovating, we're very excited. And I would tell you from a collaboration on deals on the pipeline, we continue to collaborate on many opportunities and work jointly on this opportunity. So overall, we feel very good. As you saw, Outperform, we're very excited about Outperform.

Andres D. Reiner: But where we're innovating, we're very excited. And I would tell you from the collaboration on deals in the pipeline, we continue to collaborate on many opportunities and work jointly on this opportunity. So overall, we feel very good, as you saw, outperform. We're very excited about outperform. You know, I had a thousand registrants and 60 customer speakers, and I could tell you that the feedback from them was very, very positive. And we generated more than double the opportunities this year at Outperform compared to a year ago. Some of these innovations with Microsoft have played into that, so overall, we feel very good.

Speaker Change: I had 1,000 registrants, 60 customer speakers, and I could tell you that the feedback from it was very, very positive. And we generated, you know...

Speaker Change: More than double the opportunities this year at Outperform compared to a year ago. Some of these innovations with Microsoft played into that, so overall we feel very good.

Unknown Executive: Some of these innovations with Microsoft plating to that, so overall, we feel very good. Okay, that's helpful.

Patrick A. Schulz: Okay, that's helpful. Maybe a quick follow-up too on the macro, and I appreciate all the commentary just on the updated travel expectations, but from a broader viewpoint, has anything changed in a customer's willingness to sign deals this quarter relative to last quarter? Maybe more general, just outside of travel, how has the demand environment been relative to last quarter?

Patrick Sholes: Maybe a quick follow-up too on the macro, and appreciate all the commentaries on the updated travel expectations, but from a broader viewpoint, has anything changed from a customer's willingness to sign deals this quarter, relative to last quarter?

Speaker Change: Okay, that's helpful. Maybe a quick follow-up, too, on the macro, and appreciate all the commentary just on the updated travel expectations, but from a broader viewpoint, has anything changed from a customer's willingness to sign deals this quarter relative to last quarter? Maybe more general, just outside of travel, how has the demand environment been relative to last quarter?

Andres Reiner: Maybe more generals outside of travel? How does it demand environment been relative to last quarter? Yeah, great question, Patrick. I would tell you, the environment continues to be a very difficult selling environment. It's not easy to get deals through. I think our team has been very focused on ensuring that we can sell fast time to value, one at five ROI. We're selling at the right level because right now, companies are taking a few bets that they're investing on. So I would tell you, the environment continues to be very, very hard-selling environment. Our team is doing the best to drive the best outcomes. I think in the B2B side, we're seeing the average deal size remain consistent with last year, so we're not going in and trying to reduce.

Andres D. Reiner: Yeah, great question, Patrick. I would tell you, look, the environment continues to be a very difficult selling environment. It's not easy to get deals through. I think our team has been very focused on ensuring that we can sell fast time to value, quantified ROI. We're selling at the right level because right now, companies are taking a few bets that they're investing in. So I would tell you the environment continues to be a very, very hard selling environment.

Speaker Change: Yeah, great question, Patrick. I would tell you, look, the environment continues to be a very difficult selling environment.

Speaker Change: It's not easy to get deals.

Speaker Change: Through I think our team has been very focused

Speaker Change: on ensuring that we can sell fast time to value, quantified ROI, we're selling at the right level because right now companies are taking a few bets.

Speaker Change: that they're investing on.

Speaker Change: So, I would tell you the environment continues to be very, very hard selling environment. Our team is doing the best to drive the best outcomes. I think in the B2B side, we're seeing the average deal size remain consistent with last year. So, we're not going in and trying to reduce.

Andres D. Reiner: Our team is doing its best to drive the best outcomes. I think on the B2B side, we're seeing the average deal size remain consistent with last year. So we're not going in and trying to reduce it.

Andres Reiner: We're selling a more consistent motion, and I would tell you we're doing very well in expansions. I would say that's a highlight. We're seeing, you know, we adopted the platform strategy a couple of years ago. We're seeing that play into last quarter, a lot more customers expanding, and those expansions, because we're leveraging the platform, require little services to activate, which is a great story for customers because they get more value, they get value faster, and it allows them to move on that journey to go from starting in one division to two, to getting to global on the ingredients, and example, and we have BFF working on that as well.

Andres D. Reiner: We're selling in more consistent motion. And I would tell you, we're doing very well in expansions. I would say that's a highlight. We're seeing, you know, we adopted the platform strategy a couple of years ago. We're seeing that play out in the last quarter.

Speaker Change: We're selling in more consistent motion, and I would tell you we're doing very well in expansions. I would say that's a highlight.

Speaker Change: We're seeing, you know, we adopted the platform strategy a couple years ago. We're seeing that play in into last quarter, a lot more customers expanding and those expansions because we're leveraging the platform, they require little to no services to activate.

Andres D. Reiner: A lot more customers are expanding, and those expansions, because we're leveraging the platform, they require little to no services to activate, which is a great story for customers because they get more value, they get value faster, and it allows them to move on that journey to go from starting in one division to two to getting to global, and the ingredient is an example. And we have BSF working on that as well. So overall, I believe that land realized expand strategies definitely work. But it is a difficult selling environment, no doubt about that. Great, I appreciate it.

Speaker Change: which is a great story for customers because they get more value, they get value faster, and it allows them to move on that journey to go from starting in one division to two, to getting to global, and the ingredient is an example. And we have ESF working on that as well. So overall, I believe that Land, Realize, Expand strategies.

Unknown Executive: So overall, I believe that land realized expand strategies is definitely working, but it is a very difficult selling environment, no doubt about that.

Speaker Change: is definitely working. But it is a difficult selling environment, no doubt about that.

Patrick A. Schulz: Great, I appreciate the call. Thanks for taking the questions.

Unknown Executive: Great.

Unknown Executive: I appreciate the call.

Unknown Executive: Thanks for taking the questions.

Jason Celino: Thank you. Our next question comes from the line of Jason Celino with KeyBank Capital Markets.

Speaker Change: Great, I appreciate the call. Thanks for taking the questions.

Jason Vincent Celino: Thank you. Our next question comes from the line of Jason Celino with Key Bank Capital Markets. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Jason Celino with KeyBank Capital Markets. Please proceed with your question.

Jason Celino: Please proceed with your question. Great.

Jason Vincent Celino: Great, thanks for taking my questions today. Maybe on the travel side, just curious when you started to see some of this extra, you know, cautiousness. You know, I know there was a security software vendor that caused a lot of trouble for some of these airline travel companies recently. Wondering if that had anything to do with maybe the reprioritization of some of their purchases.

Andres Reiner: Thanks for taking my questions today. Maybe on the travel side, just curious when you started to see some of this extra, you know, cautiousness. You know, I know there was a security software vendor that cuts a lot. A lot of trouble for some of these airline travel companies recently. Wondering if that had anything to do with maybe reprioritization of some of their purchases. Yeah, great, great question. I would say, obviously, the crowd site incident had big to do with it. That had a pretty broad impact to the travel industry. Many took days to recover from that.

Jason Vincent Celino: Great. Thanks for taking my questions today.

Jason Vincent Celino: Maybe on the travel side, just curious when you started to see some of this extra...

Speaker Change: You know, cautiousness, you know, I know there was a security software vendor that caused a lot of trouble for some of these airline travel companies recently. Wondering if that had anything to do with maybe reprioritization of some of their purchases.

Andres D. Reiner: Yeah, just a great, great question. I would say, obviously, the crowd site incident had a lot to do with it. That had a pretty broad impact on the travel industry, and many took days to recover from it. And as you would imagine, they have a lot of focus on getting back to operational. But I would tell you, late in the quarter and into the beginning of this quarter is when we started to see that impact. And that probably was what compounded the effect.

Speaker Change: Yeah, great question. I would say, obviously, the crowd site incident had big to do with it. That had a pretty broad impact to the travel industry.

Andres Reiner: And as you would imagine, they have a lot of focus on getting back operational, but I would tell you, late in the quarter and into the beginning of this quarter's when we started to see that impact. And that probably was what compounded the fact. Okay, no, that's helpful.

Speaker Change: Many took days to recover from that, and as you would imagine, they have a lot of focus on getting back to operational, but I would tell you, late in the quarter and into the beginning of this quarter is when we started to see

Speaker Change: that impact and that probably was what compounded the effect.

Jason Vincent Celino: Okay, no, that's helpful. And then more of just like a like an overarching question just on the guidance for the year. You know, we obviously have the US election coming up. I'm curious how you, you know, built that into the guide and or even if elections in prior years have had, you know, an impact on customer decision making, but thought I'd ask, given kind of the Q4 dynamics.

Stefan Schulz: And then more of just like an overarching question just on the guidance for the year. You know, we obviously have the US election coming up. I'm curious how you built that into the guide or even if elections you in prior years have had an impact on customer decision making. But thought I'd ask given kind of the queue for dynamics. Yeah, so I've only been here for two previous election cycles, and I can't recall any sort of dynamic that occurred as a result of anything. You know, it's a good question because there's I know there's a lot of discussion and topic around it, but we really haven't seen an impact from it in terms of how customers are looking to invest.

Speaker Change: Okay, no, that's helpful.

Speaker Change: And then more of more of just like a like a overarching question just on the guidance for the year You know, we obviously have the the US election coming up I am curious how you you know built that into the guide and or even if elections, you know in prior years have had

Speaker Change: You know, an impact on customer decision making, but thought I'd ask, given kind of the Q4 dynamics.

Stefan B. Schulz: Yeah, so I've only been here for two previous election cycles, and I can't recall any sort of dynamic that occurred, you know, as a result of it. I think it's, you know, it's a good question because there's a lot of discussion and topics around it, but we really haven't seen an impact from it in terms of how customers are looking to invest, so we didn't factor anything one way or the other into our guidance as it relates to the election. Okay.

Speaker Change: Yeah, so, I've only been here for two previous election cycles, and I can't recall any sort of dynamic that occurred, you know, as a result of it. I mean, I think it's, you know, it's a good question, because there's, I know there's a lot of discussion and topic around it.

Speaker Change: We really haven't seen an impact from it, in terms of how customers are looking to invest, so we didn't factor anything one way or the other into our guidance as it relates to the election.

Stefan Schulz: So we didn't factor anything one way or the other into our guidance as it relates to the election. Okay, perfect.

Jason Vincent Celino: Okay, perfect. Thanks, Stefan.

Unknown Executive: Thanks, Seven. Thank you.

Stefan B. Schulz: Okay, perfect. Thanks, Stefan.

Brian Jeffrey Schwartz: Thank you. Our next question comes from the line of Brian Schwartz with Oppenheimer. Please proceed with your question.

Brian Schwartz: Our next question comes from the line of Brian Schwartz with Oppenheimer. Please proceed with your question.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Brian Schwartz with Oppenheimer. Please proceed with your question.

Brian Jeffrey Schwartz: Yeah, hi, thanks for taking my questions this afternoon. I just wanted to ask you what you're seeing in terms of average sales cycle duration times in the B2B business in Q2 versus Q1, if you saw any any downtick or if it was still pretty consistent in a tough environment out there for new logos.

Brian Schwartz: Yeah, hi. Thanks for taking my questions this afternoon.

Brian Schwartz: I'm just wanted to ask you what you're seeing in terms of average sales cycle duration times in the B2B business in Q2 versus Q1. And if you saw any down tech or feel pretty consistent and tough environment out there for new logos. Great question. So I would tell you overall B2B sales cycle times have improved by 15% year to date. And I would say it's consistent Q1 and Q2. We're seeing that improvement, and I would say that that's on, I think, the rigor on execution. And I think the consistency in our motion, I think it's helping to improve that we're focused.

Brian Jeffrey Schwartz: Yeah, hi, thanks for taking my questions this afternoon. I just wanted to ask you what you're seeing in terms of average sales cycle duration times in the B2B business.

Speaker Change: In Q2 vs Q1, if you saw any any down tech or feel pretty consistent in tough environment out there for new logos.

Andres D. Reiner: Great question. So I would tell you overall that B2B sales cycle times have improved by 15% year to date. And I would say that Q1 and Q2 we're seeing that improvement, and I would say that that's on, I think the rigor of execution. And I think the consistency in our motion, I think it's helping to improve that we're focused, I wouldn't say we've declared victory, we're still focused on driving even more improvement in that. In the changes that Todd and I are making jointly across the organization, unifying the organization, but overall, we're pleased with those improvements.

Speaker Change: Great question. So I would tell you overall B2B sales cycle times have improved by 15% year-to-date.

Speaker Change: And I would say it's consistent Q1 and Q2, we're seeing that.

Speaker Change: Improvement and I would say that that's on I think the rigor on execution.

Speaker Change: And I think the consistency in our motion, I think it's helping to improve that we're focused. I wouldn't say we've declared victory. We're still focused on driving even more improvement to that.

Andres Reiner: I wouldn't say we've declared victory. We're still focused on driving even more improvement to that in the changes that Todd and I are making jointly across the organization, unifying the organization. But overall, we're pleased with those improvements.

Speaker Change: In the changes that Todd and I are making jointly across the organization, unifying the organization, but overall we're pleased with those improvements.

Stefan Schulz: and Mitch.

Brian Jeffrey Schwartz: A follow-up question I had for Stefan. It also related to the guidance and just thinking about Q4. You know, the implied subscription revenue growth guidance for Q4 is for reacceleration even when you normalize comps. Is there something that you're seeing either in your pipeline or you're hearing from customers that is giving you the confidence, you know, to guide for the subscription business to reaccelerate as you're exiting the year?

Brian Schwartz: Follow a question I had for Stefan. It also was on the guidance and just thinking about Q4. You know, the implied subscription revenue growth guidance for Q4 is for re-exceleration, even when you normalize comps.

Speaker Change: Follow-up question I had for Stefan, it also was on the guidance and just thinking about Q4, you know the implied subscription revenue growth guidance for Q4 is for re-acceleration even when you

Stefan Schulz: Is there something that you're seeing, either in your pipeline or you're hearing from customers that is giving you the confidence, you know, to guide for the subscription business to re-excelerate as you're exiting the year. Thanks. Yeah, Brian. So, you know, when you look at our second half of subscription revenue in Q3 specifically, you know, we're guiding to a lower growth rate. And that was planned all along, because we knew we had a much higher subscription number a year ago because of some accelerated recognitions that we benefited from a year ago. So that dip that you're seeing in Q3 was, you know, we expected to see a dip all along.

Speaker Change: Normalize Comps. Is there something that you're seeing either in your pipeline or you're hearing from customers that is giving you the confidence you know to guide for the subscription business to reaccelerate as you're exiting the year? Thanks.

Stefan B. Schulz: Yeah, Brian. So, you know, when you look at our second half of subscription revenue in Q3 specifically, we're guiding to a lower growth rate, and that was planned all along because we knew we had a much higher subscription number a year ago because of some accelerated recognitions that we benefited from a year ago. So, that dip that you're seeing in Q3 was, you know, we expected to see a dip all along and then, you know, kind of returning to a better growth rate in the fourth quarter.

Stefan B. Schulz: Yeah, Brian , so, you know, when you look at our second half of subscription revenue and Q3 specifically, you know, we're guiding to a lower growth rate and that was planned all along because we knew we had a much higher subscription number a year ago because of some accelerated recognitions that we benefited from a year ago.

Brian Jeffrey Schwartz: So that dip that you're seeing in Q3 was...

Stefan Schulz: And then, you know, kind of returning back to a better growth rate in the fourth quarter. So we are certainly expecting that. And, as you pointed out, we are guiding to that. I would tell you that what's driving the sequential increase between Q3 and Q4 is a little bit of what we have built into the backlog, you know, deals that were expected to be, you know, starting their recognition, but also, you know, the revenue from new bookings. So, even though we've, you know, adjusted our booking forecast down mostly from the second half, we still are expecting to see a, you know, a good second half to the year relative to the whole year.

Speaker Change: You know, we expected to see a dip all along, and then, you know, kind of returning back to a better growth rate in the fourth quarter. So, we are certainly expecting that, and as you pointed out, we are guiding to that.

Speaker Change: I would tell you that what's driving the sequential increase between Q3 and Q4 is a little bit of what we have built into the backlog of deals that were expected to be starting their recognition, but also the revenue from new bookings.

Stefan B. Schulz: So, we are certainly expecting that, and as you pointed out, we are guiding to that. So, even though we've, you know, adjusted our booking forecast down mostly from the second half, we still are expecting to see a good second half to the year relative to the full year. In other words, we still expect to see more bookings in the second half than we did in the first half. So, that is a part of the guidance, and we feel like Q4 could see a bit of an increase over Q3.

Speaker Change: So, even though we've adjusted our booking forecast down mostly from the second half, we still are expecting to see a good second half to the year relative to the full year. In other words, we still expect to see more bookings in the second half than we did the first half. So that is a part of the guidance, and while we feel like Q4 can see a bit of an increase over Q3.

Stefan Schulz: In other words, we still expect to see more bookings in the second half than we did the first half. So that is a part of the guidance, and while we feel like Q4 can see a bit of an increase over Q3.

Stefan Schulz: And then, if I could just squeeze one more and stuff on the good expansions activity that you had in QQ, was any of that impacted at all by early renewals? Did you have customers kind of coming in and buying more ahead of their renewal season, or was mostly just add on fails or expansion activities with headcount? Thanks again for taking my questions. Yeah, yeah, you know, Brian, we see that from time to time, but it's not a predominant part of our, you know, renewals. So I would say we did not see anything abnormal in the second quarter from that perspective.

Brian Jeffrey Schwartz: And then if I could just squeeze one more in, Stefan, on the good expansions activity that you had in 2Q. Was any of that impacted at all by early renewals? Did you have customers kind of coming in and buying more ahead of their renewal season, or was it mostly just add-on sales or Activities with Headcount? Thanks again for taking my call. Yeah, yeah, you know, Brian, we see that

Speaker Change: And then if I could just squeeze one more in, Stefan, on the good expansions activity that you had in 2Q. Was any of that impacted at all by early renewals? Did you have customers...

Speaker Change: Kind of coming in and buying more ahead of their renewal season or was mostly just just add-on sales or expansion

Stefan B. Schulz: Yeah, yeah. You know, Brian, we see that from time to time, but it's not a predominant part of our, you know, renewals. So I would say we did not see anything abnormal in the second quarter from that perspective. Most of our expansions that were attached to renewals were pretty much on time. We may have had, you know, a small number that were a little early, but that's pretty normal.

Speaker Change: [inaudible]

Stefan B. Schulz: Yeah, yeah, you know, Brian , we see that from time to time, but it's not a predominant part of our, you know, renewals.

Stefan B. Schulz: So, um, I would say we did not see anything abnormal in the second quarter from that perspective. Um, most of our expansions relate to, that had, that were attached to renewals were pretty much on time. Uh, we may have had, you know, a small number that were a little early, but that's pretty normal.

Stefan Schulz: Most of our expansions relate to that had that were attached to renewals were pretty much on time. We may have had, you know, a small number that were a little early, but that's pretty normal.

Unknown Executive: Thank you.

Jeff Van Ree: Our next question comes from the line of Jeff Van Ree with Craig Harlem Capital Group.

Jeff VanRee: Our next question comes from the line of Jeff VanRee with Craig Hallam Capital Group. Please proceed with your question.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Jeff Van Ree with Craig Howard.

Jeff Van Ree: Please proceed with your question. Great.

Jeff VanRee: Great, thanks. Thanks for taking my questions. I've got a couple. First, on the B2B enterprise side, did the bookings on B2B hit expectations this quarter?

Jeff Van Ree: Thanks for taking my questions. I've got a couple first on on the B2B enterprise side. Did the book use on B2B hit expectations this quarter? I would say the bookings were placed with the bookings on the B2B sign.

Speaker Change: We'll see what your questions are.

Speaker Change: Great, thanks for taking my questions. I've got a couple. First, on the B2B enterprise side, did the bookings on B2B hit expectations this quarter?

Andres D. Reiner: I would say the booking agents were pleased with the bookings on the B2B side.

Speaker Change: I would say the bookings were pleased with the bookings on the B2B side.

Stefan Schulz: And so I guess, in terms of forward guide, was there any change to the implicit B2B bookings expectations? No, I would say all the change in the four-guide is all due to travel, so I'm not going to be expecting it. Got it, got it, very helpful.

Jeff VanRee: And so, I guess, in terms of the forward guide, was there any change to the implicit B2B booking expectations?

Speaker Change: And so, I guess, in terms of the Forward Guide, was there any change to the implicit B2B bookings expectations?

Stefan B. Schulz: No, I would say all the change in the four guides is all due to travel, so not easy expectations.

Speaker Change: No, I would say all the, the, the change in the four guide is, is all due to travel. So not... That's helpful. Next page.

Jeff VanRee: And then on the Gen 4 product, I'm kind of curious to hear a bit more about the experience you've seen out in the marketplace. Specifically, it has got a lot of advantages. It takes less data to get started, which would seem to give it more broader applicability in terms of vertical industries. Have you seen it having enough impact that it's opening up prior markets that you were not able to get at with the older products?

Andres Reiner: And then on the Jennifer product, I'm kind of curious to hear a bit more about the experience you've seen out in the marketplace specifically. It's got a lot of advantages, you know; takes less data to get started, which would seem to give it more, you know, broader applicability in terms of vertical industries. Have you seen it having enough impact that it's opening up prior markets that you are not able to get at with the older product?

Speaker Change: Got it, got it, very helpful. And then on the Gen 4 product, I'm kind of curious more to hear a bit more about the experience you've seen out in the marketplace. Specifically, it's got a lot of advantages, you know, it takes less data to get started, which would seem to give it more, you know, broader applicability in terms of vertical industries. Have you seen it having enough impact that it's opening up prior markets that you were not able to get at with the older product?

Andres Reiner: Look, I would tell you in general, we have so much opportunity within the industries we're in that for us is going deep within the industries. We could apply our technology to all, but it's really about the industries we serve going deeper and deeper. And we've been very, very focused on time to value and reducing that dramatically. I might believe long-term customers aren't going to want to pay much for activation. And we've been innovating in our product to drive these very fast activations. And this is just one of the innovation stores that focus area. And it can; the beauty of this innovation, it can help us with the industries we're in.

Andres D. Reiner: Look, I would tell you in general, we have so much opportunity within the industries we're in that for us, going deep within the industries, we could apply our technology to all. But it's really about the industries we serve going deeper and deeper. And we've been very, very focused on time to value and reducing that dramatically.

Speaker Change: Look, I would tell you, in general, we have so much opportunity within the industries we're in that, for us, is going deep within the industries. We could apply our technology to all, but it's really about the industries we serve going deeper and deeper. And we've been very, very focused on time-to-value and reducing that dramatically. I believe long-term customers aren't going to want to pay much for activation, and we've been innovating in our product.

Andres D. Reiner: I believe long-term customers aren't going to want to pay much for activation, and we've been innovating in our product to drive very fast activation. And this is just one of the innovations towards that focus area. And it can do the beauty of this innovation, it can help us with the industries we're in, it can help us expand into new industries. And the beauty of our platform is that the data model is dynamic; we could go after any industry we wanted to go into and expand. But we're already in about 40 industries on the B2B side. So we have plenty of TAM to go after and go. So, for us right now, it's how do we activate those particular industries even faster.

Speaker Change: to drive these very fast activation, and this is just one of the innovations towards that focus area. And it can, the beauty of this innovation, it can help us with the industries we're in, it can help us expand into new industries, and the beauty of our platform is

Andres Reiner: It can help us expanding to new industries. And the beauty of our platform is the data model is dynamic. We could go after any industry we wanted to go and expand. But we're already in about 40 industries on the B2B side. So we have plenty of time to go after and go deep. So for us right now is how do we activate those particular industries even faster? Got it.

Speaker Change: The data model is dynamic. We could go after any industry we wanted to go and expand.

Speaker Change: But we're already in about 40 industries on the B2B side, so we have plenty of PAM to go after and go deep.

Speaker Change: So for us right now it's how do we activate that those particular industries even faster.

Jeff VanRee: Got it. Maybe if I could just sneak one last in as you're pushing more and more into the land and expanding opportunities, can you share anything with respect to the B2B side and what a typical size of a piece of land looks like now versus maybe a year ago? Just even, I don't know, broadly speaking, but would love to get a sense of that trade-off between quantity and price and how that's playing out.

Andres Reiner: Maybe if I could just sneak one last in as you're pushing more and more into the land and expand opportunities. Can you share anything with respect to the B2B side? And what a typical size of a land it looks like now versus maybe a year ago, just even, I don't know, broadly speaking. But love to get a sense of that trade-off quantity and price and how that's playing. Yeah. So I would tell you that the average the old size on B2B last year to this year remains consistent. It's in the 200K range. And that's kind of the zone three to four years ago.

Speaker Change: Got it. Maybe if I could just sneak one last in as you're pushing more and more into the land and expand opportunities. Can you share anything with respect to the B2B side and what a typical size of a land looks like now versus maybe a year ago? Just even, I don't know, broadly speaking, but love to get a sense of that trade-off quantity and price and how that's playing.

Andres D. Reiner: Yeah, so I would tell you that the average deal size on B2B last year to this year remains consistent. It's in the 200k range. And that's kind of the zone.

Speaker Change: Yeah, so I would tell you that the average deal size on B2B last year to this year remains consistent. It's in the $200K range, and that's kind of the zone. Three to four years ago, we executed on our platform strategy, and our goal was to get that to that $200K range.

Andres Reiner: We execute on our platform strategy, and our goal was to get that to that 200 range. And that to me is a great place to land and drive fast expansion. So I would say I would expect that to remain consistently. And I would tell you a year today it is exactly the same as it was last year. Okay.

Jeff VanRee: Three to four years ago, we executed on our platform strategy, and our goal was to get that to the 200 range. And, to me, that's a great place to land and drive fast expansion. So I would say I would expect that to remain consistent. And I would tell you year to date is exactly the same as it was last year. Okay, great.

Speaker Change: And that, to me, is a great place to land and drive fast expansion. So, I would say I would expect that to remain consistently, and I would tell you year-to-date is exactly the same as it was last year.

Nehal Sushil Chokshi: Okay, great. Thank you.

Unknown Executive: Great. Thank you.

Speaker Change: Okay, great. Thank you.

Nehal Sushil Chokshi: Thank you. Our next question comes from the line of Nehal Chokshi with Northland Capital Markets. Please proceed with your question.

Nihil Chokshi: Our next question comes from the line of a Nihil Chalk Sea with Northland Capital Markets. Please proceed with your question.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Nehal Chokshi with Northland Capital Markets. Please proceed with your question.

Nihil Chokshi: Oh, yeah. Thank you. Unfortunately, it sounds like you did have less lands than expected. I'll be it more expansions than expected. A is that correct? On the B2B side, that is correct. Yeah. Okay.

Nehal Sushil Chokshi: Oh, yeah, thank you. Implicitly, it sounds like you did have less land than expected, albeit more expansions than expected.

Nehal Sushil Chokshi: Oh yeah, thank you. Implicitly, it sounds like you did have less land than expected, albeit more expansion than expected. A, is that correct?

Stefan B. Schulz: On the B2B side, that is correct. Yes, Nehal.

NAHL: On the B2B side, that is correct. Yes. Nehal. Yep.

Nehal Sushil Chokshi: Okay, and why is it that you're less than expected on the B2B side?

Andres Reiner: And why is it that you're less than expected lands on the B2B side? I would tell you, look, any particular reporter you're going to see changes between land and expand depending on the pipeline you're executing. And I would tell you a lot of that has to do with the focus on the lands that we had. And those are coming up for expansions, and we executed on those. I wouldn't read too much into it. I would say that, as we've discussed, this is a different difficult macro environment to sell in and where you've achieved value, you know, it's obviously easier to drive expansions because they've seen quantified value and, in many cases.

Speaker Change: Okay, and why is it that you're less than expected lands on the B2B side?

Andres D. Reiner: I would tell you look, in any particular quarter, you're going to see, you know, changes between land and expansion depending on the pipeline you're executing. And I would tell you a lot of that has to do with the focus on the lands that we have. And those are coming up for expansions, and we've executed on those. I wouldn't read too much into it. I would say that, as we've discussed, this is a difficult macro environment to go selling to those accounts.

Speaker Change: I would tell you, look, in any particular quarter, you're going to see, you know, changes between land and expand, depending on the pipeline you're executing. And I would tell you a lot of that has to do with the focus on the lands that we had, and those are coming up for expansions.

Speaker Change: and we executed on those. I wouldn't read too much into it. I would say that as we've discussed, this is a difficult macro environment to sell in.

Speaker Change: And where you've achieved value, you know, it's obviously easier to drive expansions because they've seen quantified value, and in many cases,

Stefan Schulz: Most customers are are are having initiatives around driving margin uplift and efficiency in the organization. And we're in incredible technologies to help do that. So where they've already seen. And that is helping them scale; is helping them drive margin improvement. They want to accelerate that, and we're allocating resources to go selling to those accounts. Okay, and then step on.

Speaker Change: Most customers are having initiatives around driving margin uplift and efficiency in the organization.

Speaker Change: And we're in incredible technology to help do that. So where they've already seen that it's helping them scale, it's helping them drive margin improvement, they want to accelerate that and we're allocating resources.

Speaker Change: To go selling to those accounts.

Nehal Sushil Chokshi: Okay, and then Stefan, I still don't quite understand why we are guiding to higher BIDTA but lower free cash flow guidance in the context of the lower 2H24 travel bookings expectation.

Stefan Schulz: I still don't quite get why we are guiding a higher bit, but lower free cash for guidance in the context of the lower 220 for travel, both expectations. Yeah, so it's, it's really the timing between when we get the, you know, the profit relative to when we get the benefits of the cash. I mean, it's, you know, some of the EBITDA improvement that's occurring in the guidance range that we provided for this year relates to items such as some incentive payments that won't be realized until 2025. So you'll see the EBITDA improvement, but you won't see the free cash flow and impact, you know, for another few months.

Speaker Change: Okay. And then, Stefan, I still don't quite get why you're guiding it higher a bit, but lower free cash flow guidance in the context of the lower 2H24 travel bookings expectations.

Stefan B. Schulz: Yeah, so it's really the timing between when we get the, you know, the profit relative to when we get the benefits of the cash. I mean, some of the EBITDA improvement that's occurring in the guidance range that we provided for this year relates to items such as some incentive payments that won't be realized until 2025. So you'll see the EBITDA improvement, but you won't see the free cash flow impact, you know, for another few months. So that's one example.

Stefan B. Schulz: Yeah, so it's it's really the timing between when we get the.

Stefan B. Schulz: You know, the profit relative to when we get the benefits of the cash, I mean, it's...

Speaker Change: Some of the EBITDA improvement that's occurring in the guidance range that we provided for this year relates to items such as some incentive payments that won't be realized until 2025.

Speaker Change: So you'll see the EBITDA improvement, but you won't see the free cash flow and impact, you know, for another few months. So that's one example.

Unknown Executive: So that's one example. Okay, all right.

Nehal Sushil Chokshi: Okay. All right.

Victor Cheng: Thank you. Thank you. Thank you. Our next question comes from the line of Victor Cheng with Bank of America. Please proceed with your question.

Speaker Change: Okay. All right. Thank you.

Victor Chang: Our next question comes from the line of Victor Chang with Bank of America. Please proceed with your question.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Victor Cheng with Bank of America. Please proceed with your question.

Victor Chang: Hi, everyone. Thanks for taking my questions. Most of them I've been asked, but to, if I may, firstly, on, on new versus existing, I remember previously, it's close to 50/50 split. Can you give us some more color on what the split is right now and across B to B and B to C. I remember previously B to B has more new logos. And with that in mind as well, not just for Q2, but going forward with the Buia guidance, are you still expecting a lowest split of new versus existing? Yeah, so right now we're seeing a higher percentage of existing than new.

Victor Cheng: Hi, everyone. Thanks for taking my questions. Most of them have already been asked, but two, if I may.

Victor Cheng: Hi, everyone. Thanks for taking my questions. Most of them have been asked, but two if I may.

Andres D. Reiner: Firstly, on new versus existing customers, I remember previously it was close to a 50-50 split. Can you give us some more color on what the split is right now and across B2B and B2C? Previously, B2B had more new logos. And with that in mind as well, not just for Q2, but going forward with the full year guidance, are you still expecting a lower split of new versus existing customers?

Victor Cheng: On you versus existing, I remember previously it's close to 50-50 split.

Speaker Change: Can you give us some more color on what the split is right now and across B2B and B2C? I remember previously B2B had more new logos. And with that in mind as well, not just for Q2, but going forward with the full year guidance.

Speaker Change: Are you still expecting a lower split of new versus existing?

Andres D. Reiner: Yeah, so right now we're seeing a higher percentage of existing than new. I would say for the back half, we see strong new opportunities. So I wouldn't expect that to maintain. But I would say this year, we're expecting, where we typically are in that 50-50 range, we're definitely expecting, you know, probably closer to a 40-60 split between new and existing versus a 50-50 split.

Speaker Change #100: Yeah, so right now we're seeing a higher percentage of existing than new. I would say for the back half, we see strong new opportunities, so I wouldn't expect that to maintain.

Andres Reiner: I would say for the back half, we see strong new opportunities. So I wouldn't expect that to maintain. But I would say this year we're expecting where we typically are in that 50-50 range. We're definitely expecting, you know, probably closer to a 40/60 split between new and existing versus existing. 5050 split. Got it.

Speaker Change #100: But I would say this year we're expecting where we typically are in that 50-50 range. We're definitely expecting, you know, probably closer to a 40-60 split between new and existing versus a 50-50 split.

Unknown Executive: Thank you.

Andres Reiner: And maybe one recording. There's still a lot of, I mean, we didn't go through, but there's a lot of great lands and net new customers that we landed both on the travel and B to B. And we highlighted just a few of my prepare remarks, but there's incredible lands and some are, you know, really like a top three medical device company. And some of very incredible lands that we're having. So we're very happy with the lands that we're getting.

Victor Cheng: By the way, there's still a lot of, I mean, we didn't go into it, but there's a lot of great territories and new customers that we landed both in the travel and B2B. And we highlighted just a few of my prepared remarks, but there are incredible territories and some are, you know, really like a top three medical device company. Some are very incredible lands that we're having. So we're very happy with the lands that we're getting, understood very clearly.

Speaker Change #101: Got it. Thank you. And maybe one recording. And by the way, there's still a lot of, I mean, we didn't go through, but there's a lot of great lands and new customers that we landed both on the travel and B2B. And we highlighted just a few of my prepared remarks.

Speaker Change #101: There's incredible lands and some are, you know, really like a top three medical device company. Some are very incredible lands that we're having. So we're very happy with the lands that we're getting.

Unknown Executive: On the suit, very clear.

Victor Cheng: And maybe the other one is, um, any comments you can make regarding FTC's kind of study on market data usage. And do you think it will limit maybe how your customers can use their clients' data and kind of potentially limit that proposition in the long term?

Andres Reiner: And maybe the other one is any comments you can make regarding FTCs, kind of study on the market data usage. And do you think it will limit maybe how your customers can use their clients' data and kind of potentially limit that proposition in the long time? Yeah, at this point, I would say it's too early. We see this as we're just in the process of responding to the FTC, and we see them more; it's trying to understand the market. You know, from more perspective, we've always had clear data segregation between customers. So no data from a customer can help the algorithm or train the algorithm for another customer.

Speaker Change #102: Understood very clearly. And maybe the other one is...

Speaker Change #102: Any comments you can make regarding...

Speaker Change #103: FTC's kind of study on the market data usage. And do you think it will limit maybe how your customers can use their clients' data and kind of potentially limit value proposition in the long term?

Andres D. Reiner: Yeah, at this point, I would say it's too early. We see this as we're just in the process of responding to the FTC. And we see them more in trying to understand the market. You know, from our perspective, we've always had clear data segregation between customers. So no data from a customer can help the algorithm or train the algorithm for another customer. And that's been the case from the very beginning. The other area that their focus is on personal identifiable data, and we don't use PIA to help do our pricing algorithms. So, for us right now, I don't see any broad implications. This is for us. It's just the FTC learning in trying to understand this market.

Speaker Change #104: Yeah, at this point I would say it's too early. We see this as, we're just in the process of responding to the FTC and we see them more as trying to understand the market.

Speaker Change #104: You know, from our perspective, we've always had clear data segregation between customers. So...

Speaker Change #105: No data from a customer can help.

Andres Reiner: And that's been from the very beginning. The other area that their focus is in the personal identifiable data. And we don't use PIA to help do our pricing algorithms. So for us right now, I don't see any body implications. This is for us. It's just the FTC learning and trying to understand this market. Understood.

Speaker Change #105: The algorithm or train the algorithm for another customer. And that's been from the very beginning.

Speaker Change #105: The other area that their focus is in the personal identifiable data, and we don't use

Speaker Change #105: PIA to help do our pricing algorithms. So for us right now, I don't see any broad implications, for us it's just the FTC learning and trying to understand this market.

Victor Cheng: Understood. Thank you. Thank you.

Unknown Executive: Thank you.

Speaker Change #106: Understood. Thank you.

Belinda Overdeput: Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I'd like to turn the call back to Belinda Overdeput for closing remarks.

Speaker Change #107: Thank you.

Belinda Overdeput: Ladies and gentlemen, we have received the end of the question-and-answer session.

Speaker Change #107: Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I would like to turn the call back to Belinda Overdeput for closing remarks.

Belinda Overdeput: I'd like to turn the call back to Belinda over the put for a close and remarks. Thank you for listening to today's call. We look forward to speaking with you at conferences and events this quarter. We will be attending the Key Bank Capital Markets Technology Leadership Forum on August 6 in Vail. The virtual Oppenheimer Technology Internet and Communications Conference on August 13 and the Wolf Research TMT Conference on September 10 in San Francisco. If you have any questions following today's call, please contact us at ir@pros.com. Thank you and goodbye.

Belinda Overdeput: Thank you for listening to today's call. We look forward to speaking with you at conferences and events this quarter. We will be attending the KeyBank Capital Markets Technology Leadership Forum on August 6 in Vail, the Virtual Oppenheimer Technology, Internet, and Communications Conference on August 13, and the Wolf Research TMT Conference on September 10 in San Francisco. If you have any questions following today's call, please contact us at iratpros.com. Thank you, and goodbye.

Belinda Overdeput: Thank you for listening to today's call. We look forward to speaking with you at conferences and events this quarter.

Speaker Change #108: We will be attending the KeyBank Capital Markets Technology Leadership Forum on August 6 in Vail.

Speaker Change #109: the Virtual Oppenheimer Technology, Internet, and Communications Conference on August 13th, and the Wolf Research TMT Conference on September 10th in San Francisco. If you have any questions following today's call, please contact us at iratpros.com. Thank you and goodbye.

Andres Reiner, Robert Morelli, Michael Wu,