Q4 2024 PROS Holdings Inc Earnings Call
Greetings and welcome to the Pros Holdings fourth quarter 2024 earnings Conference call. At this time, all participants are in a listen only mode.
Linda Overdue: 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 Linda overdue.
Linda Overdue: Senior director of Investor Relations.
Linda Overdue: 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 Dot com. Our prepared remarks are also available on our website and will be replaced by the official transcript which includes participant questions.
Andras Reiner: Once available with me on today's call is Andras, 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.
Andras Reiner: Actual results could differ materially from such statements and 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. As a reminder, during the call we will discuss non-GAAP metrics reconciliations between each.
Andras Reiner: 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: Thank you Bill and good afternoon, everyone and thank you for joining us on today's call.
Speaker Change: I'm incredibly proud of our team she she's met in 'twenty 'twenty four highlighted by an outstanding second half performance that was capped off by a strong fourth quarter.
Speaker Change: In Q4, we delivered 14% subscription revenue growth and 10% total revenue growth bringing.
Speaker Change: Bringing us to 14% subscription revenue growth and 9% total revenue growth for the year.
Additionally, we delivered approximately 30 million in adjusted EBITDA for the year, an impressive 400% improvement compared to 'twenty to 'twenty three.
Speaker Change: We also expanded our free cash flow margin by four percentage points year over year.
Speaker Change: Cheating and 8% free cash flow margin for the year.
Speaker Change: Or second half results reflect our team's strong execution and our continued momentum as a market leader.
Speaker Change: Setting a solid foundation for continued growth in 2025 and beyond.
Speaker Change: Ori I driven approach.
Speaker Change: This focus on innovation in our continued execution toward land realized and expand strategy are driving our success.
Speaker Change: We've always seen embrace the power of AI.
In 'twenty 'twenty, four we continued to elevate or approach by making AI in even stronger pillar of our strategy.
Speaker Change: Embedding a deeper into our internal operations and driving transformative impact across the business.
Speaker Change: From accelerating product development to automating key aspects of the commercial process to streamlining project delivery through automating data onboarding and cash cash generation.
Speaker Change: These initiatives drove tangible results.
Speaker Change: We achieved a record high non-GAAP subscription gross margin of 81% in Q4.
Speaker Change: While processing 4.4 trillion transaction seen our platforming 'twenty 'twenty four.
Speaker Change: 29% increase in volume year over year.
Speaker Change: Additionally for the third consecutive year, we achieved double digit improvements in customer time to value.
Speaker Change: When it comes store platform, we continued to set the pace of innovation in our markets.
Speaker Change: Releasing over 560, new feature set crossroad platforming 'twenty 'twenty four.
Speaker Change: These include new solutions, such as Smart rebate management.
Speaker Change: And Jen take AI innovations such as dynamic ancillary pricing.
Speaker Change: In embedded generative he I keep ability set cross our platform such as the recent launch of Earth fare finder Genie in Q4.
Speaker Change: Fare finder Jeanie brings to life. The next generation travel agents using generative AI and real time spheres. These solution offers a pillar flight search experience, resulting in itineraries that match customer preferences.
Speaker Change: Modern airline retailing needs innovation like or suite continued to inspire travelers and drive higher conversion of sales.
Our innovation leadership continues to be recognized by major industry analysts.
Speaker Change: I'm proud to share the process once again been named a leader in the latest Gartner magic quadrant for configure price quote applications.
Speaker Change: Making one of the most significant upward moves in achieving our highest leadership ranking in devaluation to date.
Speaker Change: This success highlights our deep and broad platform capabilities, along with our expanding market presence.
Speaker Change: <unk> was also recently named the leader in the IDC market scape for worldwide configure price quote applications.
Speaker Change: Recognized four or AI, driven innovations, including our advance pricing capabilities in seamless integration with key ecosystem partners.
Speaker Change: <unk> also earned I D. C 2024, she X C P Q customer satisfaction award.
Speaker Change: This award is the result of the global survey of 2500 organizations Eval.
Speaker Change: Evaluating vendors across approximately 40 customer satisfaction metrics.
Speaker Change: Pros rank among the highest for customer satisfaction in the C. P Q application market.
Speaker Change: With recognition for ease of implementation and user experience.
Speaker Change: Process now earned a leader ranking from every key industry analysts see valuation specific tour solutions.
Speaker Change: Our success is further evidenced by the amazing new customers, who selected pros in Q4.
Speaker Change: We continue to see strong new customer wins across our target industries, including Brady plus.
Speaker Change: H B K M Werner electric among many others.
Speaker Change: Brady plus in national distributor of foodservice packaging and sanitation supplies selected the <unk> platform to dry winning offers across the diverse industries. They serve in fuel revenue growth.
Speaker Change: H B K, a global leader in testing and measurement technology selected the <unk> platform to optimize pricing and drive a better customer experience.
Speaker Change: Warner Electric and leader in electrical supply distribution also chose approach platform to streamline their pricing strategy in fuel profitable growth.
Speaker Change: We also continued to win new logos hang the travel space further expanding our leadership as a trusted partner for over 170 airlines around the world, which together represent more than 52% of the global passenger volume.
Speaker Change: James.
James: Fast jet is south African hybrid carrier selected pros in Q4 to enhance brand visibility and drive higher conversion of bookings through pros offer marketing.
James: Meanwhile, multi decade customers Air, Canada, and Lufthansa continued to deepen their innovation with pros.
James: Air Canada chose to adopt dynamic offers to power continuous pricing at cross made us shirt changing distribution channels.
James: Gaining an advantage on the price performance curve for the heavy traffic driven by these channels.
Speaker Change: Stan said group chose to adopt or dynamic cansler pricing solution and expand shopping and pricing.
Speaker Change: These wins reinforce pros decision as a trusted innovation partner delivering the most advanced AI powered solution to drive measurable revenue growth at scale.
Speaker Change: Hawken expanded its partnership with pros by adopting smart rebate management.
Speaker Change: Holcomb World, we'll optimize and automate rebate program management with N twin visibility.
Speaker Change: This solution will enhance Hawkins rebate program to plan Powerpoint furnace to drive growth and deliver a better customer experience through seamless alignment on incentives and achievement.
Speaker Change: In 2025, we're focused on building upon the three strategic pillars that have driven our success.
Speaker Change: First or land realizing expand strategy will remain central to how we continued to capture the incredible market opportunity in front of us.
Speaker Change: Second we will continue to work closely with our partner ecosystem to accelerate or joint growth strategies and third we're doubling down on AI as a transformative force to be the model E I needed company.
Deeply embedding it into our platform and operations to drive innovation efficiency and deliver unmatched value to the market.
Speaker Change: We have the best team the best solutions in amazing customers, who are driving immense value with our platform.
Speaker Change: We're in a very strong position and I look forward to a successful 2025.
Speaker Change: In closing I want to thank or entire team for their incredible dedication and commitment to pros our customers and our communities.
Speaker Change: I'd also like to thank our partners, saying shareholders for their continued support of pros.
Stefan Schulz: I'll now turn the call over to Stefan to cover financial performance and outlook.
Stefan Schulz: Thank you Andreas and good afternoon, everyone.
Stefan Schulz: We closed 2024 on a high note fueled by strong bookings across all of our core industries, including our travel business.
Stefan Schulz: Our team did amazing work throughout the year, we were able to drive our strategic growth objectives, while transforming our business through operational efficiency.
Stefan Schulz: We achieved a record high and non-GAAP gross margin as a SaaS business from significant contributions from both our subscription and services operations.
Stefan Schulz: The improvements were so significant that the year over year dollar improvement in non-GAAP gross profit was actually greater than the dollar improvement in total revenue.
Stefan Schulz: Similarly, we added 90 cents to adjusted EBITDA for every incremental revenue dollar generated in 2024.
Stefan Schulz: In 2025, we will continue to drive operational efficiencies in our business, but we will also increase our go to market investments to build on our momentum coming out of 'twenty 'twenty four and further fuel our growth.
Stefan Schulz: In R&D, we anticipate driving more efficiency improvements with the help of AI, while accelerating our innovation roadmap.
Stefan Schulz: And G&A, our global infrastructure positions us well to drive more leverage as we continue to win new customers around the world through our land realized and expand strategy.
Stefan Schulz: Now I'll cover our results in a little more detail.
Stefan Schulz: Subscription revenue in the fourth quarter was $69.3 million, increasing 14% year over year.
Stefan Schulz: And then $266 3 million for the full year also increasing 14% year over year.
Stefan Schulz: Total revenue in the fourth quarter was $85 million, increasing 10% year over year and $334 million for the full year, increasing 9% year over year.
Stefan Schulz: Recurring revenue for the fourth quarter and the full year was 85% of total revenue an increase from 84% reported last year.
Stefan Schulz: Our trailing 12 month gross revenue retention rate continues to be better than 93%.
Stefan Schulz: Our subscription <unk> was $283 $7 million, increasing 10% year over year on a constant currency basis.
Stefan Schulz: Subscription here are on an as reported basis was $281.5 million, which was negatively impacted by about one percentage point due to the strengthening U S dollar.
Stefan Schulz: Our fourth quarter recurring calculated billings increased 25% year over year and 11% for the trailing 12 months ahead of our expectations and demonstrating the strength we saw in the quarter.
Stefan Schulz: We also set a new all time high as a SaaS business for our non-GAAP subscription gross margin.
Stefan Schulz: non-GAAP subscription gross margin was 81% in Q4 and 80% for the year, increasing from 78% in 2023.
Stefan Schulz: And non-GAAP services gross margin was 16% in Q4 and 11% for the full year, an improvement from 5% reported in 2023.
Speaker Change: As I mentioned earlier these improvements in non-GAAP subscription and services margins allowed us to set a new all time highs a SaaS business for total non-GAAP gross margin of 70% in Q4 and 68% for the full year.
Speaker Change: Which is an increase from 65% reported in 2023.
Speaker Change: We delivered adjusted EBITDA of $10 $9 million in the fourth quarter significantly outperforming guidance and resulting in $30 million of adjusted EBITDA for the full year, an improvement of $24 million compared to last year.
Speaker Change: We generated $23 $5 million in free cash flow in the fourth quarter and $26 $2 million in free cash flow for the year.
Speaker Change: Significantly outperforming our guidance and an improvement of $14.8 million compared to last year.
Speaker Change: We exited the year with $172 million in cash and investments.
Speaker Change: Our non-GAAP earnings per share for the fourth quarter was 16 cents per share, bringing us to a non-GAAP earnings per share of 41 cents per share for 'twenty for 2024.
Speaker Change: Yeah.
Speaker Change: As we look to 'twenty 'twenty five we are positioned to deliver another year of double digit subscription growth, while also expanding profitability.
Speaker Change: Here's our guidance with the stated growth rates and improvement amounts at the midpoint of the ranges.
Speaker Change: For the full year, we expect subscription are our of $308 million to $311 million, representing 10% growth year over year.
Speaker Change: We anticipate full year subscription revenue to be in the range of $294 million to $296 million, representing 11% growth year over year.
Speaker Change: In total revenue to be in the range of $360 million to $362 million, representing 9% growth year over year.
We anticipate full year adjusted EBITDA of between 42, and $44 million, representing an improvement of $13 million year over year and free cash flow in the range of $40 million to $44 million, an improvement of $15 $8 million year over year.
Speaker Change: Our business typically experiences lower free cash flow in the first half of the year, followed by stronger free cash flow in the second half of the year with Q1 being the seasonal low point.
Speaker Change: We expect this trend to continue in 2025, though to a lesser degree.
Speaker Change: We are expecting a 2080 cash generation split between the halves compared to last year's 595 split.
Speaker Change: Turning now to guidance for the first quarter of 2025.
Speaker Change: We expect subscription revenue to be in the range of 72, five to $70 $75 million, representing a 10% increase year over year.
And total revenue to be in the range of $85 million to $86 million, representing a 6% increase year over year.
Speaker Change: With the recent improvements in our travel business subscription revenue from these travel bookings is expected to increase throughout 2025, which is factored into our full year guidance ranges.
Speaker Change: We expect first quarter adjusted EBITDA of between seven five and $8 $5 million, which is an improvement of $3.4 million over the first quarter last year.
Speaker Change: Using an estimated non-GAAP tax rate of 22% when dissipate Q1 non-GAAP earnings per share at 10 to 12 cents per share based on an estimated $47 9 million diluted weighted average shares outstanding.
Speaker Change: In closing I want to thank our employees for their hard work and dedication as well as our shareholders for their continued support with.
Speaker Change: With the momentum we built in 2024 I'm confident we will deliver a successful 2025 I will now turn the call back over to the operator for questions operator.
Speaker Change: Thank you.
Speaker Change: At this time, we'll be conducting a question and answer session.
Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your question from key.
Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Our first question comes from the line of Jeff Van <unk> with Craig Hallum. Please proceed with your question.
Speaker Change: Great. Thanks, Hey, guys. Thanks for taking the questions and congrats on that free cash flow as you saw at bolt in the in the year and in the guide looks great.
Speaker Change: It maybe maybe if I could just start with the travel side of the business did.
Can you talk a little bit more about the turn of Ashley you're talking about a return to growth here, but.
Speaker Change: But can you give us maybe a little more color on two aspects just what kind of growth rates are conceivable for travel in this forward your sort of low and high end and then just.
Speaker Change: At a minimum at least a little qualitative commentary on sort of the return to health of the airline industry and what you learned in the last 90 days.
Speaker Change: Well I'll take the first part and I'll, let <unk> take the next part two to your point, we were happy to see.
Speaker Change: Our travel business start showing signs of solid improvement in the fourth quarter and and right now we're planning for that to happen in 2025 as well.
Speaker Change: You know weeks, we've talk Jeff quite a bit about travel overall being a.
Speaker Change: A call at Oh.
Speaker Change: Call it a low teens growth rate on a steady state we feel like we certainly are capable of generating that type of growth I think to your point, though in.
Speaker Change: As we start to see that from a bookings standpoint.
Speaker Change: We should start to see that growth rate starting to materialize I would say as we as we exit for our as we progress through this year.
So youll see our subscription growth start to accelerate as we go from first quarter, all the way through the fourth quarter and a lot of that is going to be on the heels of what we're doing from a travel perspective.
Speaker Change: Yeah, and then the other part that I would add is that in general we're seeing the areas around offer optimization being key areas.
Speaker Change: That we're seeing the market really embrace both thinking about for example in air Canada talked about them implementing dynamic offers and continuous pricing or MHC channels. These are very strategic areas for them to capture revenue growth as they're constrained with.
Speaker Change: <unk> now that we're seeing very very strong passenger volumes.
Speaker Change: They want to optimize both.
Speaker Change: Fee revenue as well as ancillary revenue.
Speaker Change: It's another Great example, adopting DAP dynamic ancillary pricing solution.
Speaker Change: I'm really trying to continue their trajectory around the full offer optimization. So in general overall, we're seeing the travel industry in a better place.
Speaker Change: You probably see many of the major U S airline stocks about a year at the outset of year are also the investment in people and programs inside we're seeing those.
Speaker Change: Start to get activated a big big area of focus around offer optimization.
Speaker Change:
Speaker Change: Very helpful and then second maybe if I could.
Speaker Change: From a sales standpoint, Todd came in I guess mid year last year early part of last year and this might be the first full clean reset he's got going into a new year.
Speaker Change: How are you approaching from a sales leadership standpoint, the the you know the managing to drive the outcomes you want but avoid disruption and I'm.
Speaker Change: Obviously thinking specifically about quotas and territories et cetera, just talk about this transition in the new year, and what might be changing and how you're managing it.
Speaker Change: Yeah, Great question, Jeff I would say look at extreme.
Speaker Change: Extremely proud of the whole sales leadership the level of execution.
Speaker Change: Not just that a quarter level, but our weekly goals monthly goals to quarterly goals. How we are executing all the way from demand Gen to sale.
Speaker Change: George delivery teams and customer success, we have a full customer lifecycle alignment and in an incredible execution agents I would say I'm very very pleased with the programs. We put in place last year ran a regional focus and getting closer to our customers in the market.
Speaker Change: And that's working as we head into this year.
Speaker Change: Getting more surgical not big changes consolidate changes were done last year is really accelerating the programs that we started last year.
Speaker Change: One new area is we're actually moving our customer success organization beyond the adoption and renewal into expansion. So so our CSN games going into this year are again at one quote at round expansion as well beyond just the adoption value.
Speaker Change: Generation and renewals, which they've traditionally focus with very close alignment with the full sales go to market teams.
Speaker Change: The other area that we're focused now that we have or land realized and working well.
Speaker Change: Continuing to focus on our partner channel and accelerating our partner channel, but with real Big focus on key partners that are going to help us accelerate our growth. So I would say those are the key areas that we're focused this year.
Speaker Change: Great I appreciate the detail thanks.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Scott Berg with Needham <unk> Company. Please proceed with your question.
Speaker Change: Hi, everyone. This is Rob really offer Scottish kidney, taking the questions and congrats on the quarter, you announced some expansions and renewals in the travel business over the past couple weeks along with those in the press release today can you just touch on maybe the operational environment for these airlines have you noticed any improvement from a personnel perspective that drove some of that it wins over the second half of last year.
Speaker Change: Yeah, Rob Great question, Yeah overall, we've seen definitely an improvement in operational and strategic focus around new initiatives you have.
Speaker Change: Seen we've had not just renewals, but quite a few expansion as well and an acceleration of programs that frankly were working on last year.
Speaker Change: That finally got accelerated in the fourth quarter and that's we look at.
Speaker Change: This year, we're continuing to see good momentum on the on the travel industry in the strategic areas that we've invested so so overall, we've seen a meaningful improvement.
Speaker Change: In that environment.
Speaker Change: Great to hear and then last quarter, obviously, there was a big announcement ceramics and changes in leadership.
Speaker Change: You guys have on those on the search for new CEO. Thanks.
Speaker Change: Yeah. So it's progressing exactly how we expect that as we said we're going to take our time.
Speaker Change: And be very intentional through this process to ensure we have the best.
Speaker Change: Canada as well that a very well orchestrated process then is progressing as expected nothing really new to report.
Speaker Change: All right great to hear congrats on the quarter come next for taking my questions.
Speaker Change: Thank you.
Speaker Change: Thank you IRA.
Speaker Change: Our next question comes from the line of Parker language Stifel. Please proceed with your question.
Speaker Change: Hey, guys. Thanks for taking the question here, Andrew you talked about some of these AI powered solutions particular fare finder, Jamie I was just wondering if you could give us updated thoughts on how youre thinking about.
Speaker Change: Including some of these generative AI solutions as part of the broader platform versus standalone opportunities to monetize where are you, adding that evolution of that journey from a commercialization standpoint.
Speaker Change: Yeah, Great Great question Parker I'll tell you look we have within our platform as you know we have.
Speaker Change: January.
Speaker Change: January of AI capabilities or to the platform I believe and it's been our belief that pros really the value of solutions and AI is Wednesday ice at the center of it solution.
Speaker Change: Not just in ancillary component.
Speaker Change: So so we're really looking at embedding it across every capability or two each product solution, that's adding significant value to an end customer whether it be revenue uplift margin uplift or efficiency gain.
Speaker Change: And you're going to see as we head into this year and acceleration of innovation around this notion of again take AI to bring more and more of these solutions, but embedded within the products and solutions that we have.
Speaker Change: To either help people accomplish goes faster or helping it for autonomous ways like we do for dynamic ancillary pricing as an example.
Speaker Change: Empower real time channels.
Speaker Change: Thanks for the color of their address and stuff maybe one for you on the subscription gross margin and congrats on the solid improvements there in the context of your long term targets any updated view on how much of that will come as a result of further improvements off of this 87, I believe it or not that number was performance above it for you.
Speaker Change: Yes Parker.
Speaker Change: I think I'm on record as saying I didn't think that was possible just a few quarters ago and I'm not going to put any sort of limitation of what our engineering contain can do anymore.
Speaker Change: So I do think there's some upside we've actually had some conversations about.
Speaker Change: Some of the innovation that the team is doing and some of the efficiency that they're writing into the code and so there is an opportunity to do more obviously the opportunity is not quite what it used to be but.
Speaker Change: No I think I think it's something we can see 82, maybe even 83 at some point, so I'm not going to put a cap on them anymore.
Speaker Change: Well good work there and congrats again thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Jason So we know with Keybanc capital markets. Please proceed with your question.
Speaker Change: Hey, guys. Thanks for taking my question, maybe just a couple.
Speaker Change: So subscription growth in Q4 was very strong right, 40%, but when I look at the Q1 guide, it's the selling the nine and a half.
Speaker Change: I guess why would that be I guess any.
Speaker Change: Yes, I mean, maybe that question first.
Jason So: Yeah, So Jason.
Jason So: What we saw in the first quarter was some of the bookings that we had we talked about some of the travel recovery and seeing some stronger bookings. Some of those bookings are a lot of those bookings actually are having a little bit of a deferral from a recognition perspective. So we will start to see that as we go.
Jason So: Progress through 2025, and so that's part of it.
Jason So: I'd also tell you currency has had an impact currency had about a one percentage point impact just given what's happened in the last call.
Jason So: Call. It two months in terms of the FX market.
Jason So: That's part of it as well, but I think youre going to see subscription revenue.
Jason So: Spawn nicely throughout the year.
Jason So: Based on the bookings we had in the fourth quarter and obviously, what we're expecting in the first part of 2025 as well.
Jason So: Okay excellent.
Jason So: And then I think this is more for your <unk> business, but if we look back.
Jason So: Five to eight years ago.
Jason So: Tariffs seem to be in the news a lot obviously, it's very fluid.
Jason So: But how does that impact your customers spending habits is it like a near term distraction or does it just adds to the complexity of need I guess, how I guess, what did you see you know 456 years ago.
Jason So: Yes, Jason Great Great Great question.
Speaker Change: This is shifting the same realm as in general.
Speaker Change: <unk> volatility change and if you think about it today that need the requirement to have real time technologies, even greater because if you think about any changes to tariffs that may happen you have to be very quick came very surgical how you drive price change so the need for this.
Speaker Change: Is even more strategic and as companies are realizing the volatile. It yes, I've always said is really here to stay between currency shifting the potential risk of tariffs. The complexity of pricing has only amplified in they need to have you know an AI powered pricing is.
Speaker Change: Really critical in addition, we've also put a blog articles to help our customers said 12 with thought leadership.
Speaker Change: Around this.
Speaker Change: But this is an area I can tell you from talking to many of our customers top of mind and something that I think for our customers.
Speaker Change: They are very happy that they have technology like prowess to be able to address I think for the broader market I think that risk if you're an excel Emmanuel how youre going to manage the market with this level of uncertainty and volatility.
Speaker Change: So it can be a are actually helping us.
Speaker Change: From a growth perspective.
Speaker Change: Okay, great. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Rob Oliver with Baird. Please proceed with your question.
Rob Oliver: Great. Thanks, Good afternoon, guys Andres first one's for you.
Speaker Change: So it really seems like an exciting time here for.
Speaker Change: Revenue management I know historically, you guys have said that.
Speaker Change: One of the kind of maybe barriers to growth was that a lot of your airlines or customers kind of view you guys as like a closely held secret because.
Speaker Change: And not something that they wanted their competitors to have now it seems like all of the Big Airlines are talking about.
Generative AI.
Speaker Change: Times.
Speaker Change: Doing pilots with Jenny I native companies talking about the importance of revenue management. So I'd just be curious to hear from you coming into this year and obviously you guys are guiding for an improvement does travel bookings throughout the year, but.
Speaker Change: You have seen any change in the market relative to your opportunity to get shots on goal given this new focus on this market, perhaps even with some of the bigger Airlines, where you guys. Traditionally maybe have not had business and then I had a quick follow up for Stephane. Thanks.
Speaker Change: Yeah, no great great. Great question, I would say, yes, I mean, we see a lot of opportunities I think it is top of mind in that and I would say airlines are really focused on two areas. One how theyre optimizing the right to fly think of that as seat revenue and then how they're optimizing ancillary and thinking about.
Speaker Change: If future will offer optimization and I can tell you I've been quite a bit out on the road as has the rest of our team.
Speaker Change: And in that we hear loud and clear and I think they are all looking at some of technology like pros like our request specific pricing or dynamic ancillary pricing solutions.
Speaker Change: To really drive the right revenue and they all have pressure to drive higher revenue with not significant additional capacity.
Speaker Change: And these are the levers that we can help them to achieve their goals. They're trying to achieve are leveraging next generation technologies. So I can tell you look we're very excited about this.
Speaker Change: I would say I'm also really proud of our marketing team there's been a lot of focus that we put.
Speaker Change: On the branded demand strategy and really launching every two weeks new programs.
Let the market know these areas where were achieving a nominal results.
Speaker Change: To activate demand in the market. So so we're really looking at how we're driving top of the final but the opportunities that we have in our pipeline that we're working that are more late stage.
Speaker Change: Okay.
Andras Reiner: Great. Thanks, Andres I appreciate that and then.
Speaker Change: Stefan for you just on that subscription revenue growth from travel, which is expected to kind of ramp throughout the year.
Speaker Change: Obviously, you guys are generally more positive on trouble with travel which is exciting.
Speaker Change: To hear more color from you on how.
You forecast that and how you thought about that forecast you know there's different moving parts. There is perhaps the returning.
Speaker Change: Travel spend for you guys, maybe youre seeing that in the pipeline maybe it's I know you guys unified go to market teams around BW and travels so perhaps you're seeing something there, which gives you more confidence or any more color around the confidence in that trajectory throughout the year would be really helpful. Thank you.
Rob Oliver: Yes, so youre right, Rob it's all of the above I mean, we see.
Speaker Change: We see the pipeline improving on the travel side, we see.
Speaker Change: The amount of opportunities there as Andres just laid out as our sales team and him and our other executives get out and visit with customers, we're seeing more and more opportunities than what we might've seen say a year ago. I'd also say this as we look forward over the course of the next four quarters.
Speaker Change: We obviously look at whats scheduled to be recognized in terms of revenue and based on how things are already established and just looking at the second third and fourth quarter, we already see a nice.
Speaker Change: Flow of new subscription revenue, that's going to be coming online from bookings that have already taken place and so that's what gives us the really the confidence to talk in terms of of an accelerating subscription growth rate throughout the year.
Speaker Change: Got it really helpful. Thank you both.
Thank you.
Speaker Change: Thank you our.
Speaker Change: Next question comes from the line of Victor Chang with Bank of America. Please proceed with your question.
Victor Chang: Hi, Thanks for taking my questions.
Speaker Change: Then if I may.
Speaker Change: Well I guess first of all you talk about the <unk> being lead us into the <unk> space now.
Speaker Change: Remember correctly the pie Yeah, you were in the challenger bucket can you talk a bit about what has changed from product perspective or is it something else.
Speaker Change: <unk> kind of driven the change in terms of how it got in the season.
Speaker Change: Yeah, Victor Great question first of all I would say look I mean credibly proud of the product team.
When we made our or focus in acquisition in the CPU space. Initially I said look we're coming from behind there is a lot of new innovation and I would say you know just over the last three years, there's been an immense amount of innovation.
Speaker Change: Around our CPU solution and really bringing the next generation modern platform and and I would say many of our capabilities around digital collaboration for example, where we're really transforming the customer experience, we're no longer sending it P D F or a word document.
That's a quote we're actually bringing a portal experience to create a digital physical collaboration between a buyer and seller or embedded AI capabilities. Those are all the things that are greatly greatly differentiating and thanks to our sales team and their great work on the wins the market momentum.
Speaker Change: I think it's a combination of two things.
Speaker Change: We've had amazing product innovation.
Speaker Change: And now we're ahead of Sap's, Salesforce, and Oracle, which is say it huge Gulf our team in and we're not going to rest on our laurels, but now we're a leader in every one of the major analyst reports.
Speaker Change: And then the other parties if the market momentum, we're winning amazing deals.
Speaker Change: And both of those are critical to be at that top.
Speaker Change: Right hand quadrant.
Speaker Change: Got it. Thank you and then going back to the point about travel.
Speaker Change: Obviously, you've made a couple announcements.
Speaker Change: Announcements throughout the quarter.
Speaker Change: And if I take a step back and think about airlines and how technology is evolving and distribution is evolving there.
Speaker Change: I've been to a number of those conferences.
Speaker Change: It seems to me that.
Speaker Change: G N D C. The alder offer management, it's still rather quickly new despite obviously the industry talking about it.
Speaker Change: And your.
Speaker Change: But as that.
Speaker Change: Is that like you talk a bit about the offer optimization. So it sounds like that is already driving kind of solid grow throughout 'twenty five.
Speaker Change: What does that mean that as airlines eventually truly adult mtc or thinking a lot more about leveraging that to drive ancillary and and pricing optimization that actually that that ramp that that growth can be.
Speaker Change: Dane or even go higher for the next couple of years.
Speaker Change: Yeah, absolutely thinking about it they airlines have to adopt a N D. C. M multichannel like air candidates doing so that theyre not just now doing continuous pricing on on their airline dotcom, but across every meta search engine in every channel they power.
Speaker Change: And then thinking about the same for dynamic ancillary products and then the bundling. This is a journey and I think it's an incredible opportunity for us in the market to really transform both the customer experience and the revenue potential for airlines and and I would tell you. My view is the next three years, it's going to be heavily.
Speaker Change: Focus on the offer optimization side I would say longer term say three to two.
Speaker Change: Probably 10 years is going to be the next generation order management side, So I would say.
Speaker Change: You're pretty familiar with this space Victor but I would say the next decade, I expect that a lot of new innovation in the travel industry as they move to create more pre flight in flight post flight ancillary <unk> that are tied really to driving a better experience.
Speaker Change: And then technology like Rockford marketing for example are we driving demand for these type of new offers that they are creating and.
Speaker Change: And how do they build the top of the funnel all the way through activating every channel. So I think we feel like we're in an incredible position, we've been innovating towards this space and and based on our view of the this is Brad the order in which airlines can activate the next generation offer an order.
Speaker Change: Management.
Speaker Change: Got it and maybe the last question for Stephane, just thinking about how you got to put 25 and talk about the long term guidance as well.
Speaker Change: Well that you've alluded to you previously.
Speaker Change: Has your view changed in terms of the mix of of <unk>.
Speaker Change: What line grow fastest margins or just the contribution from B to C and b to B as that mix change is what I was giving you see kind of momentum coming back on the BCC side.
Victor Chang: Not really Victor it's you know it's progressing.
Victor Chang: Consistent with what we've been thinking we've always felt like travel was going to kind of recover and return. So that that's always been part of the model I will say you know I'm glad you asked the question because I know early on when we put our long term goal out there there were some questions about our ability to respond.
Victor Chang: On the profitability side, and I must say I think our team has done an amazing job, there and Theres a lot of energy and momentum behind it and I think we're going to be able to continue to do that so I think as we look out.
Victor Chang: Over the next several years I think we've got a really good really good plan to achieve the ranges that we set out there maybe a little on the lower end on one other little higher on the other hand on another one but all in all we feel very good about where we are today and where we're going in the next couple of years, that's the only thing.
Victor Chang: I would add is this year youre going to see us really increase our Seo Sem marketing investment to accelerate growth, while we expect to drive greater than 60% improvement in free cash flow, which to me, it's an incredible goal.
Victor Chang: We are in line that's in the organization to drive that significant.
Victor Chang: Investment is driving acceleration in the back half as we go into next year setting up a acceleration.
Victor Chang: While we're driving a better than 60% improvement in free cash flow.
Victor Chang: Got it very clear.
Victor Chang: Thanks.
Speaker Change: Congrats on the solid quarter. Thank you alright. Thank you. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of no talk she with Northland Capital markets. Please proceed with your question.
Speaker Change: Oh, yeah. Thank you congrats on a good finish here.
Speaker Change: Stefan.
Speaker Change: Did I hear you correctly, saying that on a constant currency basis. Your air are for calendar 'twenty four was up 10% year over year.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: What was the base for the year ago period.
Speaker Change: That's up because actually they have 11% on my model when I plug in that number.
Speaker Change: I, let me, let me grab it real quick.
Let's see here NATO.
Speaker Change: On a constant currency basis.
Speaker Change: Okay.
Speaker Change: Two.
Speaker Change: $2 59.0.
Speaker Change: Oh got it okay.
Speaker Change: Alright, I thought that was a as this number so the sort of counter 'twenty three that those assets and constant currency basis.
Speaker Change: Well it resets every year right so what happened.
Speaker Change: Right Okay.
Speaker Change: Okay Alright.
Speaker Change: Alright, so 10% constant currency growth calendar 'twenty four guiding 10% for they are growth inside of 25.
Speaker Change: Yet you're guiding subscription revenue to grow 11% for the full year previously you talked about how.
Speaker Change: The ending calendar year, our growth is a pretty good indicator as far as what the subscription revenue growth is going to do in the next year. So can you help us understand why.
Speaker Change: You have the conferencing side.
Speaker Change: Subscription revenue growth to 11%, despite and in calendar 'twenty four with 10% constant currency growth on a R.
Speaker Change: Yeah, so what.
Speaker Change: When we look at our subscription revenue going forward from a.
Speaker Change: From a quarterly perspective, there is revenue that we're getting to recognize from previous bookings from previous years that we haven't had a chance to recognize so we did have an opportunity to accelerate some of that recognition, but to your point, it's not something that's gonna be that significantly different it's going to be in the similar Zip code. So.
Speaker Change: Well, we are going to be benefiting from some of the previous bookings that are going to fall into recognition in 2025.
Speaker Change: All in all it's going to be a close proxy for where we are it's not going to be an exact number.
Speaker Change: But it'll be pretty close.
Speaker Change: Got it okay very good.
Speaker Change: Is it fair to say that your bookings and for Q, where indeed better than expected and as such.
Speaker Change: This constant currency are our was also above your expectations I E. Your expectations of having $282 million there or was on a constant currency basis not on a as his basis is that correct.
Speaker Change: No, we kind of manage to IRR on a constant currency basis.
Speaker Change: All year long and our guide was $2 80 to 284, obviously as you know we landed on the higher end of that range. So we were very happy with the bookings performance in the in the fourth quarter.
Speaker Change: And obviously happy that we landed on the higher end of the range as well.
Speaker Change: Okay great.
Speaker Change: And then you just mentioned that we will be accelerating investments in sales and marketing, which parts of them to go to market organization will be focused on.
Speaker Change: We in term in terms of BW and travel or just make sure I'm. Following your question.
Speaker Change: I was thinking more in terms of like customer success versus a quote up there and oh, okay. Yeah.
Speaker Change: Yeah.
Speaker Change: So think of it from a sales and marketing is going to be both on the demand Gen and and quota carrying personnel plus programs.
Speaker Change: Spin.
Speaker Change: Those are the areas we have a great team will continue to add but the majority of you think of them being quota carrying demand Gen and then program.
Speaker Change: Spain.
Speaker Change: Got it Okay and then final question for me is that.
Speaker Change: Yeah, I presumed it both better linearity AR continues to be something that youre observing.
Speaker Change: Todd has stepped in here.
Speaker Change: Was that the bigger role.
Speaker Change: In the half million subscription revenue beat relative to your mid point or was it actually did better than expected bookings that drove the better than expected.
Speaker Change: Oh, okay.
Speaker Change: I would say they both help the linearity definitely contributes.
And then the improvement on the bookings also contributed.
Speaker Change: It was definitely both great. Thank you for taking all my questions.
Speaker Change: Thank you.
Speaker Change: Thank you and our next question comes from the line of Brian Schwartz with Oppenheimer. Please proceed with your question.
Brian Schwartz: Yeah, Hi, Thanks for taking my question I've, just got one I've got one for Andre about the opportunity with the combating AI through the platform the.
Speaker Change: You have John take vision for the company could you share with US how we should think about the monetization path on the revenue side I'm I'm I'm. Just wondering you know volumes are going to continue to increase but somehow you know will agents increase the velocity of the volume or can you capture it I'm pricing share with us the.
Speaker Change: You know the strategy with all the new technology or introducing thanks.
Speaker Change: Yeah, that's a great question.
Speaker Change: Ryan.
Speaker Change: The way that we look at it as we said is that AI has to be core to keep the ability to bring significant value and and if you think about that as an example.
Speaker Change: If we are deploying that that obviously inspired by Gen take AI you know.
Speaker Change: It has to drive revenue uplift, we sell that as an individual SKU so customers buy for that innovation.
Speaker Change: First is incorporating it in a in an ancillary type of use ability capability. So think about in every area. When we talk about innovation surround is we're really trying to drive each one of these two bringing crim menthol value.
Speaker Change: Then customer M. D is sellable SKU that we can either sell to net new logo or expand within it makes this thing account, where we're trying to drive is based on our strategy of land realized expand its great more and more sellable skus that bring significant tangible value.
Speaker Change: That that fall with our team can sell to net new logos or can sell it as an expansion to customers.
Speaker Change: Thank you very much for the call are great color.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And ladies and gentlemen, we have reached the end of the question and answer session I would like to turn the call back to <unk>.
Speaker Change: For closing remarks.
Speaker Change: Thank you for listening to today's call. We look forward to speaking with you at conferences and events. This quarter. If you have any questions. Following the call. Please contact us at <unk>.
Speaker Change: Our app from Dot com.
Speaker Change: Thank you for listening to today's call. We look forward to speaking with you at conferences and events. This quarter. If you have any questions. Following today's call. Please contact us at IR at pros Dot com, Thank you and goodbye.
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